Now two-way

Even as outsourcing to India continues to gain momentum, reverse outsourcing is slowly gaining ground too as Indian companies outsource their processes and information technology applications to foreign ones. As the CII president, Sunil Mittal, explained to his American interlocutors recently, his Bharti group has struck a billion-dollar deal with IBM, and Idea Cellular has entered into a $700 million deal, again with IBM. At a less obvious level, reverse outsourcing could also refer to Indian software majors sub-contracting a part of their work to a third country. With India's cost advantages diminishing, many companies have started outsourcing part of their work to countries like those in Eastern Europe.

A third dimension to reverse outsourcing (if it can be called that) is foreign nationals finding employment in the overseas arms of Indian firms as well as in operations within India. As Indian firms globalise their operations, they have to localise their overseas activities in very much the same way that international firms have done in India over the years. Further, with an acute shortage of skilled human resources reflecting in sharply increasing manpower costs, a growing band of expatriate managers finds profitable opportunities in India. In the past, when Indian outsourcing companies set up offices in the West, much of the work was in marketing, brand building and business development, while most of the on-site development continued to be handled by Indians. Some of this is now changing.

Sometimes, it is simply a question of being able to scale up faster, so 'buy' becomes a better option than 'build'; so it would be a mistake to view outsourcing as mainly a cost issue. The ability to scale up or down with relative ease has continued access to a skilled and ready pool of talent, manage the rising attrition problem and the need to better their competitiveness""all these factors are making Indian companies look at the outsourcing option more seriously. The early birds in this game have been the larger companies in the telecom sector, like Bharti and Idea. Analysts say that most of the other telecom majors could be negotiating similar deals too. With consolidation in the telecom sector also happening, this could be one more reason for companies in this segment to look at reverse outsourcing. In the deals struck so far, network-related activities have been outsourced by Indian companies to foreign vendors like Nokia, Ericsson and Convergys. Further, companies like Accenture and EDS have been chosen for activities like billing, call-centre operations, customer care management and data management.

In the future, reverse outsourcing deals are expected in sectors like retail, financial services, manufacturing and the government/public sector. In retail, for example, the ability to track customer behaviour and introduce systems and processes to take advantage of such information could yield a business advantage. All of this could require a higher degree of sophistication and complexity than what is currently available. These nascent trends are to be welcomed for another reason as well: outsourcing will no longer be seen as a one-way street.