The Evolving Indian Offshore Services Environment: Greater Breadth, Depth, and Scope

Abstract

Since 1995 the offshoring of administrative, technical and software services to India has rapidly evolved from an insignificant curiosity only studied by a few scholars of international development to a major issue discussed by many in the United States and Western Europe. India’s position has expanded and evolved in terms of numbers of employees, the sophistication or value-added of the work performed, and the types of service activities. Drawing upon more than 100 interviews conducted in India in 2004, 2005, and 2006 and presentations by executives at two Sloan Foundation funded conferences in 2005 and 2006, this paper argues that two separate but related ecosystems have recently emerged in India to provide services and, more recently, high technology products for the global economy. The first ecosystem is for service provision. Here we suggest that today the service provision ecosystem is so sophisticated that it can endogenously create new service offerings and attract overseas firms to transfer new activities in new industry verticals. The second ecosystem, which is smaller and only recently emergent, is gestating new venture capital-financed, high technology startups. We provide a typology of these firms and suggest that some have bi-national roots linked to the U.S. Silicon Valley. We explore the possibility that the leading Indian information technology systems integrators may have created a new business model that is superior to that of the incumbent global market leaders such as IBM, EDS, and Accenture. Finally, we provide insight into the evolutionary trajectory of the Indian offshore service provision infrastructure suggesting that it will only grow in size, complexity, and centrality to the world economy.