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Introduction

The world economy has fast turned into a 'service economy' since the 1990s. Services revolution across the globe has changed the business map and the way business is conducted. Around the world, phenomenal growth of services sector has outstripped the growth in real GDP in a number of developing countries of the world.
This high growth of services has been aided by the expansion of trade in services due to increased tradability of a variety of business and other services.

The growth in international trade in services is now somewhat higher than the trade in goods sector - between 1990 and 2000; the exports of services registered a growth of over 7 per cent as compared with a growth of 6 per cent for goods. Rapid advancement in technology and innovations (especially in communication, transportation, and information processing) accompanied by an increased integration of financial markets have increased the tradability of services, which has further facilitated the expansion of cross-border trade in services. The most important factor driving this growth is the fact that a number of US and European companies have taken recourse to outsourcing of services from other countries to take advantage of labor arbitrage.

Globally, competitive pressure is forcing organizations to look for ways to manage growth more cost-effectively and efficiently, minimizing infrastructure and employees. As a result, organizations worldwide are trying to outsource those areas of business that can be effectively and efficiently managed outside the organization. By doing so, they gain a competitive advantage in terms of cost and productivity.

India stands out as a major outsourcing centre because of its well-developed telecommunication network; an abundant, inexpensive, qualified, skilled and English-speaking labor force; advanced technological infrastructure; and a different time zone with the United States which enables the US firms to offer 24 hours services to their clients at a much lower cost. These positive attributes have rendered India a competitive edge over other countries in the outsourcing business.

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* Contributed by: -
Shallabh Batra and Yogesh Potnis,
National Institute of Industrial Engineering, Mumbai.