New Rules of the Game

India has taken to outsourcing quite early in its enterprise IT maturity
curvea statement that we have heard very often from analysts. Probably, this
has appeared many times in the pages of Dataquest as well. So, the fact that
twenty out of twenty-two CIOs whom we spoke to said they have done some kind of
outsourcing or the other, may not come as a surprise to many.

Not too surprising either is the finding that IT support or help desk, and
management of IT infrastructure are the most frequently outsourced IT functions.

But here is the twist. More than 70% of the CIOs whom we spoke to believe
that there is a fundamental difference between outsourcing in India and in
developed markets.

Yet, when we asked what that difference was, only a few CIOs tried to
articulate that. And they did not focus on the differences that lie in the
objectives of outsourcinglike in India outsourcing is done for managing growth,
while in the West outsourcing is done for attaining cost-efficiency. Rather,
they focused on the implementation of outsourcing.

"SLAs and deliverables are well-defined in the US," says Umesh Vashishta, CIO
of Unitech. Agrees his peer from the real estate industry, Upal Chakraborty, CIO
of DLF. "What differentiates developed markets from developing markets like
India is the experience (that they have) in designing appropriate SLAs and exit
clauses; and the flexibility in scaling up and down. DLF, it may be noted, has
gone for a total outsourcing deal with IBM, and is the pioneer in this industry
to strike such a deal," says Chakraborty.

Ironically, while it is common knowledge that the West goes for outsourcing
to manage costs, Indian CIOs believe that India is more price-sensitive when it
comes to outsourcing per se. "In developed markets, outsourcing is a part of
corporate strategy to enhance business-IT integration," says Kamal Sharma of
Mindlance, "While in the Indian scenario, it is the outsourcing cost factor."
Agrees Sukanta K Nayak of Usha International, "Indian companies look at pure
cost-benefit of the outsourcing deal, whereas in developed markets, companies
take it from overall return, because they outsource most non-core functions."

Well, many of the observations of the Indian CIOs are surely true. But the
West has learned it the hard way. Most of the earlier outsourcing contracts have
been canceled or re-written during 2004-06, especially when the Indian offshore
companies challenged the incumbent outsourcing vendors. That kind of disruptive
change on the vendor offering is yet to happen in India.

And the impatience of the Indian CIOs is understandable. They have gone for
outsourcing, not at a time when they are growing a 2-3% (like the West), but
when they are growing at 20-30%. So, the speed at which they want things to
happen, may not always be possible, with the model which has helped companies in
the West. Maybe, that presents the next big opportunity for Indian outsourcing.

Last but not the least, most CIOs agree that the biggest challenge in
outsourcing remains something that the developed markets have been grappling
with for more than decadesthe contract or SLAs are not enough to ensure that
outsourcing will work. Or, the admission that what they want to get from
outsourcing is not always possible to translate into SLAs and contracts.