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Lately we have seen companies that are moving out of India — see these posts:
Why are these companies moving out of India. In both of the cases above, the companies state that it is better managed locally. Or is that just a nice way of saying that it “didn’t work out”. India was the leader, note the word “was”.
Companies went to India, why? They went because the price was cheaper. Since CEO’s are about greed for their investors first, they moved business to a lower cost without really looking at whether the quality and customer benefit is the same.
Now countries like Russia (see: Outsourcing: The Russian Revelation) are offering the same services at an even lower cost. When will the cost argument not be valid anymore? How low can these services really go? Eventually there has to be a leveling off point.
It will be interesting to watch how Indian companies handle these shifts over the next 1-2 yrs. Will they lower prices to compete with the new offshoring countries? Will they try to raise quality? The mix for India to win at the offshoring game is still up in the air.
3 Comments Add your own
1. Sanjit Kumar | August 9th, 2006 at 7:44 am
There is a saying,what kind of perception you will create when you will see a glass half filled and half empty. Someone will say it is half filled and other will say it is half empty. In corporate world facts and figures plays an important role. There are few examples given by writer on anti-outsourcing trends for India but writer forgot to mention the number of firms coming to India every month for offshore outsourcing needs. The ratio is much more higher. All research reports from leading consultancy institution clearly state that outsourcing trends for India is increasing day by day.
When any firm moves out from any country it doesn’t mean or state the capability of country or country specific resources. There are lot of country specific management and country specific man-management issues involved in International Business. I hope enterprise CIO and CEO who are dealing in international market are well aware of these issues.
The issues like competitions with countries like Russia and China. India is having no direct threat. There is a misconception that cost is major decision factor for offshore outsourcing but in reality offshore outsourcing is more of a relationship. India is having maximum no of CMMI certified firms and this number is also growing every year. Apart from this India is also having regular supply of highly skilled resources with proficiency in English communication; which is must for IT and BPO offshore outsourcing needs.
A statement by writer “Is India on the way out???? clearly reflects that writer tried to see empty part of a glass and ignore the filled portion.
Sanjit Kumar
AVP-International Business & Key Accounts
Infynita Inc.
2. Mark | September 14th, 2006 at 5:36 pm
While I don’t believe that India is “on the way out”, I do think that issues are surfacing as smooth execution becomes problematic. With regards to I.T. outsourcing in particular, many CIO’s are seeing rates rise, and are wondering if the diminished costs savings are really worth the effort.
One company does offer a domestic alternative to offshore outsourcing. You kind find them at: http://www.ITOnshore.com
3. elKore | April 23rd, 2007 at 1:14 am
The problem is - most companies underestimate the cost of outsourced IT development, thinking that $25/hour versus $100/hr in the US directly translates into a 75% cost reduction overall.
Yet, it doesn’t work quite that well. Companies overseas may do a great job in converting your detailed specs into real web applications.
Yet, when you handle over your requirements to an IT consulting company in the US, you are not expected to provide the detailed specs of your final application. In fact, THEY are expected to do the research analysis of your competitors and give you the plans A, B, and C, which you would discuss with your board and decide which plan you need to go with based on the information that the IT company has provided.
The problem with offshoring, is that you don’t get any plan A,B and C. In fact, there may be no competive research. No consulting, no suggestion, just a fixed bid proposal within a cookie-cutter model.
Yet, as a client, what would you expect from your IT company?
At a minimum, a few suggestions, such as: “at a minimum, we can do this for so much $$. Yet, your competitors are starting to do that, and if you want to keep up, its gonna cost $$$. And, if you want to go beyond, its going to be $$$$”
Yet, you never get that from an offshore company.
So the bottom line is: keep you IT consulting in the US, and IT implementation overseas to cut on costs yet still keep your competitive edge.
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