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Subodh Gupta
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Why outsourcing fails in India
India offers many opportunities for those who are brave enough to take risk and smart enough to avoid the pitfalls.

Let's see the various reasons which could result in losses by outsourcing to India.

(1)Unless the project is big enough and for long term, it does not justify the time and cost of selecting a vendor in India, as normally it takes between three to twelve months to completely hand the work over to an offshore partner.

(2)You need to make provision for laying off the staff in your own organization in your home country which will also lower down the morale of staff and could lower down the productivity in your own parent organization.

(3) There will be a cost to manage the contract.

(4)There is an additional cost of training because of cultural differences in Indian and Western management style.

(5)Biggest drawback is bleeding infrastructure. It is very difficult to imagine how things work in India if you have only lived in the UK or US.

(6) High employee attrition rate in India.

(7) Perhaps the fastest salary rises in the world which makes it difficult to justify the savings by outsourcing.

(8) Extremely slow and inefficient legal system, which makes it almost impossible to claim any damage if your partner or vendor in India didn’t deliver as per the contract.

Recent tax proposals by President Barack Obama, if accepted can results in about 50% rise in the cost of outsourcing business processes to India for American companies. This will make outsourcing to India further unprofitable for American companies.

In fact nowadays there are fewer companies in comparison to previous years, who are looking towards India as a favoured low cost outsourcing destination.

Unable to find cost savings from their Indian captive centres, some firms have chosen to believe that the problem is India itself and decide to try another location because of other emerging other low cost countries.

"Focused on UK's top IT service providers, a study by Pierre Audoin Consultants (PAC) showed that China, Morocco and Hungary are the new locations of choice to set up offshore sourcing centres".

According to another study, “since the beginning of January 2007, UK's 20 largest IT services suppliers have opened 21 new global delivery centres. However, of these only two are were located in India".

Many companies are even looking forward and planning to close their Indian operations.

British insurance major Aviva, which is one of the major firms outsourcing work to India, is considering selling two of its four companies in the South Asian country.

Travelport Group, the travel-services business owned by buyout group Blackstone, sold its Indian back-office operation, to Intelenet Global Services Pvt Ltd, a Mumbai-based company, according to sources.

"JP Morgan has closed its equity research operation in India". "Citigroup is in the process of selling its Indian back-office operations, where it employs over 5,000 people".

In the month of April 2009, Delta Airlines announced to close their Indian Call Centres because of poor customer feedback.

At the moment and in the future unless the project which is outsourced to India is big enough and on long term basis, it is going to be a loss making venture.

Issued in the interest of businesses and organizations who are planning to open back offices in India or outsourcing to India.

The author Subodh Gupta has worked for about 12 years as an entrepreneur, an engineer, a guest professor to various MBA schools in India and around 5 years in the UK as a freelance trainer and consultant.

He has organized training workshops for various companies such as Oracle, International Data Corporation, Sapient, etc. in Delhi and London.

This article is an excerpt from the book “Doing Business in India & Understanding Pitfalls” . The book is available for special discounts on bulk purchases (20 copies). Call us for special rates at +44(0)7966275913; or

