Sourcing’s Hidden Sore Points – India

October 18th, 2007

There is nothing wrong with sourcing selective activities away from your internal staff to an external service provider.  You can use this tool to save money, focus on your core business, spend less management time on non-essential tasks, and possibly redeploy savings towards more strategic initiatives.  This does not automatically translate that you should source to a company out of India.  Danger signals coming out of India point to a bumpy road ahead that will spell trouble for U.S. companies that have automatically gone this route.

Infrastructure within India is poor and sometimes downright non-workable.

Have you ever tried to obtain a high-speed (> than a T-1) circuit from Topeka Kansas to India?  Ever examine the up-time of that circuit versus the cost?  Ever make a trip to your offshore site and had the pleasure of going through the airport in India, riding in a cab to the distant location and staying in a local hotel?  Over the past 10 years what was a dismal situation has not improved and is not likely to improve anytime soon.  Ten years from now, this entire local and technical infrastructure will likely collapse from inattention.  Growth in business has not fueled any investment by India in the basics.

Costs will Adjust.

The value of the Rupee is rising, the dollar will continue to drop or remain low over the next several years, labor costs in India, along with inflation, will continue to rise.  If there are price adjustments in existing contracts, plan on upward adjustments coming out soon. If you finished a business case recently without taking these factors into account, you have an invalid business case.

Distance and Language Does Make a Difference.

Trying to develop software with teams having a 12 hours time makes a process that already has a high failure rate very difficult.  When you examine the historical costs of projects in your company, and the number that were completed on-time, do not delude yourself into thinking things will improve once you add time differences and language accents into the mix.  This may not be a politically correct point to make, but given the fact that individual from the same company at the same location have difficulty communicating effectively, it will certainly not improve matters injecting individuals with English as a second language that are now working during their night time for you.

Conflicting Management Issues.

The Indian vendors are hard at work acquiring, hiring and expanding. In a recent interview, Wipro’s CMO said the IT services provider will add 15,000 new employees in 2007.  TCS has an even larger number.  That type of double digit staff growth is difficult to manage, while keeping the business growth up to par.  Remember the tech boom when anyone that could spell JAVA got hired?  How many of those were later to be determined low quality hires.  Throwing inexpensive warm technical bodies at a problem does not make a recipe for success in the long-term.  Saves you money initially and then you get to increase the internal QA functions and add more management oversight on the receiving end of the sourcing service.

If it is not written, it has not been said.

Working with staff so far removed from the actual business mandates a more formal approach to requirements gathering, sign-off, use cases, and incremental development steps spelled out by the Software Engineering Institute’s Capability Maturity Model (CMM).  If your organization lacks this type of discipline or experience, your business case better take into account on-going education expenses on methodology and the discipline associated with the Project Management Institute. Ad-hoc requirements spelled out over the coffee break area will no longer be acceptable.

Turnover

As with any growth industry concentrated in a small location, staff has the option of moving from organization to organization.  Staff turnover might be driven by the desire to stop working odd hours, better pay, better job or any of the other reasons people change jobs.  Turnover has been rising in India and will become a problem for any long-term support model you might be relying on.  Who gets the tasks of orienting newly acquired staff – you or the outsourcing company?

Political Stability

Pakistan and India have been at odds on a number of issues.  There is terrorism in India and some locals resent that their culture is changing, youth’s outlook on family and values are evolving, and some just do not like the U.S. Sabotage attempts have already taken place and trains have been blown up. Probably do not have to do much to some of the infrastructure as it is likely to crumble with neglect. There are problems between India’s Hindu and Muslim populations and the caste system is alive and well in India.