In business, outsourcing is an agreement in which one company gives another company the contract to manage its own internal affairs. It involves giving contracts of a business to perform tasks, handle operations or provide services that are either usually executed or had previously been done by the company’s own employees. The tasks may include operational, business process, non-core functions (manufacturing, facility management, call centre support etc).
Business process outsourcing to India refers to the Business Process Outsourcing services in the outsourcing industry in India, catering mainly to Western operations of Multinational Corporations (MNCs).As of 2012, around 2.8 million people work in outsourcing sector. Annual revenues are around $11 billion, around 1% of GDP. Around 2.5 million people graduate in India every year. Wages are rising by 10–15 percent as a result of skill shortage.
The concept of Business Process Outsourcing in India started win 1980s, when American Express consolidated its Japan-Pacific back office operations in Gurgaon. In a recent survey, 80% of European and US outsourcing firms ranked India as their number one outsourcing destination. The National Association of Software & Service Companies (NASSCOM) also reported that almost half of all Fortune 500 companies choose to outsource software development to Indian outsourcing firms. Even though many other countries (including China, Mexico, Ireland and the Philippines) have emerged as major competitors, India has managed to outmanoeuvre all others and emerge as the top outsourcing destination.
Analysts believe that India remains a vital destination for outsourcing and expect its annual GDP to grow at 8–10% for the next decade. In addition, outsourcing efforts to India are held up as an effective remedy for concerns about both Chinese government policy and labour force issues, such as increasing costs and shortages.