Visit us online at Amazon.co.uk http://www.amazon.co.uk/Doing-Business-India-Understanding-P...
- 25 Sep 2010, 08:37 am
Subodh Gupta wrote: > India offers many opportunities for those who are brave enough to > take risk and smart enough to avoid the pitfalls. > > Let's see the various reasons which could result in losses by > outsourcing to India. > > (1)Unless the project is big enough and for long term, it does not > justify the time and cost of selecting a vendor in India, as normally > it takes between three to twelve months to completely hand the work > over to an offshore partner. > > (2)You need to make provision for laying off the staff in your own > organization in your home country which will also lower down the > morale of staff and could lower down the productivity in your own > parent organization. > > (3) There will be a cost to manage the contract. > > (4)There is an additional cost of training because of cultural > differences in Indian and Western management style. > > (5)Biggest drawback is bleeding infrastructure. It is very difficult > to imagine how things work in India if you have only lived in the UK > or US. > > (6) High employee attrition rate in India. > > (7) Perhaps the fastest salary rises in the world which makes it > difficult to justify the savings by outsourcing. > > (8) Extremely slow and inefficient legal system, which makes it > almost impossible to claim any damage if your partner or vendor in > India didn’t deliver as per the contract. > > Recent tax proposals by President Barack Obama, if accepted can > results in about 50% rise in the cost of outsourcing business > processes to India for American companies. This will make outsourcing > to India further unprofitable for American companies. > > In fact nowadays there are fewer companies in comparison to previous > years, who are looking towards India as a favoured low cost > outsourcing destination. > > Unable to find cost savings from their Indian captive centres, some > firms have chosen to believe that the problem is India itself and > decide to try another location because of other emerging other low > cost countries. > > "Focused on UK's top IT service providers, a study by Pierre Audoin > Consultants (PAC) showed that China, Morocco and Hungary are the new > locations of choice to set up offshore sourcing centres". > > According to another study, “since the beginning of January 2007, > UK's 20 largest IT services suppliers have opened 21 new global > delivery centres. However, of these only two are were located in > India". > > Many companies are even looking forward and planning to close their > Indian operations. > > British insurance major Aviva, which is one of the major firms > outsourcing work to India, is considering selling two of its four > companies in the South Asian country. > > Travelport Group, the travel-services business owned by buyout group > Blackstone, sold its Indian back-office operation, to Intelenet > Global Services Pvt Ltd, a Mumbai-based company, according to sources. > > "JP Morgan has closed its equity research operation in India". > "Citigroup is in the process of selling its Indian back-office > operations, where it employs over 5,000 people". > > In the month of April 2009, Delta Airlines announced to close their > Indian Call Centres because of poor customer feedback. > > > At the moment and in the future unless the project which is > outsourced to India is big enough and on long term basis, it is going > to be a loss making venture. > > > Issued in the interest of businesses and organizations who are > planning to open back offices in India or outsourcing to India. > > The author Subodh Gupta has worked for about 12 years as an > entrepreneur, an engineer, a guest professor to various MBA schools > in India and around 5 years in the UK as a freelance trainer and > consultant. > > He has organized training workshops for various companies such as > Oracle, International Data Corporation, Sapient, etc. in Delhi and > London. > > This article is an excerpt from the book “Doing Business in India & > Understanding Pitfalls” . The book is available for special discounts > on bulk purchases (20 copies). Call us for special rates at > +44(0)7966275913; or > > Visit us online at Amazon.co.uk > http://www.amazon.co.uk/Doing-Business-India-Understanding-Pitfalls/dp > /0955688272/ref=sr_1_6?s=books&ie=UTF8&qid=1285330910&sr=1-6
Ashant Chalasani Premium Member Group moderator
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Re: Why outsourcing fails in India / Because it is managed poorly!
Dear Subodh,

Thank you for the elaborate article. I have to unfortunately dismiss most of it's content as academic, and based on IT-"tabloid-press". Although a few points may be argued for the sake of an argument, most opinions expressed here are not based on practical experience. Citations for several opinions expressed are missing.

(1)Unless the project is big enough and for long term, it does not justify the time and cost of selecting a vendor in India, as normally it takes between three to twelve months to completely hand the work over to an offshore partner.
Take a look at the 100's if not 1000's of crowd-sourcing companies which have been adding values to customers in US/UK on portals such as elance, rentacoder and freelancer.com. Most vendors here are 5-50 people companies and in their own capacity have been successfully serving clients in US, UK and Europe.

Additionally, Indescon's members are small and medium sized software vendors and customers who have built fulfilling relationship with clients in Germany.

I don't think the vocabulary of "hand over work", "big enough for long-term" belongs in the offshore business.

IMHO, the prime success-factor in offshore, is to recognize

A) software is a people business. People make projects succeed or fail.

B) If you sit across a table with a customer counting money, rates, margins etc, you're bound to overlook the key success factors, such as customer priorities, project weak-points, operative logistics, staffing etc.

(2)You need to make provision for laying off the staff in your own organization in your home country which will
also lower down the morale of staff and could lower down the productivity in your own parent organization.
Doing offshore for the sake of cutting head-count on home-team is just stupid, sorry. A US/UK/German IT worker has a widely different skill-set and value-proposition than an Indian IT-worker. A manager who makes the decision to substitute the former with the later because "they come cheaper" doesn't understand jack about IT project-management and engineering.

(3) There will be a cost to manage the contract.
True. But contract's value should neither be over- nor under-estimated. More imporatant are to factor value-adds, skillsets, corporate cultures and manager-maturity.

(4)There is an additional cost of training because of cultural differences in Indian and Western management style.
IMHO there is no substance to this statement with respect to US and UK managers. Indian managers, especially IT managers understand US and UK management styles well, and emulate them closely. So while the differences are already minimal, the strengths and weaknesses of both styles are not to be overlooked when judging their effectiveness in managing local circumstances.

Infact the "cultural differences" and "western management style" are more relevant when dealing with Japanese or continental european managers/workers.

