Software outsourcing to India: Benefits, cons, top companies

India is a popular software development outsourcing destination due to its robust tech ecosystem, a large IT talent pool, and low cost of operations. 

However, before you outsource software development services to the country, make sure to analyze how it contributes to your business’s growth.

In this article, we’ll explain the five benefits and two challenges of software outsourcing to India. We’ll also cover six software services that you can outsource to the country.

Finally, we’ll introduce India’s five popular outsourcing companies and share four best practices to help you outsource successfully.

Table of Contents

Let’s get started. 

5 key benefits of software outsourcing to India

Let’s discuss the five benefits of outsourcing software development to India:

1. Lower costs

One of the primary reasons why companies outsource software development to India is to save money. 

The average annual salary of a software engineer in the US according to salaryexplorer.com is USD 91,900, while in India, it’s around INR 366,000 (4,796 USD).

Similarly, a software developer in Switzerland earns CHF 10,200 (USD 1,078) per month. Whereas an Indian developer makes INR 29,300 (USD 384) per month. 

Besides, other operational costs like office space rent, electricity charges, etc., are relatively less expensive in India.

So instead of employing in-house developers, you can outsource software development tasks to India to save huge amounts of money.

Further, this can save the time you spend on managing in-house developers and lets you invest it in core competencies. 

2. Vast talent pool

India has a huge IT talent pool specializing in software application development, mobile app development, machine learning, custom software development, and other latest technologies. 

According to the India Skill Report 2021 by Wheebox, 48.27% of IT talents who took their employability test scored above 60%, making them highly employable. 

Moreover, as per Coursera’s Global Skills Report 2021, Indian youth excel in fields like cloud computing, operating systems, software engineering, web development, and theoretical computer science.

With such talent potential, you are more likely to find a freelance Indian programmer or an IT outsourcing company offering quality software solutions for your needs. 

Besides, the country has an abundance of experienced software companies that are well equipped to manage outsourcing projects of any size and scale. 

3. Large English language speaking population

India is the second largest English speaking country in the world, with over 125 million English speakers (12.18% of the country’s total population). Also, it ranked 6th in Asia on the EF’s 2021 English Proficiency Index (EPI). 

This ensures efficient communication between your in-house and outsourcing partner. Also, your in-house team can easily collaborate with the outsourcing partner or a freelance Indian developer – preventing confusion and saving time.

4. Round the clock services

India is geographically located such that there is a time difference of nine and a half hours with Washington D.C (USA) and three and a half hours with Brussels, Belgium. 

This means that an Indian software outsourcing company can take over the work after your Europe or USA-based onshore team ends their shift. This way, your business can function even while your in-house developers rest. 

Also, this can help you deliver the outsourcing software development project quickly and avoid mistakes. Your in-house and outsourced developers can cross-check each other’s work, improving the overall quality.

5. High-quality services

Indian IT companies offer high-quality services by leveraging the latest technologies and the country’s top-notch tech infrastructure. 

India ranks 1st (out of 60 countries) on the 2021 Kearney Global Services Location Index with an overall score of 7.09. This index assesses the countries’ capacity to deliver services based on parameters like financial potential, talent availability, business environment, digital resonance, etc.

India had topped the GSLI rankings in 2016, 2017, 2019, and 2020 as well. This indicates the prominence of the Indian software outsourcing sector on the global stage. 

Know more about outsourcing software development from our comprehensive guide.

Now that you know the benefits of outsourcing software development to India, let’s look into its challenges.

2 main challenges of software outsourcing to India

It’s important to understand the challenges you may face when outsourcing software development to India. It can help you determine if it’s a viable option for your business or take preemptive measures to overcome them. 

Here are the two main challenges you may encounter while outsourcing to India:

1. Oversaturation of major IT hubs

The major IT hubs in India like Bangalore, Pune, Delhi, and Kolkata have become oversaturated with software and BPO companies, making it difficult for newer companies to emerge. This reduces the competition within the IT industry and negates cost-effectiveness due to high real estate prices. 

