What is the current state and the future direction of Indian IT / ITES outsourcing? Is it about-to-go dead or is-already dead?

The death of India's outsourcing industry was speculated from the day 1. People talked about Ireland, then Philippines, then China, Chile, Argentina.. Although all these countries have grown their service industry, Indian IT/ITes is still thriving. If it were a simple matter of wage, then there are always much cheaper destinations than India. But, such an outflow is not happening. There is a reason why India took to the path of services while no other nation at our stage of economic development is this service centric. Challenges Poor infrastructure. IT Companies are forced to handle a lot of things that the government is expected to do - train graduates, run buses, run captive electricity production. Weak Politics. Indian government is not hungry for IT growth anymore. Excess reliance on English. India is heavily dependent on US, UK and Australia. Advantages Strong companies. Unlike India's competitors - China and Philippines, India has a mature IT industry with a bunch of market leaders. Many of India's competitors are highly fragmented leading to competitive pressures and poor economies of scale. Indians hack things to survive India (termed jugaad). Without those hacks, we would not be able to live in India. For instance, our way of driving packs the maximum number of humans per sq.m of road. Such hacks are a great preparation of entrepreneurship (in fact incubators such as YCombinator explicitly ask and reward such hacks in their application). As outsourcing gets more complex, India has prepared a horde of street-trained entrepreneurs to manage the global service industry. India thrives in extreme ambiguity. Indians on the street have to manage a level of complexity that is very hard to see elsewhere. In a world where projects are getting increasingly ambiguous and complex, Indians will get to play their natural strengths. In manufacturing, our attitude is a disadvantage as manufacturing requires a certain precision and discipline. But, in service sector, ability to deal high levels of ambiguity is a plus. Indians can cope up with diversity. In a global economy, diversity is the key. We need to handle multiple tongues and the ability to accept a variety of people. Many educated Indians can deal with 3 languages (English+Hindi+mother tongue) and even to move to an adjacent state, we need all the adaptation skills. On the other hand, most of our neighbors have a single national language. This ability to speak multiple languages and deal with diversity enables us to compete comfortably in service sector with countries such as China, Japan and Germany - all with much superior technology infrastructure. India still has a massive untapped labor. A lot of people complain about wage increase and labor shortage. But, in a nation of 1.2 billion people, where the average wage is $1000/year such complaints look silly. The real problem is that, our systems are not training enough quality people to keep up with the demand. As we keep increasing our quality and as mentoring grows wider, we can supply 100s of millions to the service industry; A few of my classmates came from dirt poor families that made less than $1/day. Their kids now receive world-class education in top schools. http://articles.economictimes.indiatimes.com/2013-08-22/news/41437451_1_it-bpo-industry-it-bpo-philippines

There is no right answer to this, but IMHO, Current style of Indian outsourcing should die (change). Now there are multiple POVs that come to mind when I say current style. Let me explain it Very few companies have their R&D out sourced to India. This is a style/outsourcing I want to see in Indian services sector. Indian service sector should be choosy in their service offerings, rather than taking any project such as manual data entry, BPO and tech support should die. They are jobs that won't help the nation to develop in terms of technology, research. Indian service sector should look at niche service offerings that add more value. Like product outsourcing, research outsourcing. The above 3 points look same, but there is slight variation. Look at currently emerging Analytics services companies in India like (Mu-Sigma)http://www.mu-sigma.com/, Absolutdata(http://www.absolutdata.com/). They are niche and also generate good employment opportunities. Such service offerings don't only make you contractors, but allies to you clients in their strategy, vision. Also let me part saying- When one door closes, at least open in its place.

I think for long we ourselves have considered us suitable for "outsourcing" or cheap labour-monkey on the keyboard work. And why should it not be, we were getting better pays which were still considerably cheaper for MNCs to play on labour arbitrage. And of course, we are brilliant at logic, or to put it more righteously, fuzzy logic. We can operate both in structured chaos and unorganized harmony. And that, to the core of it, formed the basis of outsourcing industry. Now, cut to today, after a decade and a half long of 7-8% average growth. The number of college grads have swelled. The attitude is fast changing and 20% of billion plus mobile phones are internet connected ensuring global awareness for today's college or pre-college youth. We do not just want to rely on bodyshops to pay rent, we want to build and create products. We want next google or facebook or amazon to be from India. So I would say that going forward, the question would not be which country has cheapest cost of labour but which country has labour in first place. And there, India and China are winning. Even with 10% high school grads going to college in India, it still means a formidable output of 1.5 million engineers each year, and about 10x the college graduates each year. While the teething issues over employ ability are under question but those will also fade away as we progress. By some estimates, India along with China, would have highest number of post graduates in the world in next 10-12 years. We have to be patient and play our cards right, and we would have our own share of glory with next set of googles and facebooks. And to that extent, I would take a contrarian view to say that death of outsourcing as we know today is not just good but essential for us. I would seriously consider systematic death of current outsourcing if the process had not began on its own. The beauty, size and diversity of India will ultimately result in production of so much raw technical manpower that it can serve both ends - the next googles and the outsourcing bodyshops alike. But for that to happen, this death in current context is essential, else it will grow on our technical prowess like cancer.

