The Hindu Business Line : `Diaspora gives India an edge in outsourcing'

INDIA will retain its edge in outsourcing despite stiff competition from other low-cost destinations, largely on account of growing influence and expertise of Indian diaspora, especially in the US and the UK, according to a report by Evalueserve and World Bank Institute.

According to the report, many Indian engineers who had started moving to the US in the 1960s had either become entrepreneurs, venture capitalists, or senior executives in large and medium-size companies by the 1990s. Many of these professionals started their own companies in India, while others convinced their companies to hire Indian IT professionals.

"This provided more visibility to the Indian talent pool and resulted in the strengthening of the diaspora. For example, by late 1999, Indians constituted approximately 24 per cent of the IT professional population of Silicon Valley," the report said.

Riding the wave of the growing reputation in the IT sector, many well-placed senior executives in big corporations influenced outsourcing-related decisions in India's favour, the report opined.

The Evalueserve-World Bank Institute study estimates that the combined annual personal earnings of more than 20 million persons of Indian origin (PIOs) is about $364 billion; the gross domestic product of India (with a population of over one billion) is $550 billion.

The study also points out that Indians are beginning to be actively involved in the social and political scene. In 2000, the diaspora had four elected members of Parliament in the UK and 11 members in the House of Lords.

"Indian offshore vendors and various captive centres of global corporations are already moving up the value chain and performing more complex and value-added activities for their clients. Apart from providing the required capital (through investments), the Indian diaspora is expected to increasingly play a crucial role in the gradual emergence of India's high-end knowledge services sector," it said.

The diaspora is expected to provide more organised platforms for the sharing of knowledge and best practices. It is also expected to increase the brand equity of the Indian industry but without giving a semblance of bias for their home country over other low-wage destinations.

Additionally, some Venture Capitalists in the US - particularly those of Indian origin - are actively funding Indian companies that have back-end operations in India, so that they can save on research and development costs.

It is estimated that as on March 2004, over 150 start-ups in the US already have some form of back-end in India, and this number is likely to double by March 2006.