The chairman of India’s outsourcing industry body, NASSCOM, is forecasting a slow down, despite popular wisdom that portends good times for India’s outsourcing industry as global corporates seek to reduce overhead.

 “Those statements are correct, there will be more opportunities to do outsourcing, but the total volume of business will come down, so growth will come down,” Dr Ganesh Natarajan, chairman of NASSCOM told CommsDay at the sidelines of the Asian-Oceanic Computing Industry Organization meeting in Hong Kong yesterday. “There will still be growth, but it will be slower.”

Dr Natarajan, who is also CEO of ZenSar Technologies, an India-based outsourcing service provider employing 5,000 staff, projects that the country’s outsourcing revenue will grow about 20% this year, down from 28% last year. For the year ended March 2008, India’s outsourcing sector, which includes IT services outsourcing as well as business process outsourcing, was worth US$52 billion, out of which $41 billion is derived from exports.

“I think it will be slow for the next 12-15 months, and then when the global economy revives, then we will be back to the high rates of growth,” he said.

TECH FACTORY: While outsourcing often spurs visions of call centres, Dr Natarajan revealed that India is now emerging as a major contributor of new technology through its IT service outsourcing capabilities.

“If you look at India’s outsourcing market, roughly 60% is technology, and 40% is process outsourcing. 60% is what we call application development, maintenance, testing, ERP and 40% is BPO, which is transactional services and contact centres,” he explained.

According to Dr Natarajan, India’s outsourcing sector has already advanced beyond purely cost as a competitive advantage.

“The key to success [for India] is primarily the quality of people. Today the industry employs nearly 2.1 million people. They are all bright, well-educated, engineers, good English speaking skills,” he said.

“Those were the basic skills, but over the last ten years, we’ve had very good processes. Today, the reason why I think we are so successful is that our understanding of customers’ processes is probably the best. So in terms of an insurance company, we know how it works – it goes beyond technology.”

NEXT WAVE: This is what he calls the three waves. “The first was lower cost and high quality. The second was process quality, or our understanding of processes. The third, which we are working on now, is innovation. Innovation is from people who are building new intellectual property, new products, people innovating process. My own company has centres in China, Poland, the US and the UK, and we sometimes distribute the work, so it’s really a process innovation model.”

One of the key areas for innovation is found in the way applications are developed, one of the major services that India provides to global companies.

“If you look at the way applications are developed today, it is still very boring, it’s old processes. I think innovation will be much richer applications, much more user oriented. There’s a term called, semantic applications, which means that the applications itself will evolve based on the user preference,” he said. 

 “I think India can be the leader in saying that ‘how do we rebuilt the applications, to be more user centric, rather than manufacturer-centric. What this means is not just an understanding of just technology, but processes, the way people think and work, so it’s a whole new environment of looking at psychological preferences, even colour preferences.”

Meanwhile, one key trend he sees for the outsourcing market going forward is more collaboration between countries and regions, including Indian companies expanding to countries like China.

“I think this is important. I think even in China, we need 14-15 centres where India companies can set up. I was in Suzhou a few weeks back and it has really good infrastructure. Now we have to build the talent and skills there so that people can start building centres there,” he said. “I think in the future, maybe 70% of the work will be done in India, and 30% will be distributed across Asia, in Eastern Europe, Latin America.”