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India Tech Outsourcing Business Expected to Surge - 2003-12-07

The technology outsourcing business in India is expected to boom despite global job cuts in the information-technology industry.

The international consulting group Gartner says India will continue to witness huge growth in technology outsourcing, despite an outcry in countries such as Britain and the United States about job losses.

In recent years, scores of multi-national corporations have moved software development and back-office work to developing countries such as India. That has prompted huge protests from labor unions in Britain and proposals to ban outsourcing in the United States.

But in its latest predictions for the IT industry for 2004, the Gartner group says the process of moving jobs from the developed world to countries like India is irreversible. "Overwhelmingly, companies are moving ahead with their plans regardless of the backlash, it is just too compelling an opportunity for them with the cost pressures they are under, profitability pressures they are under," said Gartner vice president Partha Iyengar.

The outsourcing business took off in India when multi-nationals started moving work, such as help calls to payroll and insurance claims, to Indian cities. This year, outsourcing services accounted for $14 billion in India and is expected to quadruple in the next few years.

But Partha Iyengar said the area of what is called IT services is growing more rapidly. "IT services space, which is really where all of the current success of India is, is when companies want to develop new application systems or applications for internal use whether it is to handle their business systems, shipping systems or client relationship management systems etc," he said. "A lot of that development activity has been outsourced to India."

As result, nearly 20 percent of jobs in information-technology services are expected to move from developed countries to developing ones.

Not only is India known for the skill of its computer and software engineers, but the average professional wage is less than one-quarter of what it is in the developed world.

India's outsourcing sector grew by about 60 percent in the past financial year and is expected to grow at nearly the same pace this year. The sector accounts for about 20 percent of India's foreign exchange earnings.