The Pros and Cons of Offshoring Roles to India

At Elliott Scott HR India we have seen an increase in and appetite for numerous roles, including global business services and HR operations being moved to India and we are currently working on a number of such positions. 

Businesses, often drawn in by the cost savings which is a front of mind consideration in today’s market, sometimes do not consider the wider pros and cons when making this organizational shift. So today we are going to explore this. 

We are all familiar with the term offshoring. Over the years global businesses have shifted their operations and services to foreign shores, with the aim of harnessing economic advantages, technological prowess, and specialized skills. 

The origination of Global Capability Centres (GCCs) traces back to 1985 in India, when semiconductor giant Texas Instruments, recognised the untapped potential of the country’s engineering talent and became the first global company to set up their Research & Development facility centre in Bangalore, India. Fast forward to the present, in the year 2022, India was running 55% of the world’s operational GCC centres. By 2023, India has grown drastically and has already touched 1,580 centres, with the projection of a rise to over 1,900 by 2025 and further to 2,400 by 2030 (iebf.org).

Tier one cities like Bangalore, Hyderabad, Mumbai, Gurugram, Delhi and Pune have been the go to destinations for organizations due to the presence of large talent pools within the area, as well as established infrastructure. 

Although India has the potential to be a top outsourcing destination, it is grappling with setbacks in the business arena. Issues like inadequate data security measures and the complexity of a multi-linguistic approach are among the challenges.

This is what to consider when deciding whether your organization should offshore to India:

Advantages:

• Lower Labor Costs: It is more affordable for companies Headquartered in the US or other Western countries to pay for employees overseas as this tends to come with a lower wage than those in their own country. This is why we see many manufacturing organizations offshore to India as they are labor-intensive businesses.  
• Lower Operational Costs: Costs of utilities, infrastructure and materials are lower in countries such as India making it a cost-effective move.
• 24/7 Operations: Companies can cover time zones different to their own which provides the organization with 24/7 operations. This also means that unfinished tasks can be passed from the home country to the offshoring company.
• Wider range of Skilled Labor: Offshoring to a new location widens the pool of skilled labor, many of the top offshoring locations such as India have a vast talent pool of employees that are proficient in English, degree educated and skilled to work.

Disadvantages:

• Language and Communication Barriers: There can be a different degree of depth of understanding and knowledge of the English language. 
• Cultural Differences: Cultural differences can be hard to navigate and could result in miscommunication. Public holidays will also be different in certain countries, so be prepared for periods of time when the home country is not working and the offshore country is and vice versa.
• Terminating Roles in the Home Country: The organisation may swap further roles to the offshore country to cut costs, this will mean the termination of this role in the home country.
• Time Zone Adjustments: Although due to different time zones, you will be able to cover more ground, this can also come with challenges. Making time for both teams to talk is increasingly difficult with a large time zone difference, this can lead to miscommunication and delays on completed projects due to waiting for the other team to sign on. 

India has become a hub for many Western companies to house their operations teams, which has benefited the country and continues to help grow the economy. Though there are considerations to be made. Due to the growth and appetite we have discussed, Elliott Scott HR will be utilizing our expertise and running a webinar in January on global business service centres. Through a panel discussion, we will cover tender, set up and implementation through to scaling and FAQ’s.  

If you are interested in attending this event please reach out to me via LinkedIn or at rc@elliottscotthr.com for more information.