Why source from India
Lower wages – approx. 10 times lower compared to the US or Europe
A comprehensive study conducted by the World Bank in 2004 documents that Indian wages are approximately 10 times less compared to European wages. In particular labor intensive industries can hence take advantage of lower labor cost by shifting from European to Indian suppliers for select categories. Already today the Indian economy is growing with more than 8% per year and several Indian experts expect to see the international trade volume double within the next 5 to 6 years. Especially suppliers for the automotive industries, tool- and mechanical engineering companies as well as the pharma- and the clothing industry which already export competitive products, modules and system components to Europe will drive this trend. Sourcing from India is particularly interesting for European suppliers with labor intensive, shippable products and components.
Stable political and economic environment
The Indian economy is booming and growing with over 8% per year – some sectors even considerably faster (e.g., mechanical engineering and construction with 19.6%). The process of economic liberalization during the 1990s, as well as the opening of the country for foreign investors has resulted in the emergence and growth of numerous industrial parks and globally competitive companies. The strict laws on protection of intellectual property as well as the right to choose in international contracts the applicable law have established Indian companies as reliable suppliers for European and US companies. As a consequence the investment experts of Deutsche Bank expect that India will in the medium term deliver a higher growth compared to China or Malaysia due to the stable economic and political environment.
High qualification of the workforce
The universities of India enjoy an excellent reputation and produce year after year a large pool of highly educated graduates among which 75,000 IT graduates and over 2 million English speaking graduates. Compared to other low wage countries which at a first glance may seem equally interesting for outsourcing business processes, India has several advantages:
India is already a well established supplier market for many US and European companies – the advantages are clear:
- Lower wages – approx. 10 times lower compared to the US or to Europe
- Stable political and economic environment
- Strict laws to protect know-how and intellectual capital
- High qualification of the workforce incl. English language capabilities
- High productivity and good manufacturing equipment
High productivity and good manufacturing equipment
Indian suppliers have been cooperating for many years with foreign companies on the product and production technology development that has allowed them to achieve significant efficiencies, deliver productivity gains, increase reliability and most importantly, upgrade production technology. Many Indian companies have started as a simple “made to order shop” and now developed into an integrated system and component manufacturer.
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- Number of highly qualified graduates – in the Philippines, another growing outsourcing destination, less than 400,000 graduates are produced every year – among which only 15,000 IT graduates. Even China with its 50,000 graduates per year cannot compete with India. Ireland a well-known European outsourcing destination seems rather negligible with its 34,000 graduates per year, among which approx. 5,000 IT graduates.
- Qualification – IIndian universities enjoy globally an excellent reputation. The Indian Institute of Technology” is globally leading in its domain. Many clients across the US and Europe already access leading Indian knowledge and capabilities in particular in engineering and computer sciences since local resources with equal capabilities are not available in the market.
- English knowledge and capabilities – 2 million Indian graduates are fluent in English – European languages especially German, French and Spanish are also becoming increasingly popular. In China the number of English speaking graduates is negligible – furthermore, English speaking Chinese are typically more interested in exploring opportunities in the global labor market than staying in China and providing outsourced professional services.