IT Outsourcing Risks in India

IT Outsourcing Risks in India

India is regarded as one of the most developed global IT outsourcing locations, offering a diverse range of services. For more than 25 years, the country has been working in this direction and has maintained its position as one of the top IT outsourcing destinations.   

IT outsourcing companies established in the country are rapidly growing their operations all over the world as the demand for qualified software developers grows. The country’s supremacy in the market has been aided by the low-cost factor and a skilled skill pool. As a result, India’s average developer hourly rate is currently approximately $30.   

More than 120,000 IT specialists graduate yearly from the country’s top universities, according to the Tholons Services Globalization Index 2019. This has boosted the development of IT outsourcing hubs in the country, such as Bangalore and Hyderabad. These centers provide high-level capabilities at a lower cost than similar destinations around the world. Due to the large reliance of foreign organizations on the same, this has also enabled India to seek greater pricing in the future. 

IT outsourcing services companies in India have developed at a quicker rate in 2020 as total IT expenditures expanded by 5.5% which is valued at $1.08 trillion, according to global research firm Gartner. The report said that the global cloud computing market was worth $36.7 billion in 2018, and is expected to reach $285 billion by the end of 2025, representing a CAGR of 29.2%. 

“The first stage of cloud adoption has come to a close. Companies were first trying the advantages to see how they would play out, but they are now becoming more common. The size of the transactions is increasing. From next year forward, it will be one of the greatest catalysts for enhanced IT service growth,” said Harit Shah, an IT analyst at Reliance Securities. 

Meanwhile, Indian IT firms have doubled their younger intake in an attempt to combat attrition. With the largest attrition in the 3–7-year experience bracket, their aim is to hire and train freshers in order to immediately deploy them into projects. TCS, Infosys, Wipro, and HCL Tech have pledged to hire 160,000 freshers in 2021-22, up from a previous estimate of 120,000. In 2020-21, they employed 82,000 freshmen in comparison. Fresher pay haven’t changed much in the last decade, so the cost advantage remains, according to Apurva Prasad, IT Analyst and Vice President at Elara Capital 

According to NASSCOM’s Gupta, clients of outsourcing companies are also willing to re-negotiate pricing when higher-end talents are required, and some organizations are also equipping employees from adjacent areas with the relevant skill sets. Ballurkar, whose recruiting agency has been working with customers on a number of hire-train-deploy models, said his firm teaches cloud or cybersecurity skills to programmers. “Even in .NET, which is an old skill, we are training individuals. However, many businesses are having trouble locating Java and .NET resources.” 

India- China Conflict Negatively Impacts Economy 

Over a half-decade of increasingly tense China-India border standoffs, with aggressive patrolling techniques and provocative military development projects along and near their respective areas, have prepared the ground for fatal conflict in 2020. These circumstances were exacerbated by a rapid deterioration in India’s relations with Pakistan, a hostile neighbor and one of China’s closest allies, beginning in early 2019. India’s surprise amendment of Jammu and Kashmir’s constitutional status in August 2019, which included territory contested by China and Pakistan, heightened regional tensions and put new demands on Indian security forces. The global COVID-19 pandemic that began in China in 2020 wreaked havoc on India’s economy, sparking recriminations and creating concerns about the future of China-India business and political relations.   

In 2020, both China and India pushed their land border rivalry into other aspects of their bilateral relationship, further complicating crisis management. The steps were made to show resolve and communicate the increasing costs. Indian signaling included the deployment of a warship to the South China Sea in June 2020, which drew immediate Chinese retaliation; a ban on fifty-nine Chinese web apps from Indian markets, including WeChat and TikTok; and new barriers to Chinese companies participating in a variety of Indian infrastructure projects, such as highway construction. Chinese signals include a temporary but crippling power blackout in Mumbai in October 2020, which was caused by a cyberattack by Chinese hackers. 

Although both sides intended for these nonmilitary signals to deter military escalation along the China-India border, they show how future crises could spill over into other areas, escalation rather than de-escalation. Future Chinese intensification of cyberattacks on India’s key infrastructure, for example, would put great public pressure on India’s authorities, but it’s hard to say whether they’d feel compelled to intensify or deescalate. Similarly, if India attempted to erect new hurdles to Chinese trade or investment, China could retaliate by restricting the supply of crucial raw materials to India’s pharmaceutical industry. Other causes of friction between China and India, according to the 2015 CPM (Contingency Planning Memorandum), might flare up at the same time as a potential land border dispute, such as hypothetical naval standoffs or dramatic new developments in Tibet connected to the Dalai Lama’s succession. 

