Outsourcing to India: Pros, Cons, and Essential Insights

Based on its current rate of economic growth, India is on pace to become the world’s third-largest economy by 2027, surpassing Germany and Japan. Only the United States and Canada will have higher GDPs. India is also responsible for roughly 55% of global services outsourcing.¹ This article will break down the pros and cons of that.

Whether you're a CPA firm considering outsourcing accounting services to India or a tech startup exploring outsourcing software development to India, understanding the pros and cons is crucial for making informed business decisions. It’s also important to evaluate the costs of outsourcing to India from the US.

What Are the Benefits of Outsourcing to India?

The appeal of outsourcing to India goes far beyond simple cost savings, though that remains a primary driver for most businesses. Aside from that, India offers a skilled, English-speaking workforce that can produce goods and services during hours when most American workers are off-shift or sleeping.² We’ve provided a more detailed breakdown of this below.

Cost Efficiency

Labor costs in India are significantly lower than in the United States. For instance, the average hourly compensation for manufacturing workers in India is $0.91. To put that in perspective, the average hourly wage in the United States is $28.80.³ That’s a compelling reason for outsourcing jobs to India, but it’s only one variable in the cost equation.

Other industries are also affected. A software developer could cost $25,000-$35,000 in Bangalore or Hyderabad, without necessarily compromising on quality. CPA firms outsourcing to India can reduce their operational expenses significantly, with outsourcing tax preparation to India or outsourcing bookkeeping to India offering substantial savings.

Skilled Workforce

India’s quality of education, particularly in technical fields, has improved dramatically over the past two decades. The country has over 58,000 higher learning institutions and roughly 43 million students enrolled in undergrad and postgraduate degree programs, along with over four million college graduates in their current workforce, including 1.5 million engineers.

Companies outsourcing to India benefit from this skilled workforce across multiple domains. Whether you're outsourcing SEO to India, outsourcing web development to India, or outsourcing customer service to India, you'll find professionals with relevant experience and certifications. Many Indian service providers employ staff with advanced degrees.

Time Zone Advantage

Using a workforce that’s half a world away gives your company an advantage because you can work around the clock. Many companies in the United States use their domestic workforce during the day and hand jobs off for an “overnight” shift in India. Doing this with an outsourced team that is skilled and efficient can more than double your output.

This is particularly valuable for outsourcing services to India that require continuous monitoring or have tight deadlines. Outsourcing digital marketing to India or outsourcing graphic design work to India can accelerate project timelines significantly when managed properly. That includes choosing your outsourcing partner carefully.

English Proficiency

India has the second-largest English-speaking population in the world, with over 129 million English speakers. This linguistic advantage eliminates many communication barriers that can plague other outsourcing relationships. Most Indian professionals in the outsourcing industry have excellent written and spoken English skills, making collaboration more seamless.

Companies in the United States should recognize that the English spoken in India is not an American dialect. British English is more formal, and the colloquial and slang terms are different. English is also not the native language in India. It’s important to understand that when giving directions to your team or communicating with a new service provider.

What Are the Risks of Outsourcing to India?

While the benefits are compelling, outsourcing to India problems do exist and need to be carefully considered. Some of these are due to communication or time zone differences. Others involve technology shortfalls, insufficient infrastructure, and data security issues. Many of these can be overcome, but only if you know what to look for.

Differences in Communication

As we noted above, 129 million people in India speak English, but it's not their native language. English is taught in schools, and many top-tier professionals speak and write it fluently. Others have minimal fluency and comprehension. That could be a problem for companies trying to outsource work. Language barriers can significantly slow down production.

The concept of "yes" can be particularly tricky. Indian professionals may agree to unrealistic deadlines or requirements to avoid confrontation. This isn't malicious; it's a cultural difference in how conflict and disagreement are handled. It would be helpful to have someone on your side of the world available to translate.

Quality Control

Working with an offshore team means you can’t physically inspect products, provide immediate feedback, conduct impromptu meetings, or quickly course correct when issues arise. This can be particularly difficult for businesses outsourcing for the first time. They usually find out quickly that doing business in another country is very different than operating in the United States.