Not actually. Death is too big word for the present situation. If you are considering only the IT companies, then I would see those companies following B2B business models. These company provides solution for the problems of other companies. What you are seeing are the hard times. Western economies are in trouble and the result is less business for Indian IT cos but surely its not death at least not now. Even if the industry is progressing towards it, there is still time. I have communicated with some IT professional and they told that outsourcing of mobile development is increasing with never seen before rate. But this is not enough since it is not that a large scale compared to present outsourced work. So one aspect is demand has changed, which we are not tracking. Because for us the IT industry is only Infosys, TCS and other such giants. Other can be obvious, meeting the demand in their native country. People will be willing to work for less in the depression. But this is hard for the companies to do because the required engineers will be needed to train and other stuff which obviously no small business can do and the business which has no relation to IT industry as such. The one point that gained my attention in the Forbes article, was the wage is increasing. Salary of an Indian IT professional is very less compared to their counterparts in US, from where most of the work is outsourced. The article says it is increasing, and it will, obviously. That is and will be the main reason of the death of outsourcing industry and I believe that will be for the good of the Indian IT market and India itself but that is the story for another day. Indian IT industry biggest challenge in the future will be the new batch of entrepreneurs who have heard stories of Facebook, Google etc. How they have created an empire in their field from nothing in their hand. They give high salaries, incentives and perks. They want to be the next Google and Facebook and what is the good thing about them, they are building products. This will increase the basic knowledge requirement from the engineer willing to work in those cos but will in return give high salaries. This will also increase the salaries in the industry. The seed has already been sown but there is still time till the tree is full grown.

Indian IT Outsourcing is like Chinese Manufacturing - It took almost a decade to get kickstarted and for others to catch up, it is difficult : 1) First Mover Advantage - It will take another country 8-10 years to build similar capacity and expertise. 2) Scale - Its like the category leader and the scale is enormous. There are few countries in the world with that kind of labour - english speaking, skilled, educated, ready to work really hard. Countries like Indonesia and Pakistan come to mind but they have their own set of problems. 3) Multiple Indias - There are only parts of India which have benefited from Outsourcing. There are states like UP which are bigger than most countries which can compete by starting at lower levels of income. 4) Rupee - The cost ratio is going to be a huge differential for a long long time. Salaries have not really increased so much as the reports seem to suggest. 5) Levers : Indian companies have multiple levers that can be leveraged at any point to be competitive - a) Efficiency and productivity is poor and can be improved b) Variable Salaries c) Profit margins which are at 25% levels can be brought down d) Huge Cash reserves which can be deployed 6) Order Takers - The gripe that most people have with IT outsourcing is that the work is donkey work and does not require thinking - Though partly true, you can make the same argument about 90% of a what a company does - manufacturing is donkey work, logistics is donkey work, services is donkey work. In the end, only a small percentage of a company can do strategic work and rest all is operational. As Bob Dylan said, you need to serve somebody. So being order takers is not really a bad thing as long as you provide value and get paid well. Cloud - If Cloud is going to kill industries, outsourcing is not going to be the only one-it will be like Amazon or Apple that will wipe out multiple industries at once and Outsourcing industry may just be a part of the Cloud industry rather than outside it. Many people seem to have the Outsourcing Industry responsible for the Product Industry's failure.

The best of Indian IT Industry is yet to come.Indian Companies now have a global footprint and have established themselves as a trusted partner.Some of the Indian Companies are even Counted in the same lines like IBM,HP,Accenture.With the emergence of the new technologies like big data and digital there is lot of work coming to these Indian IT Vendors and they all have geared themselves up.Also with the new government laying a lot of emphasis on e-governance we could see lot of revenue generating from India.

Time to be lazy and just paste in a few links I've referenced before, and suggest you go read: India's Outsourcing: http://www.economist.com/news/special-report/21569571-india-no-longer-automatic-choice-it-services-and-back-office-work-turn - Economist http://www.wsj.com/articles/indias-outsourcing-firms-change-direction-as-cloud-moves-in-1436740981 - WSJ http://www.banner-managedcommunication.com/insights/offshore-outsourcing-no-longer-future http://www.thesmartcube.com/insights/sourcing/item/it-outsourcing-trends-in-2016- The Smart Cube