India continues to adhere to its own unique foreign policy approach of strategic autonomy, attempting to balance its economic benefits with China with the security threat posed by the Chinese military to India. Attempts to preserve a stable and strategic alliance with Beijing were never fully ignored in New Delhi’s foreign policy, despite China’s tremendous military modernization and the expanding profile of the People’s Liberation Army constituting a severe threat to India’s territory. 

India’s steadfast engagement with BRICS (Brazil, Russia, India, China, and South Africa), the New Development Bank, and the Asian Infrastructure Investment Bank, as well as its eventual membership in the Shanghai Cooperation Organization (SCO), has bolstered the prospects of stable, if not bright, China-India relations. However, this optimism appears to have been buried by national goals and conflicting foreign policy frameworks in recent years, especially after the continuing boundary friction in the last five years. The impasse in the western sector of the China-India border, particularly following the Galwan valley, has cast long shadows over whether relations between the two countries can ever normalize.  

China-India relations have been steadily deteriorating since the Galwan crisis of 2020, and are still at a low point, particularly as border disputes, competing nationalisms, competitive power politics, resource competition, and regional power play in the Indo-Pacific have taken center stage and emerged as critical variables gradually defining the bilateral relationship. China’s competition with the United States, as well as India’s emerging strategic relationship for ‘Global Good’ with Washington, are gradually influencing the China-India equation. 

India has succeeded in maintaining its commitment to the Quadrilateral Security Dialogue (Quad), strengthening bilateral defense cooperation with Quad countries and other Indo-Pacific partner states, and implementing an active Indian Ocean maritime security strategy. Similarly, China has been expanding its footprint in India’s Himalayan neighborhood through ‘charm offensives’, developing strategically strong ties with countries like Pakistan, Afghanistan (now under Taliban control), and Nepal (creating a Himalayan Quad), while ignoring India’s security and sovereignty concerns. 


China believes that “India was punching above her weight” and should be brought down a few notches. The Ladakh skirmishes are the Chinese way of boasting of its military prowess, embarrassing India, impacting her economic development, encouraging South Asian nations to toe the Chinese line, and undermining India’s standing with Washington as well as other capitals. 

Rising Cybersecurity Issues Undermine IT Outsourcing Industry 

According to cybersecurity and digital privacy firm Kaspersky, India is one of the top five targets for cyberattacks in the APAC region, particularly security breaches involving cyber espionage. For reasons such as fast rising use of digital technologies coupled by a comparable lack of cybersecurity awareness, as well as inadequate resources dedicated toward mitigation, Kaspersky believes the APAC area to be one of the hottest targets in the world for cyberattacks. 

Based on its data and advanced cyber-intelligence gleaned from numerous cybersecurity reports, it has identified India as one of the top five targets for cyberattacks, with a focus on cyber espionage. The kind of attacks that are expected to increase are APT (Advanced Persistent Threats) cyberattacks with the intention to collect valuable geopolitical, business, and military intelligence 

What does this mean for Indian businesses?   

  • Ransomware Attacks to Supply Chain Disruptions. The year 2022 will be marked by a steady stream of ransomware assaults that increase revenue through extortion. There will be an increase in triple extortion ransomware, in which a ransomware assault against one company becomes an extortion threat against its business partners whose data it owns, or those who can’t afford supply chain disruption. 
  • Proliferating Online Accounts, Weaker Passwords. Consumers’ current weak password practices, a significant proliferation of online accounts in the pandemic era, and a surge in cyber-attacks will result in a vicious loop of breaches and subsequent compromised passwords, allowing attackers to launch fresh attacks. 
  • Pressure Methods and DDoS Attacks. Ransomware gangs will use a variety of coercion tactics, including encryption, data hostage situations, paralyzing operations, and DDoS (Distributed Denial of Service) attacks. In addition, as penalties on belligerent nation states increase in 2021, the pressure on economically disadvantaged countries will increase, leading to increased financially driven attacks by advanced persistent threat (APT) groups.



Final Thoughts 

How India deals with the boundary crisis, as well as the choices and tradeoffs it makes, will affect the business community including the IT outsourcing industry. If restrictive policies to stifle trade come into effect, it will be important for organizations with outsourcing partnerships in India to prioritize corporate resilience, business continuity, and cybersecurity. Work with global top talents in countries with political and economic stability and most importantly, strong data privacy laws. Look into Third Wave Outsourcing to help you harness the benefits of outsourcing. 

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