(5)Biggest drawback is bleeding infrastructure. It is very difficult to imagine how things work in India if you have only lived in the UK or US.
True, but only partly. Infrastructure is pretty good in Tier-1 IT cities if sufficiently budgeted for!

(6) High employee attrition rate in India.
OK. But the more interesting and important question is, how do you manage the attrition-problem?

(7) Perhaps the fastest salary rises in the world which makes it difficult to justify the savings by outsourcing.
True, but salary raises have stagnated in economic down-turn of 2008-2010. Again, IMHO this is factual-reality that an IT-managers has to factor into the calculation and have to manage effectively.

(8) Extremely slow and inefficient legal system, which makes it almost impossible to claim any damage if your partner or vendor in India didn’t deliver as
per the contract.
True. However business relationships that reach a court are a lost cause anywhere from a practice perspective.

Recent tax proposals by President Barack Obama, if accepted can results in about 50% rise in the cost of outsourcing business processes to India for American companies. This will make outsourcing to India further unprofitable for American companies.
Ehem - this seems to have been pulled out of the back;) Is there a calculation behind this assertion?

In fact nowadays there are fewer companies in comparison to previous years, who are looking towards India as a favoured low cost outsourcing destination.
Again, a little bit of evidence please? IMHO, if the deal is right and the vendor can deliver, it doesn't matter where he is from! So asserting the above for "India" as a whole, is plain shallow!

Over the years Indian IT-vendors have gotten better at what they do. So they are no longer "low cost". They add more value, hence price themselves higher. So Indian IT vendors are not cheap any longer, and those that are in the cheap-category will soon be forced to revise their business-models, or risk losing bids to the Chinese, Vietnamese etc.

Unable to find cost savings from their Indian captive centres, some firms have chosen to believe that the problem is India itself and decide to try another location because of other emerging other low cost countries.
If a US/UK IT-manager couldn't do it right in India, he has himself to blame for it, not the Indian IT-sector!

"Focused on UK's top IT service providers, a study by Pierre Audoin Consultants (PAC) showed that China, Morocco and Hungary are the new locations of choice to set up offshore sourcing centres".
Might be true, and practice will show in the coming years. These markets (I am not sure if Hungary should be included in this) are taking the "cheap" market-space Indian-IT has just vacated.

According to another study, “since the beginning of January 2007, UK's 20 largest IT services suppliers have opened 21 new global delivery centres. However, of these only two are were located in India".
Which study? - evidence please..

Many companies are even looking forward and planning to close their Indian operations.
Again, citations requested..

British insurance major Aviva, which is one of the major firms outsourcing work to India, is considering selling two of its four companies in the South Asian country. Travelport Group, the travel-services business owned by buyout group Blackstone, sold its Indian back-office operation, to Intelenet Global Services Pvt Ltd, a Mumbai-based company, according to sources.
That's good news for Aviva, and they hopefully sell their India-operations for a profit. Selling and exiting doesn't mean giving-up or quitting. Investors do like to exit businesses when they are profitable.

"JP Morgan has closed its equity research operation in India". "Citigroup is in the process of selling its Indian back-office operations, where it employs
over 5,000 people".
I don't have the data to comment on these, but both these companies have their own problems with the financial crisis. They are under regulatory scrutiny in their home-country, and their exit from India may or may not have anything to do with the merits of the India operation!

In the month of April 2009, Delta Airlines announced to close their Indian Call Centres because of poor customer feedback.
What does this have to do with IT?

At the moment and in the future unless the project which is outsourced to India is big enough and on long term basis, it is going to be a loss making venture.
Several long-term projects have failed and several short-termed have succeeded. There is enough evidence both ways to disprove the above generalization!

Issued in the interest of businesses and organizations who are planning to open back offices in India or outsourcing to India.
Maybe next time you have something nicer to say! ;)

