Outsourcing to India vs. outsourcing to Lithuania
Table of content
1. Introduction: What is outsourcing?
2. India (abstract)
3. Factors attracting potentials to outsource in India
3.1. Low costs make IT outsourcing in India efficient.
3.2. India has got lots of educated people.
3.3. High quality guarantee for companies doing IT outsourcing in India
3.4. Indian has got one of the fastest growing economies in the world.
3.5. India has got modern and technologically advanced firms working in outsourcing
sphere.
3.6. India has got well-based means of communication
3.7. Indian government is upholding IT growth.
4. Lithuania (abstract)
5. History of outsourcing in Lithuania
6. IT outsourcing in Lithuania (advantages).
6.1. Good geographical location
6.2. Good accessibility with rather low costs.
6.3. Well-based infrastructures and IT industry.
6.4. Good telecommunications
7. Outsourcing to India vs. outsourcing to Lithuania
8. Conclusion
8. Bibliography (sources)
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Outsourcing to India vs. outsourcing to Lithuania
1. Introduction: What is outsourcing?
I am going to lead an investigation on IT outsourcing. Mainly my researches will be based on
offshore outsourcing; to be more precise I have chosen two countries, where I will make my
analysis: Lithuania and India. Both countries have got growing IT branches where outsourcing is
a significant element of an IT business.
I have chosen Lithuania for my investigations, because it is my motherland and I am going to
find out more about outsourcing which is proceeding inside the country. However I will research
Lithuanian offshore outsourcing as well and compare it with India’s position.
Second country to choose was India and the reason is that India has a rapidly growing IT
branch and it is a main country people choose to outsource in. My investigation of India will be
mainly based on offshore outsourcing as it is the primary outsourcing happening there.
So what is outsourcing? Outsourcing is defined differently in various sources, but the general
understandings of outsourcing are:

The practice of turning-over responsibility of some to all of an organization's
information systems applications and operations to an outside firm.
(www.cbu.edu/~lschmitt/I351/glossary.htm)

The practice of having goods or services provided by a person or persons outside the
business or organization. (www.yeronga.tafe.qld.gov.au/tools/glossary/glossary_o.shtml)

Manufacture of inputs to a production process, or a part of a process, in another
location, especially in another country. (www-personal.umich.edu/~alandear/glossary/o.html)
I will try to explain the definition of outsourcing by myself. Outsourcing (IT) is a process when
someone orders to make a project, a product outside a firm or a country and then uses it in local
area for own firm. Example: an American business man pays an Indian programmer to make a
secure company management program. After it is transferred and used in the United States.
There are many purposes for it like reduced cost, taxes and sometimes even better quality.
2. India (abstract)
Everybody has heard that India is a quickly developing country. Economic forecasts tell us facts
that India is going to be one of the most powerful countries in the soon future. Nowadays people
who have got any relations with in India understand the great power of India in IT business
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Outsourcing to India vs. outsourcing to Lithuania
development and solutions. In the outcome of this India earned tremendous reputation to be the
most reliable outsourcing partner. "In the outsourcing business, India has emerged to be No 1. It
is global in terms of services in the United States and the United Kingdom", says Kiran Karnik,
the president of Indian National Association of Software and Service Companies (NASSCOM).
Lots of companies such well know as AT&T, Boeing, Citibank, General Electric, IBM,
Microsoft, Morgan Stanley, Oracle, Philips, Reebok, Swissair, Sony, Wal-Mart have got their
offshore software centers in India. This trend of outsourcing is growing and granting India to be
important partner in IT business.
Facts are that more and more companies are making offshore IT outsourcing in India. But if we
look closer to the situation why do people choose India. What factors do attract potential clients
to outsource in India? I will list and describe some of the factors below.
3. Factors attracting potentials to outsource in India
3.1. Low costs make IT outsourcing in India efficient.
India is an ELDC (economically less developed country). Taxes and costs are pretty much lower
than in other more developed countries. It is very efficient to make offshore outsourcing to India
as the employees cost less to employ. The taxes, fees, extra charges and any other pays are
significantly lower in India than in other countries. That is why foreign companies take the
opportunity and choose India as the country to outsource in. Recently some Indians have opened
their own companies and are employing their natives for higher prices then foreign employers
do. This event has a rather negative impact on the western society, which has already addicted to
cheap and risk free life. However, there are too small such companies to employ all workable
Indians.
3.2. India has got lots of educated people.
India is the world's second highly populated (more then 1 billion) country. There are many well
educated and prepared young people, who want and are able to work. Many of them are skilled
in modern technologies (IT engineers, programmers, administrators) and speak English. Many
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Outsourcing to India vs. outsourcing to Lithuania
offshore companies work with Indians as they are not worse and sometimes even more prepared
for the work. That is one of the keys to success of IT outsourcing in India.
3.3. High quality guarantee for companies doing IT outsourcing in India
Indian employees not simply do cheap work; they perform high quality works which keep
abreast with foreign companies and meet all foreign standards. Foreign companies can be sure
that their orders will be done on the highest level. Even three out of every four SEI CMM Level
5 companies worldwide are located in India.
3.4. Indian has got one of the fastest growing economies in the world.
Everyone has heard that India has got stable and fast growing economics. Many economical
forecasts tell that India will be one of the most powerful countries with a very strong economics
in a near future. The service sector and IT sector, this includes local IT outsourcing, offshore IT
outsourcing and other IT services in India contributes more than 50 % of the GDP (gross
domestic protuct). India is exporting computer software from the 90s and each year the quantity
of exported software is increasing by 30 - 45 % steadily. Now India is the largest computer
software exporter, which shows that more and more companies are making offshore IT
outsourcing in India. The stable and growing economics is yet another point why India looks so
attractive for foreign companies looking where to outsource.
3.5. India has got modern and technologically advanced firms working in outsourcing sphere.
There are lots of Indian companies who offer best IT services and software solutions. There are
also lots of foreign companies who offer offshore IT outsourcing services and software solutions
based on outsourcing the work to India. Companies offer:

