Marketing India Inc

H1-B

visa-holders have made the headlines a lot recently——first as the country’s

blue-eyed boys making the megabucks, and now for the large numbers sitting it

out on the benches.

In May 1998, the US issued 65,000 H1-B visas, with over a half this number

going to those engaged in IT-related work. By July 1999, the total number had

jumped by over 75% to 115,000, of which a healthy 60% were issued to IT

professionals. Typically, the numbers were shooting because of the inherent IT

skill shortage in the US. IT solutions had been widely embraced as a necessary

ingredient for business success, and e-business, ERP, client-server and

migration services were in great demand.

The dream lasted two years till the last quarter of 2000, when profit

warnings across the IT slate indicated the beginning of a slowdown. Belts were

tightened and IT budgets came under pressure, with costs at the wrong side of

the CFOs’ knives. But time-to-market remains critical in the global economy.

Why outsource? It provides available skilled IT personnel resources at a

fraction of the cost, while also allowing an accelerated project delivery

schedule. This is because one is working on the time difference and converting

it into an advantage. The projects are fixed-price contracts, lower-cost doors

built into a watertight deadline edifice.

Majority turn believers

The Harvard Business Review identified outsourcing as one of the most

important management ideas and practices of the last 75 years. Till now,

technology and thought leaders were doing outsourcing offshore. That is changing

as a majority of the Fortune 1000 companies realize the benefits.

Outsourcing is defined as the transfer to a third party of the continuous

management responsibility for the provision of a service, governed by a service

level agreement.

Outsourcing itself is a relatively new term, and can be applied to many

different types of commercial relationships between buyers and providers.

Co-sourcing, subcontracting, facilities management, managed services and

strategic in-sourcing are different faces of outsourcing.

Ultimately, outsourcing is merely a way of getting something done, by someone

else.

What is interesting is how outsourcing enables an organization to run more

efficiently and cost-effectively. And how it improves the level of productivity

throughout an economy by focusing on what it is best at. The US technology

companies have been staunch believers in the benefits of offshore outsourcing

and many have set up wholly owned offshore development centres. Texas

Instruments, Motorola, Citibank, Oracle, Apple and Arthur Andersen are but a few

cases in point. Others have outsourced their offshore development work to one

vendor or the other. Cisco, General Electric, Nordstrom, Target Corp and

Northern Telecom are some examples of this movement. Today, over 220 of the

Fortune 1000 companies are outsourcing offshore.

But what are the different offshore outsourcing alternatives? There are five

types——one is professional services, the second individual project

outsourcing, the third an offshore development center with dedicated personnel

and resources, the fourth a joint venture with an offshore vendor, and the last

a wholly owned offshore subsidiary.

Speaking to US corporations, one found increasing commitment to outsource

offshore. Boeing has been outsourcing to India. It is the largest aerospace

company in the world, with its heritage mirroring the history of aviation; it is

now looking to build strong relationships with its providers.

Providian Financials is the fifth-largest bank-card provider in the US.

Realizing that time is one of the customers’ most valuable resources,

Providian is considering outsourcing to Indian companies. West Group, the

leading provider of e-information and solutions to the US legal market, is

considering going offshore for its outsourcing needs by September 2001.

The big change that one is witnessing is that no longer are technology

companies the only ones doing offshore outsourcing. This slowdown is getting

mainstream companies in manufacturing, utilities and healthcare to look at

outsourcing.

Chasing a moving target

Offshore outsourcing is not that you call in the provider, tell him the job

and put your feet up and relax. Successfully managing offshore contracting

requires substantial attention, discipline and interaction. According to the

Giga Information Group, "Only those companies with significant programming

requirements and software process maturity have traditionally entered into

substantive offshore contracting relationships." Success does not happen

overnight. One needs to believe it will add value. And a disciplined approach to

project management is the key.

Target Corp has been Outsourcing since 1993. It is America’s fourth-largest

general merchandise retailer, operating 1,200 stores and 19 distribution centers

across the United States. It has been outsourcing offshore in order to reduce

costs, has 16 projects with offshore components and 12 moving in that direction.

According to Randy Kirihara, senior manager, Target Corporation,

"Offshore outsourcing is not easy, it takes time. Senior management

commitment and follow-through are critical." And that commitment is now

beginning to manifest itself in increasingly larger number of companies. West

Group is an example where top management is firmly committed to outsourcing

offshore.

In this process, provider partnerships are critical. And Fortune 1000

companies are looking to build them long-term. They are trying to build them

senior management to senior management…and man to man.

Destination India

India is clearly the preferred destination for IT outsourcing. But we need to

get off tehelka and take some quick and fundamental decisions for the country as

a whole. We are ahead on the road to the future, but competition is catching up.

Ireland, the Philippines and Israel are the ones to watch. And then there would

be China and Russia to contend with. For us, people have always been the

strength. But in IT outsourcing technologies, trends and tactics keep changing

constantly, and we need to be in position to continue to leverage, in order to

maintain and strengthen our position.

Today, India boasts 250,000 software professionals, with 70,000 new graduates

coming out each year. Of the 250,000, 60% have five or years more of experience.

The challenge is in nurturing more project managers, and people with business

skills. High growth rates continue to outstrip supply of experienced project and

program managers. Processes are going to be critical. As client organizations

would be looking to get better quality products and services at increasingly

lower costs, a typical customer asks these three basic questions when selecting

a service provider:

• Is the provider a viable and
  
  stable supplier

• Does he have the
  
  required delivery capability and

• Is the pricing
  
  model competitive?

As many as 170 software companies are ISO 9000 certified in

India, and another 150 are targeting this certification More than the

certification, it is important that Indian providers achieve the required market

positioning and strategic direction, have the extent, flexibility and quality of

management processes, and are able to build in inflation guarantees.

Infrastructure and environment are key issues too.

Infrastructure issues of power, transportation and telecommunications within the

country need to be sorted out. Internet penetration is still in its infancy.

Bandwidths are a joke. The opportunity for India is huge, but we need to tighten

our belts and put our best foot forward. The India Inc brand needs to be

constantly marketed.

Ishan Ranjan is VP,

projects, CMIL. He has also been founder-editor of Voice & Data.