‘Send Us Your Doubters’

While most CXOs today are clear about the value of outsourcing to India, they have a key challenge–driving the message home to their colleagues. Som Mittal, president and CEO of Digital GlobalSoft and Chairman of Nasscom (National Association of Software and Services Companies of India) asks CIOs to invest in a visit to India. And don’t bring those who already believe in the value of outsourcing, he says. Bring those who don’t. They’ve got to see it, to believe it. Excerpts….

Som Mittal

president and CEO of Digital GlobalSoft and Chairman of Nasscom (National Association of Software and Services Companies of India)

There was a lot of debate generated by a recent article–“IT Doesn’t Matter” in the Harvard Business Review–that said IT is just like plumbing today. The strong counter-view said that IT is strongly intertwined with core business strategy. To what extent should a CEO be outsourcing something so strategic and part of core business?

Fact is, there is no longer any choice on whether or not to use IT. The only choice now is on how best to use it. Information Technology has added value and it has added to productivity in businesses. If we haven’t realized the full benefits of the technology, it’s because we haven’t used it efficiently.

One of the key issues there has been is the existence of islands of technology–multiple instances of solutions running at different places in the same organization. That is changing now though and I believe that enterprise application integration will vastly accelerate that change.

As far as outsourcing is concerned, companies still like to retain with themselves the really crucial part that links IT to core business. They might use consultants but all the decision-making and control rests with the organization. However, companies are outsourcing those processes that have been routinized and stabilized. In the case of large companies with operations spread across the US, Europe, APAC, etc, outsourcing is helping them get a global view of their operations. 

In addition, two of the critical services that every corporation uses –communication and utilities–are already outsourced.

With companies getting more and more focused on core competencies, they will outsource IT even more.

India’s services edge was founded on wage arbitrage. What is the edge, today? What is the biggest reason for a Fortune 500 company to outsource IT services to India today?



I look at the cost arbitrage edge differently. The edge is really the difference in purchasing price parity (PPP). It’s not really about salaries being lower, but what economies can buy with their currency. Besides, while lower cost was the initial driver, the focus has now very clearly shifted to quality and productivity. This is not what we are saying, by the way, but what the customers are saying–that they are able to get higher-end resources in India for the same price. Bottom line is–they came in for the price, but they’re going to stay for the quality and productivity. 



In addition, India’s PPP advantage is not going to shift dramatically over the years–it is a long-term sustainable advantage on the cost front. On the resource availability front, we continue to build a pool of skilled resources with new colleges coming up every year. Both these trends are unlike what happened in Israel and Ireland where costs went up because of the demand-supply situation as the growth of resources dried up. On the contrary, if anybody is moving work to India, they know that they do not have to move it away soon because the resources are scalable and will be available in the future also. Outsour—cing to India is a long-term benefit. 





Is there a continuing perception on the lack of adequate legal safeguards that still comes in the way?



In IT outsourcing it isn’t the legal framework that is so important as the practices you use. Key among them would be security where the depth of practices you use are important. Over the years, these practices have become very strong, standardized and repeatable and a lot of Indian companies today have security certifications. In many cases, it is the customers who help transfer some of their best practices to us. The financial services sector, for instance, has very robust security practices that a lot of Indian companies have adopted.

What should a CIO of a global enterprise look for when looking for a country to outsource to? What about when choosing from different services companies? 



Whenever a CIO outsources work, there is a tremendous investment in time and effort from both him and the vendor. I would put a very high weightage on the comfort the client has in terms of the relationship and trustworthiness with the vendor. In terms of skills–that doesn’t really matter, vendors can build those as required.

However, you cannot quantify relationships and comfort. It’s a seal that you get and every individual company is different. For first-time outsourcers, who have had no previous experience with India, magazines like yours are useful sources of information and analysis. In addition, research and industry analysts are also beginning to offer consultancy services where cumulative experience is available. Besides, CIOs have their own networks in which they interact and exchange notes.

A lot of CIOs today are visiting India to see and establish a comfort factor for themselves. That is one of the things anybody planning to outsource/offshore to India must do–they should invest in a visit to this country.

What do you find are the US customers’ greatest concerns about India today? Are they convinced about infrastructure, quality, processes, or are these still concerns?



Where outsourcing is concerned, country choice is already limited in a manner. Ireland and Israel are too expensive. There is the option of outsourcing within the US, but it has its own cost issues. The Philippines can offer some kind of help in the call center and back office area. China is emerging as the outsourcing destination for certain areas like North Asia. But clearly, when it comes to English-speaking areas, the destination of choice remains India. People do talk of geo-political risk and country risk for India with respect to things like riots, etc, but we have to work with the government on that.

One area of concern is while we are very comfortable with the English language while working, are we able to explain and communicate with our customers properly? Second is the importance of maintaining quality as we scale up. 

And finally the biggest issue–while today every CXO is convinced about outsourcing, and is also probably clear about what and how to outsource–his problem is to carry this conviction down to his people. I would suggest to these CXOs to invest in getting four of his key doubters to join him on a visit here. Get the people who are not convinced, not those who are willing.

They have to see and believe that what we are doing here in India is really happening.

At what point should a major global corporation look at setting up its own captive development or BPO unit in India, versus outsourcing to a third party?



I guess it’s really the philosophy of an organization. Large companies constantly face make/buy decisions. In the technology sector, companies have tended to set up their own centers and outsource their sustenance engineering kind of stuff to other people. Companies like Intel, Novell and Cisco have chosen a model that consists of both outsourcing and setting up their own centers.