Application development
Many companies offer full application development beginning from simple stages as
analysis and ending with the 100 % quality assurance. These include all manner of
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Outsourcing to India vs. outsourcing to Lithuania
Internet applications, E-Commerce, Client/Server applications, various web application
development services and etc. All the stages can be controlled by the clients.

Application migration
Firms can sometimes make you sensible offer to recreate available applications (to save
the time and spending) or to simply buy the existing application. They make all the
stages from planning, installing application, and verifying, to testing, customizing,
making data migration and supporting.

Re-Engineering.
To make your business successful many companies offer their help in reengineering
your business. It means looking at whole, complete processes and actions beginning
from gaining the materials, resources needed (it can be physical resources or staff)
ending with production, business marketing and work and action distribution.
Other firms working in outsourcing sphere offer similar or different services. This makes a huge
strife between the firms which is very handy for the potential clients. Clients can be sure that
they will be not deceived and their order will be made with quality. Big competition between
companies makes the prices lower which is on the side of the clients as well. I will bring you the
example of the company’s called “Vorks Software” overview: “Application Development and
Management has been Vorks Software's traditional strength involving the largest percentage of
the Company's business as well as its resources. The Company services Companies globally with
multiple year contracts for multiple projects. Superlative customer gratification is the strong
objective of Vorks in this area. Vorks typically utilizes the 24/7 onsite-offshore delivery models
for Applications Management, resulting in 25% - 35% cost savings for the client. Our endeavor
to be an extension of the client's IT organization.” As you can see, the companies try to be more
client-friendly and make good advertisement, attracting, interesting and efficient offers, because
they compete to every potential client. This is yet one more reason, why offshore IT outsourcing
in India is so popular and prospering.
3.6. India has got well-based means of communication
India has got well organized telecommunications, cellular networks and many reliable ISP
(Internet Service Providers), which provide perfect wire and wireless connections to the internet.
India also provides excellent satellite and submarine communication links which has good
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Outsourcing to India vs. outsourcing to Lithuania
connection to the whole world. Foreign companies who do outsourcing in India don’t have to
puzzle themselves about communicating with employees. They can easily communicate without
any connection problems. Furthermore, I should add that Indian government are preparing more
new telecoms and spreading this network, so that there will be no places out of reach at all. India
has got very loyal telecom policies:

Unlimited competition between firms providing telecom services. Companies
compete to the local telecom and international one. This makes lower costs and better
quality of services.

