Software outsourcing to India: Debunking common myths

When it comes to outsourcing, India is one of the first places people think about. The country has made a name for itself on the global IT scene as the biggest hub for innovation, technology, and expertise. However, just as outsourcing to India became an industry-wide practice, a few stereotypes and misconceptions have arisen.

Some Indian outsourcing companies have been blamed for low-quality deliverables, a thin talent pool of experienced programmers, poor management style, and an exaggerated pyramid of salaries that cancels out all the potential cost advantages. But if this is true, why are so many companies outsourcing to India?

In this article, we will explore the key reasons that brought India its status as the #1 global outsourcing destination and debunk the common myths that undermine the credibility of the local tech community.

The global rush for IT talent, propelled by recent pandemic-led digital transformation initiatives, urged businesses worldwide to look for new ways of sourcing skilled software developers, tempering the bias against offshore outsourcing. This trend has crossed all the barriers of economic turmoil, language differences, inefficient logistics, and lack of developed cultural and ethnic ties, becoming a win-win strategy for companies and their employees.

India did not stand aside. Despite having some strong competitors, including China, Mexico, Brazil, Poland, and the Philippines, the country has managed to outmaneuver all others and emerge as the world’s leading offshore services location. 

Over the years, India’s share in the global outsourcing market grew to 59%, bringing the nation closer to its dream of becoming a $1 trillion digital economy. According to the National Association of Software and Service Companies (Nasscom), the country’s IT industry’s revenue reached $227 billion in 2022 showing a 15.5% YoY growth.

There are several factors that enabled India to become one of the fastest-growing and largest outsourcing hubs for tech innovation in the world:

Today, India boasts advanced telecom, internet, and mobile networks in all major urban areas, which allows for a smooth flow of communication and remote work opportunities. On top of that, the country’s IT hubs, such as Hyderabad, Mumbai, and Thiruvananthapuram’s Technopark, also offer high-speed bandwidth through satellite connectivity, submarine cables, and fiber optic networks.

The Indian IT outsourcing industry draws on talent from 150 nationalities, and over 5 million digitally-skilled professionals. The country’s tech ecosystem also promotes diversity and inclusion with 1.8 million female employees. In fact, India has more female graduates in STEM (43%) than developed nations like the US (34%), UK (38%), France (32%), and Germany (27%).

One of the key reasons global organizations outsource to India is because of its cost-effectiveness. The total price tag for a software development project in this South-Asian country can be 25-35% lower compared to the US and Europe. Furthermore, Indian outsourcing vendors usually provide great pricing flexibility and several billing options, e.g. pay by the hour, by the week, per month, or by the project. This enables foreign companies to exercise greater agility and creativity in budget management while saving costs.

Indian outsourcing companies serve clients across several industry verticals, including the manufacturing, healthcare, travel, telecommunications, retail, and media. Commonly outsourced services to India include mobile app development, customer support, data entry, BPO, and data center operations.

Building up the information technology sector is a top priority for the Indian economy. The government has framed policies on GDP growth, taxation, power, telecom, industrial parks, and special zones to yield maximum benefits from the outsourcing industry. These initiatives include the recognition of electronic contracts, the fight against cybercrime, the building of high-tech IT parks, the permission of 100% foreign equity, and the removal of the registration requirements that enabled BPO employees to work from anywhere.

Despite all the benefits of IT outsourcing to India, some companies are still cautious about moving their operations abroad. They harbor some serious misgivings about the quality of local talent and software outsourcing services, time zone differences, language and cultural barriers, and the security of their project. Let’s dive deeper into these myths.

During the dot-com boom, the influx of money and rapidly expanding popularity of information technology created an internal dynamic in India where people with some entry-level computer skills could proudly wear the esteemed title of “software engineer”. Many new tech companies were emerging with the sole purpose of carving out their slice of the business outsourcing market. 

At that point, there were a lot of freelancers and firms from India that failed to deliver high-quality services and adopt a culture of openness and collaboration. This fueled the difficulty in finding a reliable outsourcing partner, and created a negative stereotype that lives up to this day. 

However, the Indian software development services landscape has changed drastically since the late nineties. As the competition grew, outsourcing providers started to pay more attention to the quality of their services, and invested in their tech talent, providing maximum security and adherence to deadlines.

Such dedication bore fruit, as 80% of European and US businesses now name India as their prime outsourcing destination. The country is also consistently placed within the top five digital nations in Kearney’s Global Services Location Index (GSLI). Furthermore, around two-thirds of companies that moved their IT operations to India reported that the quality of service provided by their overseas partners was either equal to or better than that provided by their in-house teams.

One of the key characteristics of the Indian tech talent pool is its massive youth demographic. With over 200K annual IT and engineering graduates, it’s quite rare to find a software developer older than 28. While young age is not a problem in itself, it is fraught with the risk that newly-minted tech specialists have little to no real business experience. 

The fact is, Indians value hard work and perseverance, which are an ingrained part of their culture and upbringing. The combination of these qualities along with a strong drive for technology innovation as a way of life turn the young generation into passionate, digitally savvy professionals, eager to upskill themselves in sync with the evolving work landscape. 

