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India's revenue from outsourcing could be $225B in 2020

John Ribeiro | April 22, 2009
Trade body Nasscom however warns of bottlenecks like infrastructure

BANGALORE, 21 APRIL 2009 - India's National Association of Software and Service Companies (Nasscom) said Tuesday that the country's outsourcing industry can potentially earn revenue of US$225 billion by 2020, of which about $175 billion will come from exports, and the balance from the domestic market.

The country's revenue from outsourcing in the fiscal year to March 31 was about $60 billion, of which $47 billion was from exports, a Nasscom spokeswoman said.

The Nasscom figures include revenue of both Indian outsourcers and the Indian services and research and development subsidiaries of multinational companies.

Nasscom however warned that the industry faces some challenges, including competition from other countries, and poor quality of education and infrastructure in India.

Currently only a small percentage of graduates have the skills necessary to be employed directly by the outsourcing industry. Only about 26 per cent of engineers, for example, can be employed for technology services.

Nasscom has teamed up with management consultancy McKinsey & Company to draw up a plan for the outsourcing industry for 2020.

More than 95 per cent of India's services exports originate from nine major cities whose infrastructure like power, road and air transport, and water supply is already constrained, according to the joint report. A recommended move to smaller cities has not gained momentum, it added.

Competition from at least 25 to 30 other low-cost countries could reduce India's market share by 10 percent, according to the report.

In its best-case scenario, the report forecasts a potential revenue of $375 billion by 2020 for India's outsourcing industry.

 

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