Indian government has decreased the costs of telecom services by 50 %.

Many ISP provide cheep internet, no license fee, no revenue share, no extra paying.
The outcome of such policies was more than enough. Now India has got modern well
structured cheap telecoms. This aspect is really essential and efficient for companies
preparing to make offshore IT outsourcing in India.
3.7. Indian government is upholding IT growth.
India has got a reliable and stable IT government whose policies ant taxes, economy growth,
high GDP, power, resources, telecom, stuff, industrial parks, special IT zones and other special
elements are really effective in improving the IT infrastructure, IT services, offshore IT
outsourcing and local IT outsourcing. Indian government leads loyal policy to the firms working
in outsourcing sphere, providing them with good communications, efficient taxes, great support,
providing firms with the all basic facilities, dealing with all the events to boost their work and
thus making the IT outsourcing to prosper in India. This is one yet reason why IT outsourcing in
India is so strong.
So these are the main factors attracting potentials to make offshore IT outsourcing in India.
Another reason why IT outsourcing is prospering in India is loyal government policies. Indian
government understands the importance of offshore outsourcing to Indian economics and creates
efficient policies to boost it. Below I will list and describe policies implemented by Indian
government.

First of all IT sector is one of the most profitable industries in India. This include
companies that provide local IT services, companies that export their service to the foreign
countries, this means offshore outsourcing. That is why IT outsourcing is being regarded by the
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government and policies are framed so as to gain the maximum possible benefit out of IT
outsourcing to India.

Indian government makes reforms and support offshore it outsourcing. These reforms
are enabling the foreign companies to enter the Indian market more easily.

