The Evolving Indian Offshore Services Environment: Greater Scale, Scope and Sophistication

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 types of service activities, and the sophistication or value-added of the work. 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 activities in new industry verticals. The second ecosystem, which is smaller and only recently emergent, is gestating new venture capital-financed, technology-based startups. We provide a typology of these firms and suggest that some have bi-national roots linked to the U.S. Silicon Valley. Finally, 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 Western service providers. We believe that the Indian offshore service provision infrastructure will grow in size, complexity, and importance to the world economy.