India draws Fortune 500 companies like a magnet
Fortune 500 companies from a wide range of industries have placed their bets on India -the world’s largest democracy and the 12th largest economy (the 4th largest based on purchasing power parity). And this is not just about outsourcing. They have invested in India for the long term, have set up base in India and are growing rapidly.
These multinational companies (MNCs) are represented in sectors like pharmaceuticals, automotives, food and beverages, petrochemicals and chemicals, computers and software services, financial services, engineering and logistics among others.
The reasons are not far to seek. These global leaders have come:
• To set up R&D and engineering centers in India – often the largest centers outside the companies’ headquarters in terms of investment and staffing
• To make inroads into a key growth market - India
• To fuel company-wide growth and acquire new capabilities such as
- high-quality, cost-effective software-development capacity
- product development and project management capabilities
- process chemistry skills
- manufacturing strengths
- cutting-edge technology
- financial/accounting services , payroll processing,
tax preparation ,and other services
• To attract managerial talent
• To conduct clinical trials and testing
• To tap lower manufacturing costs and minimize import duties
• To leverage India's low cost and productive workforce
• To set up captive outsourcing units
• To set up shared services centers
• To partner with third-party outsourcing service providers
A study by the Indo-American Chamber of Commerce showed India is home to 220 of the Fortune 500 companies from countries such as the US, Switzerland, Canada, Sweden, United Kingdom, Germany Netherlands, France, Japan and South Korea.
As globalization accelerates the pace of change, there is a need for MNCs to be present in India, one of the largest economies and markets of the future.
India offers
Scalability
Cost-effectiveness
Quality and process maturity
High-performing software, services and biotech sectors
A large talent pool of managers, engineers, scientists and skilled workers
The presence of MNCs in India is bringing about a cultural shift towards a more performance-oriented work culture. Employees are learning cross-cultural team management and gaining familiarity with global best practices. This can only benefit international clients as India develops and strengthens its global workforce.
A shift from captives towards third-party BPOs
The high costs of operating captive outsourcing centers has prompted some MNCs to spin off their captives and outsource work to third-party Indian BPOs. 60% of the offshoring market is held by captives.
Although MNCs have been able to ensure data security through their captive units, the shift towards Indian third party BPOs is a business decision dictated by:
1. Costs - The operating costs of captives are typically 28-30% higher than that of Indian third-party players, who are seizing the opportunity to acquire captives with capabilities in the BFSI sector (banking, financial services and insurance), which is slated to be the fastest-growing segment in the Indian outsourcing industry.
2. Scalability –Third-party BPOs are better able than captives to manage the increased size and scale of their operations to keep pace with the rapid global growth of their clients’ businesses - while keeping the cost advantage.
3. Attrition – The rate of attrition at captive centers is higher than the industry average and adds to the costs which are already high.
According to a Forrester report:
• 10% of captive units in India will shut down
• 20% will use a hybrid approach - outsource less critical work to
third parties while keeping strategic work within their Indian captive units
• 10% will sell out and go the third party route
• Almost 50% are likely to exit over time.
Third-party outsourcing service providers in India have proved their capabilities and are in a position to provide best-of-breed outsourcing services that satisfy stringent data security and confidentiality norms.
These multinational companies (MNCs) are represented in sectors like pharmaceuticals, automotives, food and beverages, petrochemicals and chemicals, computers and software services, financial services, engineering and logistics among others.
The reasons are not far to seek. These global leaders have come:
• To set up R&D and engineering centers in India – often the largest centers outside the companies’ headquarters in terms of investment and staffing
• To make inroads into a key growth market - India
• To fuel company-wide growth and acquire new capabilities such as
- high-quality, cost-effective software-development capacity
- product development and project management capabilities
- process chemistry skills
- manufacturing strengths
- cutting-edge technology
- financial/accounting services , payroll processing,
tax preparation ,and other services
• To attract managerial talent
• To conduct clinical trials and testing
• To tap lower manufacturing costs and minimize import duties
• To leverage India's low cost and productive workforce
• To set up captive outsourcing units
• To set up shared services centers
• To partner with third-party outsourcing service providers
A study by the Indo-American Chamber of Commerce showed India is home to 220 of the Fortune 500 companies from countries such as the US, Switzerland, Canada, Sweden, United Kingdom, Germany Netherlands, France, Japan and South Korea.
As globalization accelerates the pace of change, there is a need for MNCs to be present in India, one of the largest economies and markets of the future.
India offers
Scalability
Cost-effectiveness
Quality and process maturity
High-performing software, services and biotech sectors
A large talent pool of managers, engineers, scientists and skilled workers
The presence of MNCs in India is bringing about a cultural shift towards a more performance-oriented work culture. Employees are learning cross-cultural team management and gaining familiarity with global best practices. This can only benefit international clients as India develops and strengthens its global workforce.
A shift from captives towards third-party BPOs
The high costs of operating captive outsourcing centers has prompted some MNCs to spin off their captives and outsource work to third-party Indian BPOs. 60% of the offshoring market is held by captives.
Although MNCs have been able to ensure data security through their captive units, the shift towards Indian third party BPOs is a business decision dictated by:
1. Costs - The operating costs of captives are typically 28-30% higher than that of Indian third-party players, who are seizing the opportunity to acquire captives with capabilities in the BFSI sector (banking, financial services and insurance), which is slated to be the fastest-growing segment in the Indian outsourcing industry.
2. Scalability –Third-party BPOs are better able than captives to manage the increased size and scale of their operations to keep pace with the rapid global growth of their clients’ businesses - while keeping the cost advantage.
3. Attrition – The rate of attrition at captive centers is higher than the industry average and adds to the costs which are already high.
According to a Forrester report:
• 10% of captive units in India will shut down
• 20% will use a hybrid approach - outsource less critical work to
third parties while keeping strategic work within their Indian captive units
• 10% will sell out and go the third party route
• Almost 50% are likely to exit over time.
Third-party outsourcing service providers in India have proved their capabilities and are in a position to provide best-of-breed outsourcing services that satisfy stringent data security and confidentiality norms.
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