By Saurav Wadhwa,
The Halting International Relocation of Employment (HIRE) Act, proposed in the US last month, has set alarm bells ringing across India’s information technology-business process management (IT-BPM) industry. The Bill, which proposes a 25% excise tax on payments made to foreign service providers for work consumed by US customers and bars these payments from tax deduction, is yet to be approved by the senate.
But pass or fail, the signal is unmistakable: outsourcing is back in the protectionist crosshairs. And this jolt may just be the impetus India’s $250-billion IT-BPM industry needs to make its next big leap.
India’s outsourcing story
In the initial decades, India’s outsourcing success came from its cost arbitrage. The “cheap and capable” advantage powered growth, created jobs, and cemented India’s position as the world’s back office. As the sector matured, the story shifted. Lower costs were not the only driver for clients anymore; they also wanted measurable business impact. Our industry responded by adding layers of domain expertise, outcome-focused models, and digital prowess. Efficiency gains and talent arbitrage became key differentiators. Value creation replaced the cost theme. Now we stand at the next inflection point—value ownership.
Cost arbitrage bought us advantage; value creation gave us relevance. However, resilience can be assured only if we shift to a full-blown value ownership mode now. We must put real skin in the game, investing to create assets and models that go beyond contracts and shape demand.
In my opinion, three key shifts are required if the sector aspires to own value. The first is in how work gets done. Co-innovation at scale must replace the old vendor-client dynamic. Shared problem-solving must become the default, with providers acting as orchestrators of ecosystems rather than order takers.
This means creating hubs where clients bring business problems, partners bring technologies, and providers stitch them together into full-spectrum, scalable solutions. Independent, point projects become increasingly irrelevant in such a scenario. Given the high penetration of automation, digitisation and artificial intelligence, the real play now would be creating integrated solutions that consolidate systems and lay the foundation for core transformation.
The market is already signalling precursors to this trend. Earnings commentary from industry heavyweights, such as Cognizant, point to growth being increasingly driven by large, integrated transformation deals.
The second shift is about what gets delivered. The old model of bespoke projects tied to individual client requirements must give way to productisation. India has decades of operational know-how and top talent, yet we lag on the product front.
Reddit threads keep burning up with China comparisons. The world’s factory floor now produces its own chips, clouds, and social platforms. India, in contrast, is still struggling to put globally dominant software on the map. The gap stings.
India’s IT sector growth
The path forward, at least for the outsourcing industry, is to codify its years of know-how and delivery muscle into scalable products and platforms. Vertical depth is central here. Banking, insurance, healthcare, energy, and logistics—all regulated and complex sectors—are looking for solutions tuned to domain realities, not generic workflows. This is where India can carve out leadership by fielding advanced, industry-specific products that carry both scale and credibility, and are supported by top service talent.
The third shift is about funding—the arrival of co-investment models. Earlier, the big thing was supposed to be outcome-based pricing. Replacing fixed contracts and effort models with cost structures tied to defined outcomes was expected to be a radical move. But now, there is an opportunity for change. Years of strong balance sheets, mega M&A deals, and a flood of private equity dollars have armed outsourcing firms with the firepower to co-invest alongside clients. This is not about shaving costs at the margins. It is about putting actual capital behind outcomes, sharing risk financially, and creating economic value with the upside tied directly to client growth.
The point of these shifts isn’t incremental change. Together, they mark the industry’s passage into value ownership. The progression matters because it changes the yield. Owning value means creating intellectual property, shaping demand, and building solutions that travel across markets. It means the returns accrue not just from billing hours, but also from platforms, products, and ecosystems that outlast contracts. For India, this is the bridge from being the world’s back office to becoming a global innovation hub.
The timing couldn’t be sharper either. With the US tightening visa norms and piling fees on H-1Bs, our best talent might just be on a flight home, ready to fuel home-grown ventures and products.
Also, as one of the world’s fastest-growing economies, India’s own scale and complexity has created a domestic market that demands world-class products. It is time to accept the era of cost arbitrage and productivity gains is over. We must transition from creating value to owning it because the US outsourcing tax will not break the industry, but staying stuck in the cheap and capable loop definitely will.
(The writer is co-founder & CEO, MYND Integrated Solutions Pvt. Ltd)