From IT to Finance & Accounting Functions: Why other countries are relying on India’s Outsourcing Market
India has emerged as a global outsourcing hub due to its abundant pool of skilled and educated professionals. Let’s explore what kind of outsourcing services, the country provides.
- The Indian Outsourcing industry employs over 4.3 million people.
- As the global market becomes increasingly competitive, businesses are looking for ways to reduce costs and improve their efficiency.
- Let’s explore the different functions businesses are outsourcing to India, including IT, BPO, Finance and Accounting.
The Rise of India as a Global Outsourcing Hub
As the global market becomes more competitive, businesses are seeking ways to cut costs and improve their efficiency.
How are they achieving this? Through outsourcing their IT, finance, tax, and accounting functions to countries like India.
With its abundant pool of skilled and educated professionals, India has become a significant destination for companies seeking innovative solutions.
While the United States remains the largest outsourcer, other countries like the United Kingdom, Australia, Canada, and Singapore are also turning to India for cost-effective talent.
India’s English-speaking workforce, reasonable labor costs, and business-friendly policies make it an ideal location for a talent hunt.
IT - What functions are countries outsourcing to India
The demand for skilled workers in the tech sector is increasing rapidly.
Despite emerging competition from Eastern Europe, Latin America, and the rest of the Asia-Pacific region, India remains the top destination for IT outsourcing.
India is also an attractive option for hiring web developers as their salaries are lower compared to those abovementioned regions.
A Korn Ferry study predicts that India will have a 1 million surplus of skilled tech workers and become the technology leader by 2030. Indian IT & BPM outsourcing industry has established over 1,000 delivery facilities in approximately 80 countries.
In the next five years, the IT sector's export revenue is projected to increase by eight to nine percent annually.
The Indian government is also investing heavily in infrastructure to support this growth.
Roles they are outsourcing for
- IT infrastructure & management
- Website development
- Application (software) development
- Database development
- Website Hosting
- Application (software) support or management
- Database management
List of 10 best IT Outsourcing Companies in India
- Tata Consultancy Service
- HCL Technologies
- Wipro Limited
- Tech Mahindra
- Larsen & Toubro Infotech
- The NineHertz
Currently, India's BPM sector has a workforce of around 1.4 million, with IT and BPM together employing more than 4.5 million people.
The IT outsourcing industry in India is projected to grow at an annual rate of 12.42% between 2023 and 2027, resulting in a market size of US$12.47 billion by 2027.
Human Resources - What functions are countries outsourcing to India
Human Resources outsourcing is crucial for businesses of all sizes.
By transferring HR responsibilities to an external vendor, businesses can save time, resources, and money spent on routine HR tasks.
Utilizing HR outsourcing in India enables companies to access a vast pool of talent while adhering to complex local labor laws.
Understanding the process of HR outsourcing can help professionals make the right decisions when guiding their employers. It involves a contractual agreement where a business transfers some or all of its HR responsibilities to an external vendor.
Countries outsource the following HR functions to India:
- Recruitment and onboarding
- Talent acquisition
- Background screening, drug tests, and reference checks
- Training and upskilling
- Performance management
- Payroll processing
- Benefits administration
- Retirement planning
- Workplace risk management
- Safety management
- Law Compliance
Here are some of the popular companies In India that provide outsourced HR services.
- ABC Consultants
- Adecco India
- AON Hewitt India
- CareerNet Consulting
- Global Innov Source
- Headsup Corporation
- Kelly Services India
- Manpower Group India
- Randstad India
- TeamLease Services
BPO – What functions are countries outsourcing to India
Business process outsourcing (BPO) means hiring an external company to handle one or more of an organization’s tasks according to specific performance goals.
A common example of business process outsourcing is when a company hires another company to handle their payroll tasks. By doing this, the company can save time and money, while also making sure their employees are paid correctly and on schedule.
Here is some common backoffice work that other countries are outsourcing to India:
- Financial planning, analysis, and strategies
- Financial statements and reports
- Tax reporting and filing
- Accounts Receivable/Accounts Payable Management
- Cost Accounting
Why countries outsource bookkeeping functions to India
The market for bookkeeping and tax services is growing rapidly.
Many small and medium-sized enterprises (SMEs) as well as CPA firms are outsourcing work to India in order to reduce costs while maintaining high quality.
India has a large pool of talent, with over 350,000 members of the Institute of Chartered Accountants of India as of April 1, 2022.
This indicates that the country has the necessary skills and knowledge to provide excellent services to businesses in the United States.
