Exploring the Pros and Cons of Outsourcing to India

published on 13 July 2023

Remember the movie Outsourced? It was a comedy about an American call center manager who had to train his replacement in India after his entire department was outsourced. The movie portrayed some of the challenges and benefits of outsourcing to India, such as cultural differences, cost savings, and talent availability.

But how accurate was the movie? And is India still a good destination for outsourcing in 2021?

In this article, we'll explore the pros and cons of outsourcing to India, and try to make a case for considering South America as a more suitable option for your accounting and finance needs.

What do we understand as outsourcing?

Outsourcing is a term that usually refers to hiring a third-party to handle non-core tasks that don’t require in-house expertise, such as customer support, data entry and more. However, outsourcing can take different forms in today’s business landscape. You can outsource an entire project, specific tasks, or even the employment contract of a candidate who works for you as an in-house employee. This last option is known as outsourced staffing.

Outsourcing can offer various advantages that go beyond cost savings. For instance, having an in-house employee with a contractor’s contract from another company can save time and reduce risks when scaling a business. This way, you can focus on core activities that are essential for your growth.

Moreover, as many outsourcing service providers are located in countries where labor is cheaper, you can also enjoy lower costs.

About the outsourcing industry in India

India is a top choice for companies looking to outsource work, especially in cities like Mumbai, Bangalore, and Hyderabad. It's a hotspot for IT jobs, mainly because it has many skilled workers, lower pay rates, and support from an organization called NASSCOM.

Outsourcing accounting and finance services to India

Accounting and finance tasks are essential for every business, and these tasks never really come to an end. The demand for these services keeps growing, which presents a challenge. The larger issue comes when the US labor market can't keep up with this demand. The shortage of workers in this field, made worse by a wave of resignations in 2020, has made it hard for firms to find qualified candidates. That's why many businesses are outsourcing their accounting and finance needs to India.

India has a wealth of accountants and financial analysts who are equipped to handle a range of tasks, including bookkeeping, tax preparation, and financial reporting. These professionals can also help ensure businesses meet all local and international rules and standards.

Pros and cons of outsourcing to India

To help you determine if India is the right outsourcing destination for you, let's take a look at its pros and cons:

Pros

Similar to the Philippines, India has proven to be a lucrative outsourcing hub for countless businesses, including tech behemoths from Silicon Valley such as Google and Facebook.

Here are some of the advantages of outsourcing to India:

Cost savings: Compared to other industrialized countries such as the United States, India has a cheap cost of living. This means that you can hire skilled workers at a fraction of the cost. For example, according to Glassdoor, the average salary of an accountant in India is ₹3,60,000 per year, which is about $4,900. In contrast, the average salary of an accountant in the US is $56,560 per year. That's a huge difference!

English proficiency: India has the second-largest English-speaking population in the world, after the US. It also has the largest number of graduates in science, engineering and technology fields. According to NASSCOM, India has over 4.36 million IT professionals and over 1.3 million accounting professionals. That makes a great case for outsourcing IT tasks but not much for accounting and finance positions. 

Improved efficiency: Outsourcing to any country can help you improve your efficiency and productivity. By delegating your non-core tasks to a reliable service provider, you can free up your time and resources to focus on your core competencies. You can also leverage the time zone difference between India and your home country to get your work done faster and meet deadlines. But, if you need your team to be synchronized, this can be a problem. 

Cons

However, outsourcing to India is not without its challenges and drawbacks. Here are some of the disadvantages of outsourcing to India:

Language barriers: Although English is widely spoken in India, it may not be the native language of your service provider or their staff. This can lead to communication issues, misunderstandings, and errors. You may also face difficulties in understanding their accents, idioms, or slang. To avoid this, you should look for a service provider who has excellent English skills and can communicate clearly and effectively.

Cultural differences: India has a rich and diverse culture, which may differ from yours in many aspects. For example, Indians tend to be more indirect and polite than Americans, who are more direct and assertive. Indians may also have different values, beliefs, customs, and etiquette than you. These cultural differences can cause conflicts, confusion, or frustration if not handled properly. To overcome this, you should try to learn about the culture of your service provider and respect their norms and preferences.

Quality control: Outsourcing to India may compromise the quality of your work if you don't choose a reputable and reliable service provider. Some service providers may not have the necessary skills, experience, or infrastructure to deliver high-quality work. They may also cut corners or use unethical practices to save costs or time. This can result in poor performance, errors, or breaches of confidentiality. To prevent this, you should do your research and check the credentials, reputation, and portfolio of your service provider before hiring them.

Why consider South America?

As you can see, outsourcing to India has its pros and cons. But what if there was a better option? What if you could outsource your accounting and finance tasks to a region that offers similar benefits as India but with fewer challenges?

That's where South America comes in.

South America is an emerging outsourcing destination that offers many advantages for accounting and finance firms, like:

Geographical proximity: South America is closer to North America than India in terms of distance and time zones. This means that you can have more convenient and frequent communication with your service provider. You can also travel to their location more easily if needed.

Cultural compatibility: South America shares more cultural similarities with North America than India does. For example, both regions have a strong influence on European culture and history. They also have similar values, beliefs, and work ethics. This means that you can have less cultural friction and more rapport with your service provider.

Quality assurance: South America has a high standard of education and training for accounting and finance professionals. According to PwC, South America will have the second-largest increase in highly skilled workers by 2030 after China. This means that you can find qualified and experienced workers who can deliver high-quality work for your outsourcing needs.

Why South America is a better outsourcing destination than India

Outsourcing to India is a common choice for many businesses that want to reduce costs and tap into a large pool of skilled workers. However, outsourcing to India also involves some drawbacks and challenges that may compromise the quality and efficiency of your work.

That’s why you should consider outsourcing to South America as a better alternative.

South America offers similar benefits as India but with fewer disadvantages. Therefore, if you are looking for a reliable and cost-effective outsourcing destination for your accounting and finance tasks, you should consider South America over India. You will not only save money and time, but also improve your performance and satisfaction.

    🔗 Kevin Mitchell | LinkedIn
    🔗 Kevin Mitchell | LinkedIn
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Reference:

Nguyen, A. (2020, April 4). The complete guide on outsourcing to India (pros, cons, how-to). Time Doctor Blog. https://www.timedoctor.com/blog/outsourcing-to-india/

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