With modern-day technology making the world more connected and accessible, businesses are no longer bound by the geographical and legal constraints of the country they operate in.
This has led to several US and European companies, like Microsoft and Transocean, setting up offshore companies in India to benefit from lower costs, skilled talent, and quality results.
But why is India a popular offshoring destination?
In this article, we’ll answer that question and highlight 5 excellent tips to help you set up an offshore company in India.
This article contains
(click on the links to jump to the relevant section)
- What Is An Offshore Company?
- 10 Successful Offshore Companies In India
- 5 Key Benefits Of Setting Up An Offshore Company In India
- 5 Best Practices To Set Up An Offshore Company In India
Let’s get started.
What is an offshore company?
An offshore company is one that is registered in a different country from where its founders and investors reside. The company follows the laws, regulations, and tax authority of the country it’s registered in and not where its founders reside.
For example, let’s say a tax resident of the US starts a software development company. If the founder shifts some business operations to a foreign country like India, it’s called offshoring.
Now in offshoring, you can either:
- Move work processes to a foreign country but hire your own team there.
- Delegate the work to a third-party services provider and have their team perform the tasks. This is called offshore outsourcing.
10 successful offshore companies in India
Before we discuss the advantages of an Indian offshore company, let’s check out ten popular companies that run a successful offshore business in India:
Cisco is a world leader in IT (Information Technology) networking solutions.
It has invested over $150 million (INR 1100 Crore) to expand its offshore development center (Cisco Global Development Center) in Bangalore, India. It currently has seven offices in India with over 11,000 employees.
2. General Electric (GE)
With a $250 million investment in infrastructure, healthcare, real estate, GE has big plans for its Indian leg. It has set up its largest research and development center in Bangalore, India.
A European oil and gas company, Norscot registered its Mumbai office in 2001 as a consultancy firm.
Today, its Mumbai branch offers a multitude of services like:
- Rig project management.
- Drilling services and supervision.
- Specialized oil and gas equipment and services, etc.
4. Essar Oilfield Services India Ltd (EOSIL)
EOSIL is an offshore drilling service provider to major oil and gas companies in the world. It also has Indian clients like ONGC (Oil and Natural Gas Corporation) and GAIL (Gas Authority of India Ltd.
With its origins in Dubai (UAE), EOSIL was incorporated in India in 2006. It has an office in Mumbai and runs a warehouse/repair yard in West Bengal.
5. Ford Motor Company (FMC)
FMC is an American automobile company that outsources software development and customer support to India, alongside dedicated manufacturing and assembling plants. It has its India headquarters in Chennai.
Transocean is a Swiss company that specializes in offshore drilling services. They incorporated their Mumbai office in 2015. It offers a highly sophisticated fleet of rigs suitable for the oil and gas industries such as ONGC.
A popular American tech and outsourcing company, IBM offers products and services in cloud computing, artificial intelligence, data, and analytics.
IBM has been operating in India since 1992 and has offices in major cities like Bengaluru (Karnataka), Ahmedabad (Gujarat), Delhi, etc. It has a strong team of 100,000+ offshore developers.
Microsoft, an American software development giant, has nine registered offices in India with over 8000 employees. In 2020, its venture capital fund ‘M12’ opened its first office (5th globally) in India.
Microsoft has also engaged with Indian software outsourcing companies like Wipro and TCS (Tata Consultancy Services) for its support operations.
9. American Express (Amex)
Headquartered in New York, American Express is a financial corporation that opened its first office in India way back in 1921.
Today, it offers a range of financial, travel, and banking services through its Indian offices. It also outsources its customer service operations to India.
A pioneer in computer technology, Dell is an American multinational company that has multiple offices in India. Its manufacturing unit in Chennai caters to the huge market for computing devices in India and globally.
5 key benefits of setting up an offshore company in India
In the last few decades, India has become a preferred offshore destination for businesses across Europe and the US.
Here are the top five reasons behind this popularity:
1. Cost savings
Depending on the type of operations offshored to India (development or support), an EU (European Union) or U.S. company can reduce its overall operating costs and increase profit margins.
Factors that contribute to this include:
- Lower cost of living.
- Currency difference.
- Reduced expenditure on recruitment, training, and salaries.
- Faster project completion.
This allows them to divert more capital for the core business functions, as well as research. Most importantly, the reduced cost doesn’t compromise the effectiveness or quality of the final product or service.
2. Highly skilled human resources
Thanks to the boom in the technical education sector in the late 90s and early 2000s, India has a large pool of highly skilled professionals.
Many Indian universities consistently rank among the top educational institutions across the globe. Moreover, most Indian professionals are proficient in English, which makes it easy to communicate project needs.
This has made India one of the biggest contributors to the global talent pool and an ideal destination to build a solid offshore team.
3. Excellent technological infrastructure
India has seen a massive transformation in technology in the last few years.
And this has resulted in a surge in offshore outsourcing of software development and other IT-related services to India.
Many Indian cities such as Bengaluru, Hyderabad, and Pune are now global IT hubs with world-class infrastructure and offshore support services. The offshore development in these cities then helps other industries grow by providing customized software solutions for their needs.
4. Favorable government policies
India’s stable political and socio-economic state has made it easier for the government to implement policies that help foreign businesses flourish.
Here are some pro-IT policies that have helped India become a major player in the global IT scene:
- Incentives to IT and ITES (Information Technology Enabled Services) companies (the Income Tax Act, 1961).
- Ease of setting up an IT startup.
- Development of IT parks across the country, etc.
This has also boosted various supporting industries that promote India’s offshoring prospects.
5. Faster time-to-market
Companies offshoring to India have a significant advantage in terms of the overall delivery time.