Many companies outsource different bookkeeping roles to India. Among the popular bookkeeping roles that are outsourced to India are:
- Accounts Payable
- Accounts Receivable: Bank Reconciliation
- General Ledger Maintenance
- Payroll Processing
- Tax reporting and filing
Indian accounting professionals can handle a range of services, from bookkeeping to financial statement preparation, and they have the expertise to manage even the most complex projects.
Common tax services that are outsourced to India
India is a preferred destination for outsourcing various tax-related tasks by companies from different countries, especially the US.
The US tax system is complex, with multiple tiers, with taxes imposed by federal, state, and sometimes local governments. As a result, there is a wide range of tax forms, and corporations have to abide by stricter tax regulations.
- Tax Preparation
- Tax Compliance:
- Tax Planning:
- Transfer Pricing.
- Tax Research:
Eligibility for Becoming Income Tax Return Preparer in India
Previously many outsourcing companies required you to be an Enrolled Agent (EA) to prepare US Tax Return. An enrolled agent is a person who has earned the privilege of representing taxpayers before the Internal Revenue Service in the US.
But now the scenario has changed. You just need to have taxation knowledge and analytical skills.
- They are hiring CA dropouts, semi-qualified CAs, and B. Com graduates.
- Some companies, provide a three-month paid training to those who join.
- If you are a fresher or a professional with 1-5 years of experience, you can earn anywhere between INR 6 - 30 lakhs as an employee.
- However, if you intend to consult US-based clients or represent the taxpayers before the Internal Revenue Service (IRS), it is recommended that you become an Enrolled Agent (EA) or Certified Public Accountant (CPA).
Lately, Canada, Australia, and the UK have also started outsourcing tax work to India, and soon, Germany will likely join the trend.
Countries outsourcing Audit Support Services to India
Companies often outsource audit work to India, particularly when it involves specialized skills and can be performed remotely.
Some examples of audit work that are commonly outsourced to India include:
- Financial statement audit: Companies may outsource financial statement audit work to India to take advantage of the lower costs of labor. This includes tasks such as testing internal controls, verifying financial information, and analyzing financial statements.
- IT Audit: Companies may outsource IT audit work to India to ensure the security and integrity of their IT systems. This includes tasks such as evaluating the effectiveness of information security measures and reviewing system controls.
- Internal Audit: Companies may also outsource their internal audit work to India to assess the effectiveness of their internal controls and identify potential areas of risk. This includes tasks such as reviewing financial records, evaluating compliance with company policies and procedures, and identifying opportunities for process improvement.
- Compliance Audit: Companies may also outsource compliance audit work to India to ensure they are meeting regulatory requirements. This includes tasks such as reviewing policies and procedures, evaluating compliance with laws and regulations, and identifying areas of risk.
As per Grand View Research, the global market for outsourced internal audit services was valued at $16.9 billion in 2019 and is expected to grow at a CAGR of 22.6% from 2020 to 2027.
India is poised to be a major contributor to this growth, considering its cost advantages and expertise.
Advantages and Disadvantages of Outsourcing to India
Pros of outsourcing to India
Cost savings: One of the main reasons why businesses outsource to India is cost savings. Labor costs in India are generally lower than in many other countries, which can result in significant savings for businesses.
Time zone advantage: India's time zone is 9-12 hours ahead of the US and Europe, which means that businesses can have work done while they are closed, leading to faster turnaround times.
Quality of work: India is known for providing high-quality outsourcing services. Indian professionals have a strong work ethic, are detail-oriented, and strive to deliver projects on time and within budget
Client Support: Outsourcing to India offers the advantage of having excellent client support. Their workforce is trained to handle modern communication technology applications such as Skype, Zoom, and more.
Cons of outsourcing to India
Poor management and poor quality: Ensuring the quality of work can be a challenge, particularly when working with remote teams that are not under direct supervision.
Lack of Privacy and Security laws: Outsourcing to India can pose certain privacy and security concerns due to the lack of comprehensive privacy and security laws in the country. While India does have laws in place to protect intellectual property rights and personal data, there are still some gaps and limitations that could potentially expose sensitive business information to unauthorized access or misuse.
Overall the outsourcing industry in India has been a significant contributor to the country's economic growth.
The industry employs over 4.3 million people in India, with the potential to create over 1 million new jobs.
According to the National Association of Software and Service Companies (NASSCOM), the Indian outsourcing industry generated revenue of $191 billion in the financial year 2019-20, with exports accounting for $147 billion of that total.
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