India’s not-so-bottomless-well for outsourcing

ARTICLE: “Outsourcing Works So Well, India Is Sending Jobs Abroad,” by Anand Giridharadas, New York Times, 25 September 2007, p. A1.

This out-outsourcing phenomenon is less about finding the necessary bodies in India (although, yes Virginia, there is such a thing as rising wages in India) than it is about these Indian companies ambition to go global.

The quote from Ashok Vemuri, SVP from Infosys:

… the future of outsourcing is “to take the work from any part of the world and do it in any part of the world.”

Sounds like he’s read the bible of Sam Palmisano, IBM’s CEO.

So new back-back offices in Brazil, Chile, Uruguay, Guadalajara, the Czech Republic, Thailand and cheap-labor areas in the U.S. and China. Hell, Americans are brought into India to boost the company’s diversity program!

Nice.

The killer connectivity dynamic:

Infosys says its outsourcing experience in India has taught it to carve up a project, apportion each slice to suitable workers, double-check quality and then export a final, reassembled product to clients. The company argues it can clone its Indian back offices in other nations and groom Chinese, Mexican or Czech employees to be more productive than local outsourcing companies could make them.

“We have pioneered this movement of work,” Mr. [S.] Gopalakrishnan [CEO] said. “These new countries don’t have experience and maturity in doing that, and that’s what we’re taking to these countries.”

Experience, maturity, connectivity . . . India really arrives with this sort of stuff: not just taking in work but spreading work.

Very impressive and very powerful, and indicative of what I’ve argued consistently since Blueprint for Action: the New Core sets the new rules. Or as I like to say now, “The last in, the next begins.” The most recent globalizers are the countries and economies that will drive its next-stage expansion.

India will be huge in this regard, along with China. This article describes serious frontier-integration activity. You just gotta see how many frontiers are actually out there. Infosys’s training is described by Americans who’ve taken it as “the equivalent of a bachelor’s in computer science in six months.”

Extending nets, outsourcing to the bottom of the pyramid--wherever it is found--and exporting education . . . again, there is very powerful stuff to be located within the New Core's rise.

You either access this phenomenon or you get left behind.

Comments

[Mark]

Tom,

I understand the financial gains made with outsourcing and think it makes perfect sense to have the work done in the most cost effective way, no matter where that is or who does it.

However, I work for a client who is currently engaged with this type of outsource with Infosys as well as Genpact and TCS. I manage a team who supports the server infrastructure these clowns work on and run apps on and, frankly, they are all awful. None of them have even a basic understanding of the fundemental operations of enterprise infrastructure and either we or our client's support teams end up picking up the slack. It's created more work where there was none before on our side while "money gets saved" by having these folks do what they do.

Not naysaying here but, at what point do you think enough knees get skinned by this (I hear this same experience from many friends in the industry) that the cost benefit is found to be a net loss compared with real growth?

I've found that the ROI that is easily shown wins the day in terms of cost benefit where the costs of added workload for the folks on the ground seems to be hidden. And with the current US job market being what it is for IT (ironically driven in part by this same outsourcing) most folks cling to their jobs rather than having attrition wake up senior leaderhip.

How do you see this playing out in the long haul?

[Tom Barnett]

I only know so much on this, so my reply is limited.

What I would say is this: Newcomers typically rewrite rule sets in industries. Then they grow and have trouble keeping quality in their delivery. As they grow, established powers watch and wait and learn. Then they often step in. As they step in, the newcomers come under competitive assault: they either improve dramatically or they're gone.

So my answer would be this: it goes on (your judged poor quality) until the pie gets big enough for established players in adjacent markets to move in and dramatically ramp up the competitive space.

[vinit joshi]

I think there were several articles a couple of months back regarding the expansion of several big tech giants in india, specifically, IBM and HP and how they were expanding into the markets once dominated by the indian outsourcers. I think it was in BusinessWeek, exactly what Dr. Barnett mentions in his comments