This means that a small business with a limited budget may find it challenging to find quality outsourcing vendors at competitive prices.

To counter this congestion, the Indian government is offering several programs to encourage outsourcing companies to set up operations in emerging cities like Nasik, Chandigarh, and Ahmedabad. 

2. Data privacy and IP issues

India ranked 40th (out of 100 countries) on the 2021 International Intellectual Property (IP) Index. This is due to stringent patent eligibility criteria, lack of trade secret protection, the presence of bureaucratic barriers, etc.

However, companies can always take appropriate measures to safeguard their data when outsourcing to India. For example, you can get your software development outsourcing partner to sign an NDA (Non-Disclosure Agreement). 

This will prevent them from disclosing sensitive information related to your software project to a third party.

Check out our comprehensive guide on software development outsourcing.

India is clearly a great outsourcing destination, as the benefits of outsourcing here far outweigh the drawbacks. Now, let’s dive into some common software services that companies outsource to the country.

6 top software services to outsource to India

Here are the top six software services that companies usually outsource to India:

1. Hyper automation

Hyper automation is the strategic confluence of artificial intelligence (AI), machine learning, robotic process automation, and other latest technologies. It helps companies accelerate their digital transformation journey. 

According to the International Data Corporation (IDC), the Indian AI market was worth USD 3.1 billion in 2020. It expects the market valuation to reach USD 7.8 billion by 2025, at a CAGR (compound annual growth rate) of 20.2%. 

Educational institutions like IIT Madras are investing in AI, machine learning, and other latest technologies – ensuring a promising future for hyper automation in the country.

AI-powered voice search is another latest technology that’s fast gaining ground in the country’s IT outsourcing sector. It enables you to use voice commands to search the internet, website, or app. The voice search queries in India are growing at a rate of 270% annually. 

2. IoT services

Internet of Things (IoT) helps form a network of physical objects to exchange data using sensors, software, and other technologies. 

With IoT, you can monitor business processes, save time and money, generate high revenue, and more. Some of the popular use cases of IoT include smart parking, smart lighting, etc.

The Indian IoT industry was valued at USD 4.98 billion in 2020 and is predicted to grow to USD 9.28 billion by 2025. 

Additionally, IoT may become a part of day-to-day life in India in the near future. Reliance Jio, a leading Indian telecommunications company, is planning to introduce IoT products and services to their customers. 

3. App development

Application development can be broadly categorized into mobile and web application development. 

Web app development refers to the creation of programs that run on a web server and can be accessed through a web browser. Whereas, in mobile app development, programmers build apps that run on mobile operating systems like iOS, Android, etc.

The app development sector in India is growing rapidly due to the increasing use of smartphones and desktops and the rising demand for business agility. 

According to Statista, the overall revenue from mobile app development accounted for USD 195 million. Moreover, it’s expected to grow at a CAGR of 9.22% and reach a value of USD 2,365 million by 2026.

4. Knowledge Process Outsourcing (KPO)

KPO is the outsourcing of core information-related activities, such as R&D, data analysis and interpretation, etc., that are aimed to gain key business insights. 

The Indian IT companies have the necessary skill and technological infrastructure required to carry out these core activities.

KPO has become a prominent part of the legal, manufacturing, management, and life sciences sectors.

5. DevOps

DevOps is a set of practices that combines software development and IT operations. It aims to speed up the software development life cycle (SDLC). 

This function helps businesses use automation to collaborate and communicate more effectively throughout the software development life cycle, reducing the overall turnaround time.

According to the Industry ARC, the Indian DevOps market is likely to grow at a CAGR of 23.23% during 2020-2025. And several Indian IT giants like Infosys and Tech Mahindra aim to venture into DevOps.

Now, let’s explore the leading software development companies in India.