Best regards,

Ashant Chalasani
This post was modified on 26 Sep 2010 at 12:30 pm.
- 26 Sep 2010, 12:27 pm
Ashant Chalasani wrote: > Dear Subodh, > > Thank you for the elaborate article. I have to unfortunately dismiss > most of it's content as academic, and based on IT-"tabloid-press". > Although a few points may be argued for the sake of an argument, most > opinions expressed here are not based on practical experience. > Citations for several opinions expressed are missing. > > > (1)Unless the project is big enough and for long term, it does not > > justify the time and cost of selecting a vendor in India, as normally > > it takes between three to twelve months to completely hand the work > > over to an offshore partner. > > Take a look at the 100's if not 1000's of crowd-sourcing companies > which have been adding values to customers in US/UK on portals such > as elance, rentacoder and freelancer.com. Most vendors here are 5-50 > people companies and in their own capacity have been successfully > serving clients in US, UK and Europe. > > Additionally, Indescon's members are small and medium sized software > vendors and customers who have built fulfilling relationship with > clients in Germany. > > I don't think the vocabulary of "hand over work", "big enough for > long-term" belongs in the offshore business. > > IMHO, the prime success-factor in offshore, is to recognize > > A) software is a people business. People make projects succeed or > fail. > > B) If you sit across a table with a customer counting money, rates, > margins etc, you're bound to overlook the key success factors, such > as customer priorities, project weak-points, operative logistics, > staffing etc. > > > (2)You need to make provision for laying off the staff in your own > > organization in your home country which will > > also lower down the morale of staff and could lower down the > > productivity in your own parent organization. > > Doing offshore for the sake of cutting head-count on home-team is > just stupid, sorry. A US/UK/German IT worker has a widely different > skill-set and value-proposition than an Indian IT-worker. A manager > who makes the decision to substitute the former with the later > because "they come cheaper" doesn't understand jack about IT > project-management and engineering. > > > (3) There will be a cost to manage the contract. > > True. But contract's value should neither be over- nor > under-estimated. More imporatant are to factor value-adds, > skillsets, corporate cultures and manager-maturity. > > > (4)There is an additional cost of training because of cultural > > differences in Indian and Western management style. > > IMHO there is no substance to this statement with respect to US and > UK managers. Indian managers, especially IT managers understand US > and UK management styles well, and emulate them closely. So while > the differences are already minimal, the strengths and weaknesses of > both styles are not to be overlooked when judging their effectiveness > in managing local circumstances. > > Infact the "cultural differences" and "western management style" are > more relevant when dealing with Japanese or continental european > managers/workers. > > > (5)Biggest drawback is bleeding infrastructure. It is very difficult > > to imagine how things work in India if you have only lived in the UK > > or US. > > True, but only partly. Infrastructure is pretty good in Tier-1 IT > cities if sufficiently budgeted for! > > > (6) High employee attrition rate in India. > > OK. But the more interesting and important question is, how do you > manage the attrition-problem? > > > (7) Perhaps the fastest salary rises in the world which makes it > > difficult to justify the savings by outsourcing. > > True, but salary raises have stagnated in economic down-turn of > 2008-2010. Again, IMHO this is factual-reality that an IT-managers > has to factor into the calculation and have to manage effectively. > > > (8) Extremely slow and inefficient legal system, which makes it > > almost impossible to claim any damage if your partner or vendor in > > India didn’t deliver as > > > per the contract. > > True. However business relationships that reach a court are a lost > cause anywhere from a practice perspective. > > > Recent tax proposals by President Barack Obama, if accepted can > > results in about 50% rise in the cost of outsourcing business > > processes to India for American companies. This will make outsourcing > > to India further unprofitable for American companies. > > Ehem - this seems to have been pulled out of the back;) Is there a > calculation behind this assertion? > > > In fact nowadays there are fewer companies in comparison to previous > > years, who are looking towards India as a favoured low cost > > outsourcing destination. > > Again, a little bit of evidence please? IMHO, if the deal is right > and the vendor can deliver, it doesn't matter where he is from! So > asserting the above for "India" as a whole, is plain shallow! > > Over the years Indian IT-vendors have gotten better at what they do. > So they are no longer "low cost". They add more value, hence price > themselves higher. So Indian IT vendors are not cheap any longer, > and those that are in the cheap-category will soon be forced to > revise their business-models, or risk losing bids to the Chinese, > Vietnamese etc. > > > Unable to find cost savings from their Indian captive centres, some > > firms have chosen to believe that the problem is India itself and > > decide to try another location because of other emerging other low > > cost countries. > > If a US/UK IT-manager couldn't do it right in India, he has himself > to blame for it, not the Indian IT-sector! > > > "Focused on UK's top IT service providers, a study by Pierre Audoin > > Consultants (PAC) showed that China, Morocco and Hungary are the new > > locations of choice to set up offshore sourcing centres". > > Might be true, and practice will show in the coming years. These > markets (I am not sure if Hungary should be included in this) are > taking the "cheap" market-space Indian-IT has just vacated. > > > According to another study, “since the beginning of January 2007, > > UK's 20 largest IT services suppliers have opened 21 new global > > delivery centres. However, of these only two are were located in > > India". > > Which study? - evidence please.. > > > Many companies are even looking forward and planning to close their > > Indian operations. > > Again, citations requested.. > > > British insurance major Aviva, which is one of the major firms > > outsourcing work to India, is considering selling two of its four > > companies in the South Asian country. Travelport Group, the > > travel-services business owned by buyout group Blackstone, sold its > > Indian back-office operation, to Intelenet Global Services Pvt Ltd, a > > Mumbai-based company, according to sources. > > That's good news for Aviva, and they hopefully sell their > India-operations for a profit. Selling and exiting doesn't mean > giving-up or quitting. Investors do like to exit businesses when > they are profitable. > > > "JP Morgan has closed its equity research operation in India". > > "Citigroup is in the process of selling its Indian back-office > > operations, where it employs > > > over 5,000 people". > > I don't have the data to comment on these, but both these companies > have their own problems with the financial crisis. They are under > regulatory scrutiny in their home-country, and their exit from India > may or may not have anything to do with the merits of the India > operation! > > > In the month of April 2009, Delta Airlines announced to close their > > Indian Call Centres because of poor customer feedback. > > What does this have to do with IT? > > > At the moment and in the future unless the project which is > > outsourced to India is big enough and on long term basis, it is going > > to be a loss making venture. > > Several long-term projects have failed and several short-termed have > succeeded. There is enough evidence both ways to disprove the above > generalization! > > > Issued in the interest of businesses and organizations who are > > planning to open back offices in India or outsourcing to India. > > Maybe next time you have something nicer to say! ;) > > Best regards, > > Ashant Chalasani
Lars Nielsen Premium Member Group moderator
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Re^2: Why outsourcing fails in India / Because it is managed poorly!
Hi Ashant,

