In 2013, the Economist made the bold statement that India is no longer the choice for IT services and back-office work- two areas, traditionally associated with this offshore destination. To what extend is this true? Has the world’s top outsourcing destination lost its appeal?

“Be so busy improving your self that you have no time to criticize others.” – Chetan Bhagat”

For the time being, numbers are still in favor of India. According to Tholons, The Asia Pacific region (mainly India and The Philippines) was the leading outsourcing market in 2013. Services exports for India were reported by NASSCOM to have grossed US$75.8 billion for FY2013 and Bangalore was the top outsourcing destination in the globe.

American and European companies are still flocking to send some of their business functions over to their Indian outsourcing partners. The US and Europe are the biggest drivers customers for the Indian outsourcing industry and account for 60% of IT and 31% of BPO exports in the country. Within these outsourced tasks are financial services, high-tech/ telecom services, manufacturing jobs, and retail. An estimated over 2.2 million people in India are employed by outsourcing companies.

Quantity does not equal quality

Despite the positive figures, the overall outsourcing trends are shaped not only by the number of contracts but also by the quality of the job done.

Complaints about the overall level of customer service, quality of help, and the linguistic aspects of communication are increasing. The international IT giant Dell faced a wave of customer complaints and criticism after an increasing number of clients had disappointing encounters with customer support. The company’s bulletin board included comments like “How do I know my credit card information is safe in India?”, “Customer service has been compromised”.

Dell’s headquarters in Texas received reports from customers who had to speak with technical support staff whose accents were barely understandable and instead of one-on-one support many people received generic scripted support responses.

What does the future hold for India?

According to Vivek Wadhwa, a fellow at Stanford university the key problem is not regional, or localized only in India: “It is not that Indian outsourcers have become less capable of servicing Western needs. It is that their customer base—the CIO and IT department—is in decline. With the advent of tablets, apps, and cloud computing, users have direct access to better technology than their IT departments can provide them”.

Customer needs and demands are changing and adapting to this challenge requires more than simple retraining or debriefing of your outsourcing partners. More and more IT services become customizable and new technologies are allowing for many processes to become automatized and thus- much cheaper. This can lead to a gradual decline in outsourcing especially for IT tasks, and many processes have a chance to be resourced back to the US or Europe from their current offshore destinations.

This, however, will take at least 5 to 10 years to spot a sharp decline and for now, India remains the most popular and cost-efficient option for outsourcing.