Dr. Paul Davies : In the West, financial services companies have begun to look beyond India. They are also looking at Thailand, Vietnam, and Eastern Europe. It is very interesting that they are already thinking beyond India. At the same time, of course, India remains the touchstone – or reference point and some companies will go elsewhere but through Indian companies.

Companies are also beginning to go beyond ordinary skills like processing of an order, or inbound and outbound voice. Much more importantly than where companies source these services is the trend towards outsourcing or offshoring research & analysis. Indian companies are gearing up to address these requirements but there is a weakness in India that is holding back the developments in this area.

The weaknesses of Indian companies is the lack of domain skills in financial services and there is not much awareness in Indian companies of the more sophisticated demands that financial services companies are likely to make. There is, much more significantly, a lack of awareness of how important the domain skills are.

Dr. Paul Davies : Yes, I think that is very much the case. There are two trends happening in India, which I think, are significant. One is, as you said, that India is moving up the value chain, not away from but complementing commodity call centers, but it is also significant that India is starting to act like a clearing center for Western companies that want to offshore processes.

The move up the value change is extremely important in maintaining India’s dominant global position in this market.

Outsourcing HR systems, for example, has moved up the values chain. Even three years ago, it was simple processing of employee data, but now analysis of the employee data is becoming more common:. Indian companies are starting to consider employee issues & starting to apply analysis to what happens in the work place, Not only are they recording sick leave, but now working out the patterns of what is acceptable and what is not, and addressing concerns about how retention of employees is affected by employment benefits.

Dr. Paul Davies : We are looking at the usual suspects, which are costs, which remains an important factor, and then quality and responsiveness, which are eventually equally important. The most important factor for the future will be added value, not only processing the data, but also analyzing what the data means. We see a movement from recording how equities are moving to looking at the way equities are moving. Analysis companies’ reports are being carried out offshore and recommendations given based on that work. I have seen very high quality design work in India and areas such as these are making Indian companies more successful than its competitors.

Moving up the value chain is one of the key drivers for India.

From a client’s perspective, go offshore to save money then stay offshore because of the higher quality & availability of skilled labor.

The flexibility of labor laws in India means that they can add staff and remove staff much more easily than even in the US. This flexibility, allied with high quality output is a key driver.

Dr. Paul Davies : Manufacturing went offshore from West in the 70s and 80s, and IT services went offshore in the ’90s, and now services are going offshore. This is a revolution, and it is a very sensitive issue to understand what is going to replace services in the West, The focus is more and more intellectual property & ideas.

What is going to sustain and drive Western economies for the next five years is based ideas & intellectual property. This will have a knock on Western education systems will have to change rapidly to focus on the development of ideas.

On the other hand, India will not stand still and is not standing still. India’s move up the value chain will press Western economies hard.

I say this is revolutionary because services have been transferred offshore and will be replaced by wealth generated by ideas. Yet no country will have a monopoly of ideas. We are moving into a more comprehensive global economy, where development of ideas will become the main focus.

It will be a social, educational and services revolution. As I said in my book, if you can carry out service in the next office with the door closed then it does not matter where you are carrying out your service. This has profound consequences.

Dr. Paul Davies : In the short-term, the initial focus is Indian companies focus on at the moment cost reduction. There is also a focus on the concerns of Western companies the development of specifications and the way that specifications are understood; Indian companies will need to be able to interpret specifications in new ways to respond to Western approaches.

Large Indian companies have already, of course, gone international. But, interestingly enough they remain Indian companies that have gone international, not international companies that are Indian in origin. They remain very hierarchical, centrally driven companies. The future will require changes, especially in the role of middle managers & product managers in Indian companies.

A key differentiator for Western companies will be management capability of Indian companies seeking to work with them.

Dr. Paul Davies : They need to monitor what the offshore company does and not manage the offshore companies. Western companies try to impose Western approaches on Indian companies in areas where that is not appropriate and it causes issues and concerns both ways. They should learn to work in partnership with Indian companies and Indian companies should begin to understand what partnership means in the way that I have started to formalize. It is no longer enough to use relationship managers – they should be part of a partner success relationship.

Cultural aspects are important too. English is the common language that separates us. Indian English is different from English as US English is different from UK English. Both sides need to recognize that when even simple words like “yes” are used, they often mean very different things across cultures.

Dr. Paul Davies : For offshoring a particular process, one should always keep in mind how close the process is to the generation of revenue and how much value can be added if it is outsourced. It is obviously easier outsourcing customer service, and voice outsource sales, as it is much closer to revenue generation. It does not mean it should not be done – only that analysis is vital.

Dr. Paul Davies : One focus will be “Advantage India”, which means if you come to India, you will get many advantages. On the other hand, it can be both a problem and threat to Indian business. There is significant overstatement in the way India advertisings its capabilities. I draw attention to the way Indian manufacturing is being oversold.

Yes, the advantage of working with India is great for Western economies. Key attributes of India, such as its political stability, free Press, and largest English speaking population in the world after the USA, are important. It is one of the very strong growing economies in the world and India has the opportunity to let Western people understand that it has a very different way of doing business and it is a great opportunity for the West and India working in partnership.