The sustainability of India's comparative advantage in it offshore outsourcing

In an increasingly competitive business environment characterized by more globalization, deregulation and technological advances, companies have been looking for ways of differentiating their products and services and also rethinking their business model through leaner operations and reduced costs. In this context, a new practice that has recently gained a lot of attention is the offshore outsourcing of information technology (IT) activities and services. It has become an increasingly attractive proposition to companies and organizations in industrialized countries. The most often cited benefit of such a practice is its cost-effectiveness; i.e., the ability of having business tasks or processes performed in an offshore country (most often in India) at an equal quality but significantly reduced cost than doing them at home. This paper presents the benefits and concerns in IT offshore outsourcing and discusses the sustainability of the comparative advantage that India has as the leading offshoring destination in the world. It argues that the currently low wages of skilled IT staff in India may be eroding over time and companies will be shifting their attention to other value-adding benefits as opposed to looking in offshoring countries for just lower cost provision of IT tasks and services.