In recent years India has become an outsourcing Hub for the West, mainly because of lower costs and a good talent base available in the country.

The outsourcing services include customer care, BPO, medical transcription, telemarketing, market research , manufacturing, designing data management services, engineering services, financial services, creative services, web analytics services, healthcare services, ghost writing, digital image editing services, and software services.

So what exactly is outsourcing and why do companies do this, with India hogging the limelight? There are questions whether or not the economic slowdown will affect the outsourcing trend and even whether it will expand to other areas.

Outsourcing can be defined as a process in which a company delegates some of its in-house operations/processes to a third party. Thus, outsourcing is a contractual transaction through which one company buys services from another while keeping ownership and ultimate responsibility for the underlying processes. The clients inform their provider what they want and how they want the work performed. So the client can authorize the provider to operate as well as redesign basic processes in order to ensure even greater cost and efficiency benefits. Importance in outsourcing should be understood where the third party or partner company takes full responsibility of any part of operations undertaken.

When a company decides to concentrate on what it's best at, it decides to subcontract some of the process such as testing, manufacturing, development to a certain extent to a vendor company to reduce the overhead costs of the main company and make more efficient use of land, labour and resources for more important activities.

A classic example is the Tata Nano car which has stolen the headlines in recent times. Tata Motors has outsourced the body manufacturing responsibility of the Nano to the Lord Swaraj Paul a London based NRI who also runs the Capro group. Many of the information technology companies in the hardware sector have outsourced customer care work and BPO to India as the cost savings are huge due to the abundant supply of talented man power and labour costs when compared to their home countries. Some get their act together and set up their own customer care base in India, examples being Dell and HP, while others outsource the services to partner companies like Infosys, Transworks, and TCS, which reduce the overhead costs and responsibility of the parent company to a large extent.

India has been the favorite destination for BPO, customer care and IT services for a long time now. The country enjoys a commanding 63% share of the offshore market. The estimated revenue figures for the financial year 2008 and for BPO in India is $10.9 billion and combining the IT sector the revenue generated has been put at around $30 billion. This 63% is a decline from 70% a year back, despite the industry growing at 38% a year back. That's because of competition from countries such as Eastern Europe, Philippines, Morocco, Egypt, South Africa and China. India is still going to see good growth in the future as the companies in India offer talent with experience of over a decade in the IT and BPO sector and communication has been the strong point of Indians comparatively.

The global economy has faced gloomy days from the beginning of 2008 and the US - from which nearly 80% of IT revenue in the country is generated - is the worst hit. Questions have arisen about the future of IT services outsourcing to India as America is in economic recession. But India offers quality IT, BPO, customer care services to companies outside India, so the future might swing either way with companies outsourcing projects to India and the other developing economies more than before to cut costs.

It's possible that India might see a slowdown in outsourcing of projects with companies themselves entering Indian shores to set up operating bases in the country leaving only the core competency behind, but that is highly unlikely. If the latter happens and we might see Indian IT majors shifting their priorities to consultancy which has been dubbed the future.

According to a silicon.com report, over the next six years, research and analysis outsourcing is poised to outstrip the growth of BPOs with revenues growing to the tune of $17 billion. India is still going to be the favourite due to the talent and the high education levels, capturing nearly 70% of the market share - $12 billion.

If India keeps up its competitive edge as one of the first in the outsourcing industry, the growth story may well continue, braving the threat of losing market share to the newcomers. X