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Growing influence and expertise of Diaspora in the United States, the United Kingdom and Canada will help India retain its edge and move up the value chain in outsourcing as other countries try to catch up with it in other parameters, a study by World Bank Institute has said.
"Riding the wave of growing reputation and visibility of Indians in the IT sector, many well-placed senior executives (of Indian origin) in big corporations who had moved to these countries in 1960s influenced outsourcing-related decisions in India's favour. As the networking and mentoring role of Diaspora increases India will continue to retain the edge in outsourcing," the study said.
"The crucial role performed by the Indian expat community was to convince the large global corporations that India was a good place to get work done and provide required mentoring and troubleshooting assuring that the work had indeed been done," Marc Vollenweider, a Swiss expatriate and former partner with McKinsey was quoted in the study as saying.
The study conducted for the institute by research firm Evalueserve said many Indian engineers, who had started moving to the US in the 1960s, had either become entrepreneurs, venture capitalists, or senior executives in large and medium-size companies.
Many of these professionals started their own companies in India while others convinced their companies to hire Indian IT professionals. This provided more visibility to the Indian talent pool and resulted in the strengthening of the Diaspora.
Indian offshore vendors and various captive centers of global corporations are already moving up the value chain and performing more complex and value-added activities for their clients.
Apart from providing the required capital through investments, the Indian Diaspora is expected to increasingly play a crucial role in the gradual emergence of India's high-end knowledge services sector.
Some venture capitalists in the US particularly those of Indian origin are actively funding Indian companies that have back-end operations in India, so that they can save on research and development costs.
It is estimated that over 150 start-ups in the US already have some form of back-end in India and this number is likely to double by March 2006.
Several networking organisations like The IndUS Entrepreneurs (TiE), American Association of Physicians from India, American Asian Hotel Owners Association, American Asian Convenient Stores Association are helping the Indian Diaspora and the entrepreneur community in India to bond stronger.
In addition, many of these organisations are creating win-win situations with other Diaspora and IT communities.
The study says that the Diaspora will also provide more organised platforms for the sharing of knowledge and best practices. It is also expected to increase the brand equity of the Indian industry but without giving a semblance of bias for their home country over other low-wage destinations.
"Profound restructuring of global value chains we are witnessing now opens new windows of opportunities for India, particularly regarding outsourcing of corporate research and development. The India Diaspora will again play a critical role in this incipient process. There are also important lessons for other Diasporas, in particular for highly skilled one such as Diaspora of Armenia or Argentina," said Yevgeny Kuznetsov, a senior economist at the World Bank.
While all expatriates contacted for the study agreed that the Diaspora had been a major catalyst, many downplayed its role in the gradual transformation of India.
According to this group, the sudden demand for skilled labour after the growth of Internet and the Y2K problem would have drawn India's engineers and technicians into the world IT industry regardless of the Diaspora's assistance.
"However, countries such as South Africa, Russia, and other Eastern European countries were not similarly drafted into the boom and we believe that the influence of the Diaspora has been crucial," says Alok Aggarwal, the co-founder of Evalueserve, who graduated from IIT-Delhi and worked for IBM in the US.