Outsourcing the Provision of Software and IT-Enabled Services to India: Emerging Strategies

The debate about the competitive threat posed for European and North American employment by the evident preference of many multinational enterprises to relocate software development and information technology (IT)-enabled business services (ITES) offshore to India tends to be overly focused on cost comparisons. This is understandable given that cost considerations are a key driver behind the decision to relocate to India. It is argued in this paper that it is also important to analyze the wider strategic logic behind the offshoring impulse and the context from which Indian software and ITES providers have emerged, the business models being adopted, and their strengths and weaknesses. It is argued that successful Indian IT and ITES companies will pursue higher value-added activities through acquisition of related European- and North American-based companies in order to achieve greater credibility with major customers. Alternatively, Indian companies will become captives of European or North American companies.