Complete Guide to Outsourcing Software Development to India in 2022
The Republic of India is a country in South Asia. With area of 3,287,263 km2 (1,269,219 sq mi), India is the seventh-largest country, and 1,352,642,280 citizens make it the second-most populous country in the world. Hindi and English are the state's official languages, while its people speak 447 languages overall. Mumbai and Delhi are the nation's largest cities when it comes to population, with Bangalore, Hyderabad, Ahmedabad, Chennai, Kolkata, Surat, Pune, and Jaipur coming next.
The history of India began with Indus Valley Civilisation which thrived between 2500 and 1900 BCE. The ancient culture had many achievements, including the innovations like canal irrigation systems and standardized weights and measures. The Baudhāyana sūtras, written circa the 8th century BCE, included passages on advanced mathematics, including Pythagorean triples (named after Pythagoras, who lived in the 6th century BCE). Notable Indian scholars and scientists list include a 5th-century mathematician, astronomer, astrologer, and physicist Aryabhatta, a 7th-century mathematician Brahmgupta, a 12th-century mathematician and astronomer Bhaskaracharya, as well as more recent 1930 Nobel Prize in Physics winner Chandrasekhara Venkata Raman, internationally acclaimed astrophysicist Venkatraman Radhakrishnan, and aerospace engineer Avul Pakir Jainulabdeen Abdul Kalam.
India today is a federal parliamentary constitutional republic with a GDP per capita of USD 1,927.7 (data for 2020). Over 900 universities and over 40,000 colleges make the Indian higher education system 3rd-largest in the world, after USA and China. In 2021, the number of engineering graduates was estimated at 500,000 a year, and the IT sector employed around 4.5 million people overall. The annual R&D spending in India reached USD 158,691 billion in 2022 (the 4th largest expenditure in the world). Plenty of global companies are already present in India, including Accenture, Amazon, American Express, Apple, Deloitte, Google, IBM, Intel, Maxima Consulting, Microsoft, SAP SE, Oracle Corporation, Walmart, and Wells Fargo.
Read further to learn more about India's remarkable standing in the global business process outsourcing and the IT offshoring landscape. We'll cover relevant rankings, top IT hubs, pros and cons of outsourcing to India, and Indian talent's most important facts.
Why is India so popular when it comes to IT outsourcing?
Even though the competition from Latin America, Eastern Europe, and Asia is fierce and growing, India is still one of the global leaders in outsourcing services. Let’s start with the top 5 reasons why:
- India is on the way to becoming the world's fastest-growing economy. According to The Economist, the International Monetary Fund (IMF) predicts that India's growth in 2022 will be the highest among all big economies, reaching 8%. By 2027 India should become the fifth-largest economy in the world.
- Being business-friendly is a major focus for the Indian government. In recent years the country got rid of over 25,000 compliances and 1,486 union laws. The recently announced "Ease of Doing Business 2.0" program should further improve India's attractiveness as a top outsourcing destination for global companies. ETRetail reported that the government formulates new tax incentives for startups and plans to reserve 25% of the R&D budget for startups and private enterprises.
- The country enjoys a huge and still growing tech talent pool. The IT-BPM (information technology and business process management) sector in India employed over 4 million people in 2021, as reported by Statista. The site also names India as the largest offshoring provider for IT companies in the world.
- India's budget for 2022 proves the nation's commitment to infrastructure development and digitalization efforts. Deutsche Welle (DW) reported that India's 2022 budget focuses on infrastructure spending to sustain a high level of growth. According to the story, the government also plans to introduce a new digital rupee and hold spectrum auctions for 5G mobile in 2022.
- India's outsourcing sector is well-established, dependable, and brings consistent results. The country has been involved with IT offshoring and Business Process Outsourcing since the mid-80, Outlook India reports. Continued public support for engineering education, efforts to improve business-related regulations, and readiness to tackle complex and innovative contracts make India's dominance in the outsourcing world likely to extend far into the future.
India's good standing in the international offshoring landscape is also clearly visible in several independent rankings, such as the selection below.
Global Services Location Index
The Kearney Global Services Location Index is a biannual report that rates the outsourcing attractiveness of participating countries. In the most recent publication for the year 2021, the GSLI compared 60 nations in four categories - financial attractiveness, people skills and availability, business environment, and digital resonance. India received 1st place in the overall ranking (again) and earned 17th place in the digital resonance ranking.