The government is actively promoting FDI, investments from NRIs (Non-Resident
Indians) including Overseas Corporate Bodies (OCB's) owned by the NRIs. FDI can be brought
in through the automatic route, based on powers accorded to the Reserve Bank of India.
Till 1994, DOT was the sole provider of basic telecom services in India. The new National
Telecom Policy has opened the field for private participants.
After realizing the potential of India as a major IT power, the government has taken several
initiatives to promote the development of IT. The Ministry of Information and Communication
Technology is playing an active role in developing the infrastructure that supports the
development of information technology. The IT Bill passed in 2000 provides a legal framework
for the recognition of electronic contracts, prevention of computer crimes, electronic filing of
documents, etc.
Amendments have also been proposed in the Indian Evidence Act, Indian Penal Code and the
RBI Act. The mechanism of digital signature has been proposed to address the issues of
jurisdiction, authentication and origination.
Recognizing the importance of Venture Capital Funding, the Ministry of Information
Technology has set up a National Venture Fund for the Software and IT Industry with a corpus
of Rs. 100 crore in association with the Small Industries Development Bank of India (SIDBI)
and Industrial Development Bank of India (IDBI). The aim of the Fund is to provide Venture
Capital to start up software professionals and IT units in the small-scale sector. (Source :
NASSCOM)
4. Lithuania (abstract)
Talking about IT sector in my motherland Lithuania, I suppose it would be sensible to remember
USSR. Lithuania was the country on the edge of Soviet Union. Industry in Lithuania was always
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Outsourcing to India vs. outsourcing to Lithuania
prospering and already in 90s when IT sector only started to gain its importance Lithuania had
great universities and other higher schools which taught qualified students. When USSR broke
up Lithuania was a free country. However Lithuania is ELD (economically less developed)
country and its GDP is lower than in EMD countries. That means Lithuanian people get lower
salaries, which is on the side of companies making offshore IT outsourcing in Lithuania. In the
later years of 20th century Lithuania experiences many companies who make offshore IT
outsourcing in Lithuania. This has got some negative and positive impacts.
5. History of outsourcing in Lithuania
I made some investigation about recent IT offshore and local outsourcing in Lithuania. I want to
describe IT sector and IT outsourcing development in Lithuania in chronological sequence. I will
divide period in three parts beginning and present situation. I will briefly describe each part to
make more clearness.
1. First part which I called “beginning” started soon after Soviet Union broke down. Lithuania
became an independent country and foreign countries could easily have relations with Lithuania.
There were many good universities which raise many qualified young experts in IT sphere.
People in Lithuania were rather poor and were seeking for the well-paid job. Many foreign
countries exhausted the situation and started massive offshore IT outsourcing to our country. It
was the same as the present situation with India – high quality and low costs.
2. The second part is “prosperity” it took place in the very end of the 20th century. The IT sector
specialties were popular and more people studied it. They had many work from abroad
companies. Some people started their own IT business in Lithuania and employed many IT
specialists. Lithuania gained lots of taxes and fees from the companies making offshore
outsourcing to Lithuania. Many good IT masters migrated abroad and started living a new life
with better paying job. Those people who are staying in Lithuania don’t want to work for small
salaries. Government spends to small money for the education and those great IT universities are
not being modernized and simply can’t prepare high qualified masters. IT sector specializations
are still popular, but students who graduate if IT diploma don’t usually find good job offer in
Lithuania and go abroad. Lithuania has got one of the highest taxes in Europe and it is a
disadvantage for offshore outsourcing. After Lithuania has joined European Union people can
move easily around the Europe and more skilled people are leaving Lithuania. European Union
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doesn’t allow exhausting people and demand higher salaries, so it became inefficient to make
offshore outsourcing to Lithuania. On the other hand as Lithuania joined the EU it became more
open to the world. From the Economist (9/24/2005) “One reason is a boom in labour-thirsty
business: Lithuania's construction industry, for example, jumped 16% in the first half of 2005.
Membership of the European Union is bringing foreign investment and outsourcing.” From the
“And while paperwork may be plentiful, people are often scarce. From the U.S. News & World
Report (11/17/2003) "We're already the largest [information technology] exporter in the Baltics,"
says Poberezhsky of Exigen's 600 employees in Riga, Latvia, and Vilnius, Lithuania, noting that
the personnel challenges in small Central European countries are already sending some
multinationals farther east.” The history of IT outsourcing in not so comprehensive as in India.
However offshore outsourcing has got big impact on Lithuanian economics and many experts
relate the future with outsourcing. Lithuania has got some advantages of IT outsourcing on India
and some disadvantages as well.
6. IT outsourcing in Lithuania (advantages).
6.1. Good geographical location
Lithuania is geographically located in the Europe center. Western society has perfect
accessibility to Lithuanian industry and can easily outsource with the minimum time consuming.
From the U.S. News & World Report (11/17/2003) “Geography, in this case, is guiding destiny.
For while few experts predict Eastern Europe will unseat India from its spot atop the techoutsourcing heap, most expect the region's proximity to the West to soon start paying off in
spades. With Western European clients hooked on just-in-time delivery, and shipping times from
the Far East topping 30 days, Taiwan-based Foxconn Electronics--which assembles computer
systems for customers like Hewlett-Packard and Apple--was feeling pinched.“
6.2. Good accessibility with rather low costs.
Lithuania joined the European Union in 2004 and it has changed the outsourcing business in
Lithuania. The cost rose up a bit, but it became fully accessible for the Western society and
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foreign companies concentrating on IT offshore outsourcing business. You do not need to fly to
India and buy computer for 1000 $ if you can buy it near your home for 1500 $ which is rather
cheap. From the U.S. News & World Report (11/17/2003) “Labor costs run as low as a third of
those in Western Europe, for one thing. And "as these countries start to join the European Union,
they'll be more attractive as an [outsourcing] destination," says Gartner research Vice President
Ian Marriott, noting that when 10 Eastern European countries join the EU next May, they'll give
companies easy access to the world's largest trading bloc. The many-faceted nature of cost is a
key factor in Central Europe's rise. San Francisco outsourcing firm Exigen offers clients like
Wachovia Securities savings up to 50 percent by funneling back-office tasks to its developers in
Latvia and Lithuania. But general manager Alex Poberezhsky says knowledge, not price, is his
selling point. "If I wanted to compete on price alone, I'd be in Asia," he says. But "even though
India has a long history of outsourcing, it doesn't have a long history of data processing." It's a
crucial distinction: Many financial- services firms outsource maintenance work on decades-old
computer systems--the same kinds used in the former Soviet Union. "When clients need
mainframe legacy application talent," says Poberezhsky, "I can supply 50 people immediately."
6.3. Well-based infrastructures and IT industry.
Lithuania has got well-based infrastructures and IT industry. The basement of good
infrastructure was made when Lithuania was part of USSR. Nowadays it is a big advantage if
foreign companies want to make offshore outsourcing in Lithuania and create big networks of
the company. From the U.S. News & World Report (11/17/2003) “That vast landscape to the
east is perhaps Central Europe's biggest threat. While EU membership will no doubt be a market
boon, it's also likely to undercut the region's current cost advantage. "Costs in Ukraine are
already 40 to 50 percent less than in Latvia," says Poberezhsky. "And I can get the same
education base and type of expertise" there. But most countries further east have miles to go
before their infrastructures can truly handle a major influx of global firms. And "compared with
developed Western European countries, it'll still be competitive," says Foxconn's Jim Chang.”
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6.4. Good telecommunications
Lithuania is proud of its good well structured telecoms. Lithuania has 3 main mobile operators
and many ISP providing wire and wireless connection to the internet of rather high quality. The
main disadvantage is a high cost of telecoms. However EU has demanded to lower the prices on
the telecom services.
7. Outsourcing to India vs. outsourcing to Lithuania
The table below shows the positive and negative signs which have impact on the companies
making decision where to outsource.
Lithuania
Population (number of specialists)
Educated, high skilled specialists
High quality guarantee
Costs
Taxes & Fees
Popularity
SEI CMM Level 5 companies
Location
Advanced technologies
Good infrastructure
Government loyalty and policies
Telecommunications
Political aspect
Accessibility
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Outsourcing to India vs. outsourcing to Lithuania