On top of that, India boasts a robust and diversified tech ecosystem, featuring over 6K tech service companies, 2K product companies, 78+ unicorns, and more than 25K technology startups. Working in such a vibrant and multifaceted environment pushes young professionals to take on responsibilities earlier on in their careers, making them more competitive, creative, and business-oriented.

The quality of India’s tech talent is confirmed by several renowned global rankings. According to HackerRank, the overall score of Indian programmers is 76 out of 100, which allowed them to land 31st on the platform’s leaderboard. The national tech community also holds second place on TopCoder’s list of the most first-place finishes in its coding challenges. 

According to Coursera’s analysis, Indians demonstrate strong core competencies, with 46% performance in technology and 26% in data science. They are particularly well-versed in cloud computing (74%), web app development (56%), mobile development (54%), and software engineering (48%). Learners in India are also keen on developing their skills in theoretical computer science (64%), operating systems (58%), machine learning (41%), leadership and management (36%), security engineering (30%), and data analysis (26%). 

The time difference is often referred to as one of the biggest disadvantages of outsourcing to India due to limited collaborative working hours. It is, indeed, hard to stay connected and avoid communication gaps when a part of the team is in California starting their workday in the office, and their peers in Bangalore or Chennai are already approaching the close of business hours. With a 12-hour time gap, it can be quite challenging to arrange meetings and find moments to speak. 

However, having operational units spanned across several time zones isn’t always a problem. Outsourcing to India is an ideal option for client-driven companies set to provide their clients with 24/7 help desk or customer support services. This move enables round-the-clock operations, constant availability of seasoned tech specialists, and swift resolution of any production issues before they make it into the mainstream. 

For EU-based companies, the timezone gap does not pose any serious difficulties at all. With just a 3.30-hour difference there is still a 56% working time overlap, which allows in-house and remote teams to stay in touch with each other while being independent. This prevents miscommunication, expedites project completion, and creates a growth continuum.

The success of software development largely depends on having a clear line of communication. Without it, you will likely find your IT project outsourcing progressively heading in the wrong direction. This can result in chaotic workflow, stagnant progress, and missing deadlines. 

Some IT professionals working in  global businesses have credited their Indian peers with these vices. The managers claim that language and custom barriers often require them to revisit the same issues, explain the big picture of what is happening, translate requirements to Indian programmers, and even deal with a different “sense of time” leading to frustration and low productivity. 

The reason behind miscommunication can be deeply cultural in origin. To put it in a nutshell, Indian society is very hierarchical, and employees are typically used to receiving direct and comprehensive instructions from their leadership, and doing precisely what has been asked of them. At the same time, people in the West are usually given some vague goals and left alone to work out how to achieve them. 

To overcome some of these cultural issues when outsourcing to India, it’s best to provide all the details of your project as early into the development process as possible. Make a brief, that includes all the planning steps, create crystal-clear communication channels, and introduce project management tools to make the collaboration with outsourced teams more efficient. At the end of the day, it’s a win-win for the entire organization, and will likely lead to greater productivity and faster time-to-market.

Indian culture can also be considered as quite verbal, so another tip would be to record all communication in writing using email. It will bring everyone together on a common platform, and focus on a common cause. This move will also enable active cooperation between your in-house team and Indian software engineers, allowing them to quickly resolve misunderstandings, lead discussions, and track progress. 

It is important to note that while these stereotypes exist, they are not true for all engineering outsourcing projects in India. The country’s popularity with large enterprises, such as Microsoft, Oracle FinServ, Sun Microsystems, and Accenture, is  testament to the fact that no matter where in the world your tech staff resides, what really matters is industry-standard, high-quality service, coupled with decisive cost advantage. Moreover, each project is unique and requires careful evaluation and consideration before deciding on an outsourcing provider. 

As a digital-native technology services provider that aids Fortune 1000 companies accelerate their growth and bolster their competitive advantage, Grid Dynamics is a perfect partner to help you find a good-fit engineering team. With a wealth of experience in the realm of digital transformation and custom software development, our dedicated team has the necessary expertise to guide your business toward scalability and resilience in today’s fast-changing world. 

With engineering centers across the Americas, Europe, and India Grid Dynamics has the resources to cater to the needs of businesses of any size, wherever they are located. Our company has recently opened an office in Hyderabad, India, as a part of our long-term growth strategy aimed at scaling the best talent to deliver global services to our clients. 

Within the next year, we plan to expand our team in India, tapping into a strong pool of developers coming from a network of globally renowned, top-tier engineering and management schools. On top of that, Grid Dynamics has recently acquired two Indian companies – Mutual Mobile and NextSphere Technologies. These acquisitions will further enable us to diversify our global talent force, enhance digital capabilities, and bolster the growth of our Hyderabad center.

Our clients are enthusiastic about our presence in India as it allows us to seamlessly scale our engineering workforce and deliver high quality software solutions. If you would also like to experience the perks of technology innovation services in India, we are here to help you! Get in touch with us to find out the details.