Over the years, the Indian offshore outsourcing industry has developed a reliable system that minimizes the time from conceptualization to delivery.
Here’s how Indian offshore development companies have developed the expertise for a faster time-to-market:
- A thorough project plan using methodologies like Agile and SCRUM.
- Round the clock development cycle.
- Access to a vast pool of resources and an experienced development team.
- Ability to ramp up the development process at any given time.
5 best practices to set up an offshore company in India
Offshoring your operations to India has its benefits.
However, it also poses a few challenges — mainly due to legal, logistical, and administrative constraints.
But don’t worry. Here are five best practices that’ll make your offshoring transition smooth:
1. Be aware of the laws and regulations
Before you decide to offshore to India, you must read up on the laws that govern how a foreign company is registered and incorporated in India.
Some of these laws include:
- Foreign Direct Investments (FDI).
- Foreign Exchange Management Act (FEMA).
- The Companies Act, 2013.
- Payment and Settlement Systems Act, 2007.
- Environment (Protection) Act, 1986.
- The Patents Act, 1970.
Being aware of these laws will help you:
- Understand the eligibility requirements for setting up an offshore entity.
- Determine the exact process of registration or incorporation of the offshore entity.
- Identify the types of documents required.
- Understand the taxation policies to make accurate financial estimates.
- Understand and set legal disclaimers.
- Protect intellectual property.
- Get appropriate certifications as per the ISO (International Organization for Standardization) or IEC (International Electrotechnical Commission) standards.
2. Create a long-term offshoring strategy
Long-term success in offshoring requires careful planning and constant reassessment. It’ll help you tackle any hidden risks that may emerge at times.
The leadership team of your company should create a long-term strategy that covers:
- Business processes that should be outsourced to India.
- Locations that would be best suited for the type of operations.
- Assessment of workforce requirements for effective management.
- Ground realities, market fluctuations, and cultural differences when doing a cost-benefit analysis.
- Whether you should build an in-house team or outsource the processes to a third party.
- Level of authority the vendor has over the business functions.
- Action plans for any contingencies.
3. Choose your company structure wisely
The leadership team should decide on the company structure based on the short and long-term offshoring strategy.
They should consider factors like the number of owners or investors, maintenance cost and taxation structure for various company types, level of security needed, etc.
Based on these factors, a foreign company can choose from options like:
- Joint venture with an Indian company.
- Wholly-owned subsidiary company.
- Project office.
- Branch office.
- Limited Liability Partnerships (LLPs).
A company’s structure also plays a role in its naming. Based on it, you may need to choose a suffix like Pvt. Ltd, Inc., or LLP for your company.
4. Prepare for administrative challenges
It’s common for an offshore development company to underestimate the administrative challenges when starting an office in India. But being aware and ready for such challenges could make the entire process much quicker and smoother.
Here are few points to address before you take an offshoring decision:
A. Infrastructural challenges
Being a vast country with ever-growing offshoring potential, India offers a ton of choices in terms of how and where to set up your office.
Depending upon the nature of your business, there are Indian cities that can offer ready-to-begin solutions.
For example, Bangalore and Hyderabad are usually the first-choice destinations for IT outsourcing. On the other hand, Mumbai, Daman, and Ahmedabad are great for manufacturing setups.
Special Economic Zones (SEZ) and industrial corridors also offer specialized services and tax incentives that you should consider.
B. Recruitment challenges
With increasing competition in India’s offshore outsourcing market, companies are rushing to hire the best talent.
Having an India-specific recruitment strategy will help businesses hire the right people and reduce the recruitment expenditure.
C. Skill-development challenges
You may notice a difference in the way Indian companies train their workforce. This is a result of the contrast in the cultural values.
For example, India’s culture relies more on subtle and non-verbal communication. Oral commitments hold as much or even more value than written ones in such cultures.
The training methodologies used by offshore companies must keep these differences in mind. They must come up with a training strategy tailored to Indian sensibilities and needs.
D. Team management challenges
Since your offshore team could be thousands of miles away, you need to monitor them during work hours to ensure that they tackle your tasks efficiently.
This will also help you understand how long each project takes to complete for accurate payroll and invoicing.
Fortunately, you can use employee productivity management tools like Time Doctor to:
- Accurately track their work hours to the second.
- Gain insights into their performance and project progress with detailed reports.
- Pay your offshore team’s salaries or bill the service provider with integrated payroll management functionality.
Check out Time Doctor’s other features and benefits.
5. Hire an offshore outsourcing service provider
Even with all the preparation, offshoring could still prove to be a daunting task — especially for small businesses.
Hiring a specialized offshore service provider could make this task much more manageable and cost-effective. There is no shortage of companies that provide offshore software development services and manufacturing assistance in India.
Here are some Indian offshoring service providers:
- Trigent Software Inc.: A leading Bangalore-based outsourcing and offshore software development company with 22+ years of experience.
- Clarion Technologies: Pune-based offshore outsourcing company that offers software development services like web and mobile app development and helps you put together a skilled offshore development team.
- Outsource Services India: An outsourcing partner for financial services, such as bookkeeping and accounting tasks.
- Vofox Solutions: A software outsourcing company with over 15 years of experience in software development and IT consulting.
Over the years, India has become a sought-after offshoring and outsourcing destination — especially for offshore software development and IT services.
But while setting up offshore companies in India offers several benefits, it also comes with its fair share of challenges. Use the tips we covered here to understand how you can overcome these challenges.
And once you have a solid strategy in place, offshoring to India becomes a breeze!
Andy is a technology & marketing leader who has delivered award-winning and world-first experiences.