How outsourcing took over the IT industry – and led to digital transformation

‘Outsourcing’ is a word that is often affiliated with the work companies delegate to an external source to cut costs, or when they do not have internal expertise. Sure, it attains high functionality, but we seem to overlook a major aspect of the evolution of outsourcing, from where it started as a solution to Y2K problems to becoming a cut-throat competition of specialized nature. A need will always exist for companies to co-exist with one another to get work done, but outsourcing functions in a market will continue to grow so long as the competition is healthy.

IT offshoring around the globe started in 1963 and can be dated back to when Electronic Data Systems (EDS) signed an agreement with Blue Cross to build and handle computer systems for them. In the Indian scenario, between 1990 and 2000, the outburst of service-oriented markets laid the foundation of an offshoring ecosystem, thus attributing to the positive impact of economic liberalization in India. Companies thrived in this historic period when non-core operations were taken care of by IT pioneers that mainly encapsulated telecommunication management, system integration, and application development. The Indian IT-BPO industry touched US$73 billion in overall software and services revenue by 2010.

The next phase of this evolution commenced with the advent of mobility and cloud during 2007-2011 when many startups and IT professionals rose to prominence. For such a burgeoning industry, the talent has also rapidly grown parallel to the trend. Soon, the job market rose to give employment to around 2.5 million professionals in the sector. The kind of innovation in cloud and mobility solutions we see today justifies our highly competitive market at a high rate of innovation. Therefore, the need for startups exists. This ecosystem grants the advantage and opportunity to any small team at any location to provide a life-changing solution to any sector.

Moving over to the next couple of years marks the beginning of the ‘new-age shift’ where the ecosystem takes full effect of the changes to the market environment. Various non-core operations could soon give rise to a positive scope for product-outsourcing. This will make businesses completely mobilize their branches, thereby upholding the digital vision. Need-based operations in the case of BPO and KPO functions have been running the show which has positively affected GDP, and a person in India can service any other country irrespective of the location of the actual problem.

Soon enough, we will see that MNCs and burgeoning companies in the Information Technology sector will establish a local workforce and only have to rely on a technology partner to oversee customer preferences.

So what drives outsourcing? One may say that every brand wants to cater to their customer and fulfil the requirements of a thriving business. But the actual fact lies in the expectations of the customer. The customer expects far more than yesterday, and the brand is expected to deliver. Technology has evolved to a whole new level of interaction with the digital consumer as well as maintaining an on-ground presence with a managerial stronghold.

All of this is driving towards the need for digital transformation. Today, technology has been able to automate intermediate processes, which has brought down the headcount to a quarter of what was required earlier to manage the same work. Essentially, outsourcing has led companies to understand and identify digital transformation to be the next phase of growth crucial for their success, which includes process, automation, and technology solutions.

Anupam Kulkarni is the Co-founder of iauro Systems, a mobile cloud product design and development company.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)