thanks for this quite comprehensive and interesting reply to these statements.
At least your answers gave me some interesting perspectives and insights.
(Maybe you should start to write a book on this topics...?)

Btw: I would be really interested in an counter reply from Subodh against your argumentation.
This could bring some more insights. (hm... on the other hand side... maybe not. ;o)

Best regards
Lars
- 28 Sep 2010, 11:11 pm
Lars Nielsen wrote: > Hi Ashant, > > thanks for this quite comprehensive and interesting reply to these > statements. > At least your answers gave me some interesting perspectives and > insights. > (Maybe you should start to write a book on this topics...?) > > Btw: I would be really interested in an counter reply from Subodh > against your argumentation. > This could bring some more insights. (hm... on the other hand side... > maybe not. ;o) > > Best regards > Lars
Subodh Gupta
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Re^3: Outsourcing to India bound to fail - reasons
Dear Ashant

Thanks for asking my opinion. Let me summarise the conversation in 4 points.

(a) I was born and brought up in India and worked there for number of years as an entrepreneur and I speak from my experience and my point in the article above are based on that basis, you read about India and you made your point without you ever actually being based in India.

(b) You have asked for citation in your comments above . Here are few, have a look at them.

(1) “Unable to find cost savings from their Indian captive centres, some firms have chosen to believe that the problem is India itself and decide to try another location.

Rising costs, attrition put 15% of MNC captives in exit mode
http://economictimes.indiatimes.com/15_of_MNC_captives_in_ex...

(2) "According to the study, since the beginning of January 2007, UK's 20 largest IT services suppliers have opened 21 new global delivery centres. However, of these only two are were located in India."

India no longer top outsourcing destination?
http://www.rediff.com/money/2008/mar/05bpo.htm

(3) Aviva to cut India operations

...In December, .. Travelport Group, the travel-services business owned by buyout group Blackstone, sold its Indian back-office operation, to Intelenet Global Services Pvt Ltd, .

...Analysts say that Aviva cutting down its operations and the rising labour cost in India for such activities is expected to lead to a slowing down of the outsourcing trend to India.

The rising costs in India are beginning to reduce the potential benefits for Western companies, analysts claim.

http://timesofindia.indiatimes.com/articleshow/2832544.cms

(4) JP Morgan has closed its equity research operation in India. Now research is being coordinated from Hong Kong, according to sources close to JP Morgan.

Citigroup is in the process of selling its Indian back-office operations, where it employs over 5,000 people.

http://www.hindustantimes.com/News-Feed/sectorsbpos/BPO-Melt...

(c) You have raised a point about minimal cultural difference between India and west. I didn't expect this from a person of your calibre.

Just for comparison when a person born and brought up in India say that " I have a concern " and a person born and brought up in the UK says the same, dear Ashant their is hugeeeeeeee difference. So there is a cost of cross cultural training if you are saving on that, I don't know what to say.

(d) Regarding the efficiency the way project is managed in India. Have a look at commonwealth games example dear Ashant.

Expenditure: Rs 70,000 crore or almost around 15,500 million dollars
Time to plan : 7 years
Most prestigious project for improving India Image.

Results:
(a) Newly constructed bridge collapsed like a pack of cards.
23 people serious injured and government says it's fine they are ordinary people.

