Owing to its financial attractiveness and availability of staff and skills, India was considered the most attractive destination to offshore business services, with an index score of 2.82 and 2.23 respectively, according to a 2019 survey. Where India was not as attractive though was in the new category assessed, digital resonance, scoring 0.87. For comparison, the United States scored 1.21 for its digital resonance.


Offshoring versus outsourcing

While both may involve moving a business function to a different country, offshoring is different to outsourcing. Offshoring refers to the relocation of work to a different country, usually to lower costs, whereas outsourcing involves contracting out work to a third party (which may or may not be in the same country). There are also the additional categories of nearshoring, which is offshoring to a neighboring country, and onshoring, which is outsourcing to a third party located in the same country. Across all industries except manufacturing, spending on onshoring is expected to grow faster than offshoring in 2019. Data from the IT industry suggests this may be fairly a recent trend, with increases in offshoring spending outpacing outsourcing spending up until 2014.

Popularity of offshoring

In recent years, the popularity of offshoring appears to be declining. Across all business functions the growth in offshoring spending between 2018 and 2020 is predicted to be much lower than between 2014 and 2016 – in most cases, around three to four times lower. This decline is occurring in the context of a slowing of the broader outsourcing market, with total global revenues contracting slightly from 2017 to 2018, and currently well below their 2014 peak. Nonetheless outsourcing remains very popular for certain functions – especially software, with a majority of companies outsourcing software-related functions in 2017.