The digital resonance category was first introduced by Kearney in 2019 to score things like workers’ digital skills, digital outputs, the scale of corporate activity, the regulations concerning intellectual property, and some other aspects of conducting business in a given country. According to Kearney, the digital resonance category is likely to become more and more significant in the following years.
Global Innovation Index
In 2021, World Intellectual Property Organization released the 14th edition of the Global Innovation Index. The ranking compares 132 economies according to their capacity for innovation and their successes in that regard. India placed 46th in the overall GII 2021 ranking, 2nd in the Lower middle-income group, and 1st in the Central and Southern Asia Region. That means, in just a decade, India managed to move up by 16 positions in the ranking.
The report also mentions that India:
- is among the economies with the potential to transform the global innovation landscape
- is performing above expectations in relation to its level of economic development
- hosts top-tier science and technology clusters in Delhi and Mumbai
- is successful in developing sophisticated services that are ready for the international customers
- is a Central and Southern Asia leader when it comes to “Business sophistication” and “Knowledge and technology outputs” categories
Ease of Doing Business Ranking
The World Bank Group’s “Doing Business” was designed to provide objective information about business regulations across the globe. Although it was discontinued in 2021, the latest edition, published in 2020, remains a valuable resource with a detailed comparison of 190 Economies.
The Ease of Doing Business Ranking was an inseparable part of the yearly report. In 2020, India placed 63rd in the overall ranking (which translated to 17th place among Asian economies). The report mentions India as one of 10 economies with the most notable improvement in the ranking. Compared to a year before, India gained additional 3.5 points in the Doing Business Score, resulting from the implementation of new reforms that made it easier to do business in the country. The experts behind the Doing Business project appreciated changes in regulations concerning starting a business, construction permits, and international trade.
EF English Proficiency Index
EF Education First is an international company behind the EF English Proficiency Index (EF EPI), an annual ranking of Countries and Regions by English Skills. The results for the 2021 edition were based on an online survey completed by approximately 2 million users. Only places with 400 or more test takers were included in the ranking. Among 112 countries and regions, India received 48th place, 19 places higher than the year before (which translated to 6th place in Asia). The paper also mentioned India as one of the countries that improved its general English Proficiency the fastest.
India scores high in a number of other rankings, including:
- 3rd place in Renewable Energy Country Attractiveness Index 2021 by EY
- 3rd top country when it comes to the number of Startup Unicorns (54), according to Hurun Research Institute's Global Unicorn Index 2021
- 2nd place in the 2021 Global Crypto Adoption Index by Chainalysis
- 43rd place in Competitiveness, 46th in Digital Competitiveness, and 56th in Talent Category in the IMD World Competitiveness Ranking
Possible challenges you should know about before outsourcing your IT project to India
In some cases, the time difference can be an advantage. For example, if you want your project to be worked on around the clock. On the other hand, working in different time zones can lead to communication issues, as it’s not that easy to organize a meeting and talk things through.
Additionally, it’s important to remember that India’s popularity as an IT outsourcing destination results in fierce competition. There’s still a lot of untapped talent in India, but finding someone with the exact skill set you need can be difficult, especially when it comes to legacy technologies and highly specialized knowledge.
For these reasons, it may be a good idea to partner up with a company with offices in your home country and at least several years of experience in business and recruitment in India. And if you prefer to retain as much control as possible, consider leveraging the Build-Operate-Transfer model.
Top IT hubs in India
Here’s a list of 4 outstanding Indian cities we at Maxima consider to have the most potential when it comes to IT outsourcing.
City Area: 516.18 km2 (199.30 sq mi)
City Population: around 5,000,000
Metropolitan Area: 7,256.4 km2 (2,801.7 sq mi)
Metropolitan Population: 7,541,946
Time zone: UTC+5:30 (IST)
Climate: tropical wet and dry; bordering on a hot semi-arid
Education: Pune is home to many universities, colleges, and other institutions of higher education, which is why it’s sometimes called the “Oxford of the East.” The list includes the Indian Institute of Science Education and Research (22nd best university in India according to CWUR - the Center for World University Rankings), the Savitribai Phule Pune University (32nd place), and the College of Engineering (2nd oldest engineering college in India, 15th best Engineering College in 2019 according to Outlook India, and 52nd best Engineering College according to National Institutional Ranking Framework Ranking for 2021).