(b)Human faeces and stray dogs are all over the athletes' village accommodation.

(c) Site workers pee openly on site.

(d) Roof ceilings collapsed.

If that wasn't enough, SNAKE in the rooms of players.

Welcome to Incredible India.

Best Wishes
Subodh Gupta
- 29 Sep 2010, 4:13 pm
Subodh Gupta wrote: > Dear Ashant > > Thanks for asking my opinion. Let me summarise the conversation in 4 > points. > > (a) I was born and brought up in India and worked there for number of > years as an entrepreneur and I speak from my experience and my point > in the article above are based on that basis, you read about India > and you made your point without you ever actually being based in > India. > > > (b) You have asked for citation in your comments above . Here are > few, have a look at them. > > > (1) “Unable to find cost savings from their Indian captive centres, > some firms have chosen to believe that the problem is India itself > and decide to try another location. > > Rising costs, attrition put 15% of MNC captives in exit mode > http://economictimes.indiatimes.com/15_of_MNC_captives_in_exit_mode/articleshow/2980334.cms > > > (2) "According to the study, since the beginning of January 2007, > UK's 20 largest IT services suppliers have opened 21 new global > delivery centres. However, of these only two are were located in > India." > > India no longer top outsourcing destination? > http://www.rediff.com/money/2008/mar/05bpo.htm > > > (3) Aviva to cut India operations > > ...In December, .. Travelport Group, the travel-services business > owned by buyout group Blackstone, sold its Indian back-office > operation, to Intelenet Global Services Pvt Ltd, . > > ...Analysts say that Aviva cutting down its operations and the rising > labour cost in India for such activities is expected to lead to a > slowing down of the outsourcing trend to India. > > The rising costs in India are beginning to reduce the potential > benefits for Western companies, analysts claim. > > http://timesofindia.indiatimes.com/articleshow/2832544.cms > > > (4) JP Morgan has closed its equity research operation in India. Now > research is being coordinated from Hong Kong, according to sources > close to JP Morgan. > > Citigroup is in the process of selling its Indian back-office > operations, where it employs over 5,000 people. > > http://www.hindustantimes.com/News-Feed/sectorsbpos/BPO-Meltdown-US-banks-hold-meetings-to-pacify-staff/Article1-283310.aspx > > > > (c) You have raised a point about minimal cultural difference between > India and west. I didn't expect this from a person of your calibre. > > Just for comparison when a person born and brought up in India say > that " I have a concern " and a person born and brought up in the UK > says the same, dear Ashant their is hugeeeeeeee difference. So there > is a cost of cross cultural training if you are saving on that, I > don't know what to say. > > > (d) Regarding the efficiency the way project is managed in India. > Have a look at commonwealth games example dear Ashant. > > Expenditure: Rs 70,000 crore or almost around 15,500 million dollars > Time to plan : 7 years > Most prestigious project for improving India Image. > > Results: > (a) Newly constructed bridge collapsed like a pack of cards. > 23 people serious injured and government says it's fine they are > ordinary people. > > (b)Human faeces and stray dogs are all over the athletes' village > accommodation. > > (c) Site workers pee openly on site. > > (d) Roof ceilings collapsed. > > If that wasn't enough, SNAKE in the rooms of players. > > Welcome to Incredible India. > > Best Wishes > Subodh Gupta
Janardhan Burugupalli
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Re^3: Why outsourcing fails in India / Because it is managed poorly!
Ashant,

Great comments from you. I think the following stands out

"Over the years Indian IT-vendors have gotten better at what they do. So they are no longer "low cost". They add more value, hence price themselves higher. So Indian IT vendors are not cheap any longer, and those that are in the cheap-category will soon be forced to revise their business-models, or risk losing bids to the Chinese, Vietnamese etc. "
- 29 Sep 2010, 4:16 pm
Janardhan Burugupalli wrote: > Ashant, > > Great comments from you. I think the following stands out > > "Over the years Indian IT-vendors have gotten better at what they do. > So they are no longer "low cost". They add more value, hence price > themselves higher. So Indian IT vendors are not cheap any longer, and > those that are in the cheap-category will soon be forced to revise > their business-models, or risk losing bids to the Chinese, Vietnamese > etc. "
Christina Polacek Premium Member Group moderator
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Re^2: Why outsourcing fails in India / Because it is managed poorly!
Ashant,

thanks for your comments. i have benn in benchmarking business since more than 10 years and I ahve analysed varios outsourcing deals, offshoring and non offshoring. In the past some of Mr Guptas arguments have been valid, today my result ist there no gernealisation is possible. i have seen many prjects that failed, but that was not only the problem of sourcing services in India but regulations, laws in the clients home country, missing leadership and the main factor has been communication. You are 1000% right software is people business, hence it cannot be the concept that fails.

