Indian IT industry  outsourcing

Tactical outsourcing was thus often undertaken for activities that employees of the company did not want to do and the company was not keen to employ people who would want to do such jobs.

While outsourcing of physical jobs like cleaning, transportation and so on was quite common worldwide, outsourcing of non-physical work started largely when two Indian entrepreneurs set up an international private leased circuit (IPLC) between India & USA to connect an IT center in India with a hospital in USA for the purpose of medical transcriptions.

Doctors in USA would dictate into Dictaphones while on hospital rounds. The dictations would pertain to the progress made by various patients in the hospital.

Notes dictated by the doctors had to be made available to other people within the medical system – nurses who would administer medicines to the patients, other doctors and specialists who may also be examining the patients and so on.

The voice files of the dictations were transported to India over the IPLC. In India they were heard by operators who would then type out or transcribe everything contained in the dictated notes. These transcribed files were sent back to the hospitals where the same would now be available to other users either as digital files on disk or as prints.

Reading, editing, printing, storing and retrieving of the notes became much simpler now as the dictated notes had been transcribed to text form.

This transcription work had to be sent to a location such as India as the hospital did not have the manpower required to hear the dictations and transcribe them. It was also very inconvenient for the nurses to keep hearing the dictated notes to determine what medicines to administer to the patients. And, of course, it was inconvenient for the doctors to write these notes instead of dictating them to being with.

Getting the dictated notes transcribed in India became possible because:

1. Manpower in India had adequate amount of medical knowledge so that they were able to understand what the doctors were dictating. Nurses and people otherwise trained in medicine were used for the transcription work in India.
2. The transcriptions done by the people in India were accurate enough to be used for further medical work by the hospital staff in USA.
3. The time difference between India and USA was not a deterrent but actually worked in favor of the work. The dictations made all through the day in USA would be shipped across the IPLCs to India at the end of the day in USA. By that time it would be the start of another day in India and transcriptions could be done during normal business hours in India.
4. Manpower in India was cheap enough to be usable for activities like this.
5. There was connectivity between India and USA so that the dictated files could be sent across to India.

Economy was one of the less important reasons for getting the transcriptions done in India, but economy was what was seen by people, written in the press and generally given a lot of prominence. Outsourcing thus started being perceived as an activity that would help cut costs.

But as far as the transcriptions go, cost was not the primary driver of outsourcing this work to India. The main reason that the work came to India was the fact that India had enough people who had the basic medical training to be able to do this work and there was a scarcity of such manpower in USA. The persistence of the entrepreneurs who founded this business and the willingness (or helplessness) of the medically trained personnel in India to do such seemingly low-end work were the other drivers of this business.

Also, transcribing the dictations was seen as a low priority activity by the hospitals. Hospitals did not really want to recruit additional manpower for the job.

The risk associated with getting the transcriptions done in India was also low. There was so perceived problem in sending the voice files to India (the world was a lot less concerned with data privacy, secrecy and security back then) and the expected benefits of having typed texts ready for the hospital staff were far greater than the cost or the risk associated with getting the transcriptions done in India.

Economy for the American hospitals was just happenstance. But this side-effect of the medical transcriptions business became the main talking point of outsourcing and businesses other than hospitals tried to emulate this business model largely to exploit the economy of getting such work done in India and elsewhere.

In the subsequent years, the world saw a lot of work moving to India and the term outsourcing became synonymous with getting relatively less important work done in countries like India to save money largely by exploiting labor arbitrage opportunities.

Most of this outsourcing work was not strategic in nature. It was largely tactical or operational outsourcing. This outsourcing was undertaken more to overcome some limitation or resource constraint within the organization (for example the unavailability of transcribers in the American hospitals) rather than with any long term strategic goals in mind.

Slowly, as outsourcing established itself as a viable business activity, companies started outsourcing more significant work to India and the strategic benefits of outsourcing soon started becoming obvious.

The benefits of outsourcing can be quite huge if outsourcing is seen and performed as a strategic activity. Diagram 1 shows the increase in the strategic value of outsourcing as focus shifts away from mere cost advantage to improvements in business processes.

In the next part of this series of articles we will examine what is meant by business applications, business processes and business transformation. We will also look at the modalities of outsourcing these different types of activities and the expected benefits from each.