5 popular software development companies in India

As there are many Indian outsourcing companies providing key software development services, it can be difficult to choose one. Here are the five best software development companies in India:

1. Tata Consultancy Services

Tata Consultancy Services (TCS) is an Indian multinational IT company headquartered in Mumbai. It has branches in 149 locations across 26 countries, including the United Kingdom and the United States.

Key software outsourcing services

• Automation, AI, and blockchain.
• IoT and digital engineering.
• Cybersecurity.
• IT consulting.

2. HCL Technologies

HCL Technologies is an Indian company headquartered in Noida. It offers IT services, IT consulting, and software project management, to companies across the globe. The software outsourcing company operates in 52 countries, including Indonesia and New Zealand.

Key software outsourcing services

• IT infrastructure management services.
• Web and mobile application development services.
• Cloud-native services.
• Cybersecurity and IoT.

3. Infosys

Infosys is a next-generation software development company headquartered in Bangalore, offering IT solutions and digital marketing services. In addition to having several branches across India, it has a presence in over 50 countries, including China and Japan. 

Key software outsourcing services

• Blockchain.
• IoT.
• API (Application Programming Interface) Economy.
• Application development.

4. Wipro

Wipro Limited is an Indian IT company that provides a range of services from software development outsourcing to consulting services. It’s headquartered in Bangalore and has branches in the USA, Turkey, and many other countries. It also has subsidiaries in Ukraine, Japan, and other countries.

Key software outsourcing services

• Data analytics solutions.
• Application development.
• Digital operations and platform.
• AI solutions.

5. Tech Mahindra

Tech Mahindra is a software development, IT services, and consulting company based in Pune. The company has branches across 90 countries, including Austria, China, and Italy. It also has offices in major cities like Delhi, Bangalore, and Chennai.

Key software outsourcing services

• Infrastructure and cloud services.
• Software testing services.
• Experience design services.
• Artificial intelligence.

Now that you know the major software development outsourcing companies in India, let’s look at four best practices for profitable outsourcing.

3 best practices to ensure successful software outsourcing to India

Here are a few tips to help you have a smooth experience with IT outsourcing to India:

1. Go through customer reviews

Choosing the right outsourcing software development company is essential for a profitable partnership. But that can be challenging with so many options available. 

One way to screen service providers is by reading their customer reviews. Client feedback will help you understand their strengths and weaknesses.

Additionally, go through their website and case studies to understand how they function and their experience in the outsourcing industry. This will help you make an informed outsourcing decision.

2. Make provisions for data safety

An NDA is an agreement signed between the client company and its partner software development company. It acts as a formal agreement to protect the privacy of the foreign company and keep the software development project confidential. 

With an NDA, you can legally bind the software development team to keep all project-related data confidential.

But before you create one, ensure that you study the NDA rules in India since these rules may vary from one country to another. 

Here are a few key elements of NDAs in India:

• Identification of both parties.
• Duration of contract.
• Definition of what is confidential.

3. Make a communication and engagement plan

Your in-house and outsourced Indian team needs to communicate effectively to ensure transparency and collaboration. Without proper communication between the teams, you may face project delays and financial losses.

To avoid this, you can assign dedicated channels for different types of communication. For example, the in-house and Indian teams can use Slack for regular queries and Whatsapp when in need of urgent contact. 

Additionally, develop an effective engagement strategy to build the desired relationship between you and the vendor. 

For this, you can choose a suitable engagement model that works for all stakeholders, such as:

• On-site model: The hired Indian software development team moves to your location to work on the project. 
• Dedicated team model: The software development team works primarily for you for a particular time period from their office in India. 
• Offshore development center model: You provide the Indian development team with office space and manpower to develop the software solution. 

Wrapping up

Software outsourcing to India is beneficial due to low costs, a large skill set, robust infrastructure, and other reasons. However, it also has a few drawbacks, like crowded IT hubs and privacy issues.

Use the information shared in the article to understand how to outsource software development to the country and its benefits. 

Also, go through the leading outsourcing software services and popular outsourcing companies in India to make an informed decision. And remember to follow the best practices mentioned above to ensure a smooth outsourcing process.