Some US companies outsourcing to India have experienced quality inconsistencies, usually in the early stages of the relationship. This is often due to inadequate communication of requirements rather than the capabilities of the Indian provider. Unfortunately, it’s not always communicated that way. Keep that in mind when vetting new providers.

Data Security

Outsourcing accounting work to India or handling sensitive customer information can bring up data security concerns because the laws protecting you are different there. India has strengthened those laws in recent years, but it’s still best to look for providers with international security certifications recognized in the United States and Europe.

This brings us to the cost of regulatory compliance. It’s more expensive when dealing with cross-border transactions, particularly for industries like healthcare or finance that have strict data handling requirements. Some regulations require disclosure to your clients who may not be willing to agree to outsourcing their data to another country.

Infrastructure Challenges

India's IT infrastructure has improved, but operations are occasionally disrupted by power outages, internet connectivity issues, and extreme weather. India has over 1.2 million square miles of space and a population of 1.4 billion, but it’s still not considered a “fully developed” country.⁵ Their technology has a way to go before it achieves that status.

In addition to technological development, the variables used to determine whether a country is fully developed include the general standard of living, levels of education, health, and literacy. Per capita income is also a factor. If that goes up, one of the most compelling reasons to outsource to India will disappear. That’s why this is in the “con” category.

How to Navigate Legal and Compliance Issues in India

India has signed several international agreements for data protection, intellectual property, and business cooperation. These provide some protection to foreign corporations, but you should check with your attorneys before signing any contracts. You’ll also need a compliance expert to help you wade through tax and tariff rules that frequently change.

What Industries Commonly Outsource to India?

Information technology remains the largest sector in this category, with outsourcing coding to India and mobile application development outsourcing to India being particularly popular. Financial services is another, with accounting firms outsourcing to India, outsourcing audit work to India, and tax preparation outsourcing to India becoming increasingly common.

Healthcare organizations are also increasingly outsourcing medical coding to India, taking advantage of trained professionals who understand complex medical terminology and insurance requirements. Manufacturing companies outsource engineering design services, while marketing agencies handle SEO outsourcing to India and content creation.

How Do I Choose an Outsourcing Partner in India?

Selecting the right partner in India is similar to choosing one in the United States or Europe. You can start by evaluating the potential provider’s track record, reading client testimonials, and reviewing industry certifications. If you can, check with other companies in your industry to see who they do business with. You might find a potential partnership there somewhere.

Financial stability matters. You want a partner with staying power, so check their funding, growth trajectory, and employee retention rates. If that data is not available, you might want to look at other providers. Ask for references and pay attention to how they answer questions. Communication is a key factor if you’re looking for a long-term relationship.

Streamline Your International Payments with Wise Business

When outsourcing services to India, managing international payments efficiently becomes crucial for your business operations. Traditional banks often charge hefty fees and offer poor exchange rates for international transfers. Wise Business provides a smarter solution for companies working with Indian service providers.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in 40+ currencies. You can get major currency account details for a one-off fee to receive overseas payments like a local. You can also send money to 140+ countries.

Open a Wise Business account online

The outsourcing landscape will continue to evolve, but India's position as a leading destination seems secure. Cost advantages, a skilled workforce, and an improving infrastructure make it an attractive option for businesses in the United States and Europe.

	Editor & Business Expert:
	Panna is an expert in US business finance, covering topics from invoicing to international expansion. She creates guides and reviews to help businesses save time and make informed decisions. You can read more useful business articles on her author profile.

	Author:
	Kevin D. Flynn is a retired financial professional, business coach, and financial writer. He lives in Leominster, Massachusetts with his wife Evelyn, two cats, and ten wonderful grandchildren. When he’s not working, you’ll find him at the golf course or on his back porch reading classic sci-fi novels.

Sources

1. India Leading the Next Phase of Global Outsourcing Growth: Deloitte Report
2. Compensation costs in India : The Economics Daily : U.S. Bureau of Labor Statistics
3. United States Average Hourly Wages in Manufacturing
4. India releases updated higher education statistics | British Council
5. What is a developed country, a status India is aiming to achieve by 2047?
   All sources checked: September 2025.