Economy: The fDI Intelligence's data states that Pune had 248 inbound Tech FDI projects in the years 2003-2021. Pune received 7th place in the Services and Technology pillars of the Municipal Performance Index, which was published in 2020 by the Indian Ministry of Housing and Urban Affairs. In 2021, Pune received 38th place in the Top 100 Super Cities Ranking, part of Tholons Global Innovation Index that compares cities according to 5 categories: Talent, Skill & Quality, Business Catalyst, Cost & Infrastructure, Risk & Quality of Life, and Innovation/Digital. The Global Startup Ecosystem Report 2021 mentioned Pune as one of 91 ecosystems that managed to create its first unicorn startup in 2020. The GSE report from 2022 placed the city at the #51–60 position among the Top 100 Emerging Ecosystems, and its best grade (7/10) was in the Performace category. The ranking, created by Startup Genome, evaluates and compares nearly 300 top startup ecosystems around the world in 6 categories: Performance, Funding, Connectedness, Market Reach, Knowledge, and Talent + Experience.
Outsourcing facts: Pune received 5th place in the Top 10 Outsourcing Destinations in India white paper published by BackOffice Pro. The city’s IT companies and services are on the rise, with Engineering and Information Technology both listed among the services with the most outsourcing potential. Out of 360 engineering colleges in the whole of Maharashtra State, as many as 116 are affiliated with the University of Pune. It’s also worth mentioning that a Special Economic Zone in Pune comes with a set of economic benefits, including tax exemptions, advantageous rates of commercial loans, and the ease of getting various government approvals. Pune was named one of the top cities in India for techies to work in, according to the 2020 TechGig Survey.
City Area: 741 km2 (286 sq mi)
City Population: 8,443,675
Metropolitan Area: 8,005 km2 (3,091 sq mi)
Metropolitan Population: 10,456,000
Time zone: UTC+05:30 (IST)
Climate: tropical savanna; distinct wet and dry seasons
Education: Bangalore is one of the educational hubs in India, with many educational and research institutions in the city. The Bangalore University lists 133 colleges, including the University Visvesvaraya College of Engineering, the 5th engineering college established in the country, and the 1st in the Karnataka State. Other notable institutions of higher education in Bangalore are the Visvesvaraya Technological University, the 57th Best Engineering College in 2021 according to the National Institutional Ranking Framework 2021 (NIRF), and the Ramaiah Institute of Technology (placed 65th in the same ranking).
Economy: Bangalore is the only Indian city in the fDi’s Top 25 Global Cities of the Future 2021/22 report, with 13th place overall and 7th place among megacities. According to them, the city attracted as many as 762 inbound software and IT services FDI projects in the years 2003-2021. The most recent installment of the ranking aims to compare the economic, financial, and business possibilities in top cities around the world. Bangalore received 25th place in the Services and Technology pillars of the Municipal Performance Index 2020, published by the Indian Ministry of Housing and Urban Affairs. The Karnataka State capital was also named 3rd Top Global Super City in the Tholons Global Innovation Index 2022, with one of the highest scores overall in the Innovation/Digital category. Bangalore also received 22nd place in the Global Startup Ecosystem Report 2022, the best result among all Indian cities. Bangalore placed in the Top 15 Global Ecosystem in Funding, Top 20 in Bang for Buck, and Top 25 in Performance. The report also mentions Bangalore as one of the world’s fastest-growing tech hubs and Karnataka as the first Indian state government to establish a dedicated Startup Cell to promote its ecosystem.
Outsourcing facts: BackOffice Pro’s white paper on Top 10 Outsourcing Destinations in India ranks Banlagore in 1st place. According to the report, 100,000 graduates of Engineering, Arts, Commerce, Business, and Economics graduate every year from Educational Institutions in the city. Businesses in Bangalore can benefit from numerous financial incentives, including tax exemption, tax holidays, and tax allowances. Bangalore offers a great deal of highly qualified employees in the fields of Business Process Outsourcing (BPO), Information Technology Services, and Engineering Services, among others. It’s worth mentioning that in a 2020 TechGig Survey, as many as 40% of technology professionals named Bangalore the best city for working. Moreover, the multinational audit, tax, and advisory services company KPMG placed Bangalore in 8th place in their global Technology Innovation Hubs report, published in 2021.
City Area: 650 km2 (250 sq mi)
City Population: 6,809,970
Metropolitan Area: 7,257 km2 (2,802 sq mi)
Metropolitan Population: 9,700,000
Time zone: UTC+5:30 (IST)
Climate: tropical wet and dry; bordering on a hot semi-arid
Education: Hyderabad is an important educational hub in southern India, as it's home to two central universities, three deemed universities, six state universities, and numerous other institutions of learning. The Center for World University Rankings ranked the University of Hyderabad in 27th place among all Indian Universities. When it comes to Top Engineering Colleges in India, the Indian Institute of Technology in Hyderabad is 8th in the country according to NIRF 2021, and Koneru Lakshmaiah Education Foundation is 50th in the same ranking.