The population of Lithuania is more then 3 million people and population of India is
more than 1 billion. This huge difference has impact on the number of IT educated
and skilled experts which has an impact on job they can do and amount of job
companies can outsource to the country. To conclude, India wins in this sector.

Both India and Lithuania has got good universities and other educational facilities. So
both countries can teach and have skilled experts in IT sphere which is essential for
outsourcing business.

As I mentioned before both countries have well educated and trained specialists and
both countries have companies which can trust you that the job will be completed
with a high quality guarantee.

Cost is one of the factors that mainly attract companies to make IT outsourcing.
Lithuania is rather cheap if in comparison with EMD countries. However India is
cheaper in comparison with Lithuania.

India has got low taxes and fees, because government is very loyal to outsourcing.
However Lithuania has got on of the biggest taxes in Europe.

Baltic countries it means Lithuania too is rather popular when talking about offshore
outsourcing, but India remains the most popular.

Lithuania has vantage at India if talking about location and time consuming when
transferring any products. India is located far from the Western society which is the
main partner in outsourcing business. Lithuania, on the other hand, is located in a
perfect geographical location and is very accessible due to Lithuania is a member of
EU.

Infrastructures of main cities are well developed both in India and in Lithuania. It is
good for firms planning vast plans with the country. Telecoms, internet and other
communication facilities, mass media and etc. are well developed too.
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8. Conclusion
Both countries India and Lithuania have got growing and prospering IT outsourcing industries.
Although these countries have got different local industries and infrastructures, population,
education and government attitude, India and Lithuania are both alike when dealing with IT
outsourcing sector. However India as a great country with more than 1 billion population and
great skilled specialists has got better foundation for IT outsourcing sector to improve and roll.
This is due to the fact that India has got certainly better infrastructure, loyal government and
policies, telecommunications, greater number of professionals, lower taxes, fees and costs. On
the other hand Lithuania is in the geographical centre of Europe which is a great advantage for
companies which is in lack of time. Furthermore Lithuania has got better accessibility and surely
skilled specialists in IT branch. India is one of the IT outsourcing monsters - a country which
provides cheap and quality IT software to the whole world. Lithuania is a small country with
good location and growing IT industry. The potential client should decide where make IT
outsourcing by himself.
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8. Bibliography (sources)

Sheila Pantry & Peter Griffiths “Managing Outsourcing in Library and Information
Services”

newspaper “U.S. News & World Report” (11/17/2003)

newspaper “Economist” (9/24/2005)

newspaper “ITTraining” Apr 2004

India’s government policies

NASSCOM
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