All the Best

Christina Polacek
- 29 Sep 2010, 4:28 pm
Christina Polacek wrote: > Ashant, > > thanks for your comments. i have benn in benchmarking business since > more than 10 years and I ahve analysed varios outsourcing deals, > offshoring and non offshoring. In the past some of Mr Guptas > arguments have been valid, today my result ist there no > gernealisation is possible. i have seen many prjects that failed, but > that was not only the problem of sourcing services in India but > regulations, laws in the clients home country, missing leadership > and the main factor has been communication. You are 1000% right > software is people business, hence it cannot be the concept that > fails. > > All the Best > > Christina Polacek
Pramod Reddy Premium Member Group moderator
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Re^3: Why outsourcing fails in India / Because it is managed poorly!
Hi Subodh & all,

Very interesting to go through the comments here..but I don't understand why we are discussing only the negative parts of India which is negligible when compared to the evolution that India has achieved in IT business. It is usual that every business has ups and downs..It doesn't mean that entire outsourcing is a failure in India. People like us should help our Indian business communities to understand these challenges and come up with right solutions.

JP Morgan or CITI - they have other problems too in shifting their operational centers...and the Indian media is always hyper active to push the wrong part of the news....

Well, what if UK majors go to some other locations? I'm not surprised if those centers are not Indian subsidiaries.

I totally agree with Christina about the missing Leadership capabilities in India. In every engagement, project success depends on the relationship between a client and a vendor and also the governance framework that secures the long term engagement. India has to look into this aspect to secure its cake.

Alternatively, India has 2 & 3 Tier cities where the costs are relatively lower than the T1 that are often in news. Also, important point here is, besides outsourcing, Indian firms are very much recognized as strategic partners worldwide and contributes a lot to the growth of businesses. India should feel proud for this state.
PS:
I feel that we cannot post on the common wealth games stuff on this forum as this is purely meant for IT.

Subodh, if you could consolidate this discussion into a value add to the outsourcing business community would be appreciated!!

Thank you
Pramod.
- 29 Sep 2010, 5:08 pm
Pramod Reddy wrote: > Hi Subodh & all, > > Very interesting to go through the comments here..but I don't > understand why we are discussing only the negative parts of India > which is negligible when compared to the evolution that India has > achieved in IT business. It is usual that every business has ups and > downs..It doesn't mean that entire outsourcing is a failure in India. > People like us should help our Indian business communities to > understand these challenges and come up with right solutions. > > JP Morgan or CITI - they have other problems too in shifting their > operational centers...and the Indian media is always hyper active to > push the wrong part of the news.... > > Well, what if UK majors go to some other locations? I'm not surprised > if those centers are not Indian subsidiaries. > > I totally agree with Christina about the missing Leadership > capabilities in India. In every engagement, project success depends > on the relationship between a client and a vendor and also the > governance framework that secures the long term engagement. India has > to look into this aspect to secure its cake. > > Alternatively, India has 2 & 3 Tier cities where the costs are > relatively lower than the T1 that are often in news. Also, important > point here is, besides outsourcing, Indian firms are very much > recognized as strategic partners worldwide and contributes a lot to > the growth of businesses. India should feel proud for this state. > PS: > I feel that we cannot post on the common wealth games stuff on this > forum as this is purely meant for IT. > > Subodh, if you could consolidate this discussion into a value add to > the outsourcing business community would be appreciated!! > > Thank you > Pramod.
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Mukund Krishna
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Re^5: Why outsourcing fails in India / Because it is managed poorly!
I agree with Ashant, Chritina and Felix. I have been in this business for over 15 years and have seen both successes and failures. Success and failures always depended on the management! Sure there are additional issues pertaining to managing across cultures, but very simply put outsourcing mostly fails because of poor management.

Outsourcing to India is not going to stop anytime soon. Regardless of what the supposed experts are commenting (there are always other experts with counter comments), outsourcing to India is here to stay and grow despite salary increases, cultural issues, poor talent, and what not. Foreign Direct Investments in IT in India is increasing steadily with the mid to large outsourcing companies publicly reporting over 20% margins. Companies won't invest in Indian Outsourcing if outsourcing were a failed value proposition.

Outsourcing is also right for small and medium companies, now more than ever. I know this works because three of my SME clients are very happy right now and they are asking for more services! The savings are being used by these companies to market their services better in their own markets.