Economy: Data gathered by fDI Intelligence mentions 333 inbound tech FDI projects in Hyderabad in the years 2003-2021. Hyderabad earned 45th place in the Services pillar and 13th place in the Technology pillar in the Municipal Performance Index 2020. Tholons Global Innovation Index ranked the city in 42nd place in the Top 100 Super Cities Ranking for 2021. Telangana state, where Hyderabad is the capital, places 61-70th in the Global Startup Ecosystem Ranking 2022. The Startup Genome’s publication mentions Hyderabad as home to a populous community of technical education students in India. Additionally, Telangana State ended up in the Top 10 Global Ecosystem in Affordable Talent, Top 15 in Bang for Buck, and Top 15 Asian Ecosystem in Funding.
Outsourcing facts: Hyderabad ranked 6th in the abovementioned Top 10 Outsourcing Destinations in India report. According to the white paper, the city is home to 1300+ IT companies, which means it’s one of the leading tech destinations in India. The reasons include business-friendly local regulations, ease of financial transactions, economic stability, and IT-focused Special Economic Zones. Primary outsourcing possibilities in the area include Engineering, IT, Admin, and HR Services. Hyderabad is also home to 13 universities with 35,000 graduates every year. 20% of developers who took part in the 2020 TechGig Survey on best cities to work in for techies chose Hyderabad.
City Area: 426 km2 (164.5 sq mi)
City Population: 7,088,000
Metropolitan Area: 1,189 km2 (459.07 sq mi)
Metropolitan Population: 8,917,749
Time zone: UTC+05:30 (IST)
Climate: tropical wet and dry
Education: In 2021, Chennai received 39th place in the Top 100 Super Cities Ranking, as seen in the Tholons Global Innovation Index. Chennai is one of the most important educational and research hubs in India. The IIT (Indian Institute of Technology) Madras received 1st place in the NIRF ranking of Top Engineering Colleges in India 2021 and was named the 4th best university in India overall, according to CWUR. The College of Engineering affiliated with Anna University placed 18th in the NIRF ranking, and SRM Institute of Science and Technology was at 34th place in the same ranking. The University of Madras is also worth mentioning, as it's one of the oldest universities in India and the 53rd Indian University overall in CWUR Ranking.
Economy: Chennai managed to draw 204 inbound FDI projects in IT services and software development in the years 2003-2021, according to fDI Intelligence. In the Municipal Performance Index 2020, Chennai was 17th in the Services and 18th in the Technology pillars. The city was also mentioned in the Global Startup Ecosystem Ranking as one of the well-performing ecosystems in the Cost of Tech Talent category. The city earned a 31-40th place in the GSER 2022 ranking.
Outsourcing facts: Top 10 Outsourcing Destinations in India white paper puts Chennai in 4th place. The city is home to 3 of the largest Indian banks, as well as a number of educational institutions that produce more than 80,000 engineering graduates a year. The report also states that starting a new business in the city should take only around 34 days and that export-focused Software Technology companies may be eligible for tax benefits. 9% of tech professionals pointed to Chennai as the top city to work in India.
Facts on IT Experts and Software Developers in India
The number of employees in IT has grown steadily for years. As many as 450,000 people joined the industry in the fiscal year 2022 alone, the Economic Times reported in February. 44% of new hires were women, which means the IT sector has become the largest private-sector employer of women in India.
The PYPL PopularitY of Programming Language Index is a ranking based on the analysis of demand for given programming language tutorials in Google Search. The PYPL page publishes a separate ranking for India, which is an interesting insight into what languages are popular among Developers in this country. According to the PYPL project, the most popular programming languages in India in June of 2022 are:
- Python (26.5% share of searches)
- Java (22.96%)
- C/C++ (8.86%)
- C# (8.16%)
- PHP (5.66%)
- TypeScript (2.55%)
- R (2.51%)
- Kotlin (1.34%)
- Swift (1.19%)
Why Should You Choose Maxima as Your Outsourcing Partner in India?
Maxima Consulting is a people-centric company with a proven history of delivering outstanding results to clients from various parts of the world. We come from the United States, but our European and Indian offices are well-established by now, making business partnerships and day-to-day communication as easy as it gets. You can see what we’re best at and who we work with, or just contact us to talk about particular needs of your business.