We can argue till the end of time whether outsourcing to India works or not citing various articles from all kinds of sources. Bottomline ...see how the consumer market is reacting and trending towards outsourcing companies in India and affecting its profits and the statistics will speak for itself.
- 30 Sep 2010, 12:10 pm
Mukund Krishna wrote: > I agree with Ashant, Chritina and Felix. I have been in this business > for over 15 years and have seen both successes and failures. Success > and failures always depended on the management! Sure there are > additional issues pertaining to managing across cultures, but very > simply put outsourcing mostly fails because of poor management. > > Outsourcing to India is not going to stop anytime soon. Regardless of > what the supposed experts are commenting (there are always other > experts with counter comments), outsourcing to India is here to stay > and grow despite salary increases, cultural issues, poor talent, and > what not. Foreign Direct Investments in IT in India is increasing > steadily with the mid to large outsourcing companies publicly > reporting over 20% margins. Companies won't invest in Indian > Outsourcing if outsourcing were a failed value proposition. > > Outsourcing is also right for small and medium companies, now more > than ever. I know this works because three of my SME clients are very > happy right now and they are asking for more services! The savings > are being used by these companies to market their services better in > their own markets. > > We can argue till the end of time whether outsourcing to India works > or not citing various articles from all kinds of sources. Bottomline > ...see how the consumer market is reacting and trending towards > outsourcing companies in India and affecting its profits and the > statistics will speak for itself.
Christian Becker Premium Member
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Re^6: Why outsourcing fails in India / Because it is managed poorly!
I would agree that one of the key success factors for Offshoring is the quality of management. But this means good management on both sides, client and provider, which makes it all the more difficult. But I certainly don't agree with the idea that, since it all comes down to decent management, all other factors like bad education, high fluctuation (people turnover), 4 hours of time difference, very different cultures, etc. don't matter. It's like with a ship: navigating a boat in the Mediterranean sea on a sunny and quiet day requires much less skill than getting the same boat through a rough storm on the open Atlantic. So the more difficult the environmental parameters in Offshoring are, the more skilled and experienced management need to be to handle it.

It is clear that for US customers, India is as remote as any European location. But this is the Indo-German group, not the Indo-Anglosaxon one. And for German customers, an Offshore destination in Eastern Europe is definitely much closer in terms of geography but also culture, so why bother with India? I would definitely argue that some of the factors mentioned above are easier to handle in Europe compared to India (or China or Vietnam for that matter) and thus don't require such a high level of project management competency, i.e. are much easier to handle. In other words: why would a German client look into the Indian Offshore market if he can get more favourable conditions (exceptions confirm the rule, of course) in a much closer region.

The only aspect to justify this would be money, i.e. lower rates. And I doubt that this is the case. On the contrary, I would argue that average daily rates in India are way above the rates of most Eastern European destinations, while productivity is at least on a comparable level.

The great success of India as an Offshore destination is largely based on the Indian Govt.'s determination to plough in a lot of resources and money to promote the place. Undoubtedly, it has done a great job.
- 01 Oct 2010, 10:22 am
Christian Becker wrote: > I would agree that one of the key success factors for Offshoring is > the quality of management. But this means good management on both > sides, client and provider, which makes it all the more difficult. > But I certainly don't agree with the idea that, since it all comes > down to decent management, all other factors like bad education, high > fluctuation (people turnover), 4 hours of time difference, very > different cultures, etc. don't matter. It's like with a ship: > navigating a boat in the Mediterranean sea on a sunny and quiet day > requires much less skill than getting the same boat through a rough > storm on the open Atlantic. So the more difficult the environmental > parameters in Offshoring are, the more skilled and experienced > management need to be to handle it. > > It is clear that for US customers, India is as remote as any European > location. But this is the Indo-German group, not the Indo-Anglosaxon > one. And for German customers, an Offshore destination in Eastern > Europe is definitely much closer in terms of geography but also > culture, so why bother with India? I would definitely argue that some > of the factors mentioned above are easier to handle in Europe > compared to India (or China or Vietnam for that matter) and thus > don't require such a high level of project management competency, > i.e. are much easier to handle. In other words: why would a German > client look into the Indian Offshore market if he can get more > favourable conditions (exceptions confirm the rule, of course) in a > much closer region. > > The only aspect to justify this would be money, i.e. lower rates. > And I doubt that this is the case. On the contrary, I would argue > that average daily rates in India are way above the rates of most > Eastern European destinations, while productivity is at least on a > comparable level. > > The great success of India as an Offshore destination is largely > based on the Indian Govt.'s determination to plough in a lot of > resources and money to promote the place. Undoubtedly, it has done a > great job.

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