I have spent nearly two weeks in Bangalore working with a client and the outsourced engineering team they contracted for the project. Though I am contractually prevented from identifying the "players", my client is a household brand with a global footprint. Likewise the off-shore development partner is among the largest in the world. Together you would think that they would have this down to a science but you would be mistaken. Tools and processes are sophamoric and (IMHO) my client made a fundamental mistake by not having people embedded from day 1. This is a large project with 10s of thousands of staff hours and yet, untill recently, when they felt the project was in serious jeopady of missing key milestones and objectives, there was no direct representation of my client here in B'lore. The dev partner, eager for the potential long-term relationship, failed to demand reasonable terms, again IMHO. Now neither side is "happy"; people are working serious hours that may have been the norm for strart-ups 10-15 years ago, but neither of these are start-up. They are both companies billion dollar revenues but they short-change the effort regardless of the resources available to them. Some of it politics, some of it financial.
Now, as it often does, coincidence strikes. I exchanged email with another former collegue who is starting his own company. He has asked me to provide any insight I can give him on off shoring to India. My advice, particularly for a start-up with limited resources (both capital and time) is to seriously consider on-shoring. Sure from a finacial analysis on paper, India looks to be a much better deal but I am not sure they build in the true cost accurately. Travel, time, wear and tear on the staff that has to be on calls from 8:00 PM until midnight to discuss critical issues with the development team. The cost of doing business in India is rising, the cost of doing buisiness in the US is stabilizing or dropping in some instances. Plus, given the current financial situation, perhaps on-shoring serves a greater good.
Whatever my friend decides to do, my advice is to provide adequate resources, if he wants to off-shore, my council is that he have one of his own in B'lore and one of their staff at his site. Pay the price necessary to succeed, don't cut corners on tools or process, or it will come back to bite him in the a__.
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I would first categorize the outsourcing providers as follows :
1) Selfish - "Sell Services at all cost"
2) Body Shops/Virtual Captives
3) Strategically Customizable Partners
Selfish
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The ones which would try to sell their services at all cost (sometimes much lower than realistic). They would do this even at the cost of not understanding the customer's real business needs and pressures (the pressures which will be tougher in these times) - The customers would need vendors who can understand the real pressures they will face and adjust the delivery models and value propositions accordingly.
On the contrary, during these times you would start coming across alot of such vendors who will pitch the lowest costs (apparently). They would be doing this to sustain their existence through whatever cash-flow they can keep generating. However you need to keep a fair distance from such vendors - as they'll not only themselves fail but will play their part in getting you failed too! (doomed is a bit too strong of a word)
Body Shops/Virtual Captives
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Body Shops/Virtual Captives (providers renting out dedicated resources), the captives and the ones in between they will get a hit but the effect will be neutralized by the need for cutting down costs by off-shoring more resources to these body shops and virtual captive centers. So there would be a mixed trend with these type of vendors.
Strategically Customizable Partners
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I would put in this category the providers who have spent enough time (even at their own cost) in understanding the business models, plans and revenue cycles of their customers. These are the ones who can connect with their customers at a strategic frequency and understand the SWOT position of their customers. At the same time they are agile enough to customize their service offerings in order to create a real strategic value for their customers (esp in the context of a tough economy). I understand that the word "strategic partners" and "synergy" are so over-used and abused that it adds further to the confusions and frustrations of selecting the right service provider. However, there are a few litmus tests which can serve as a good filter.
India is no doubt a world leader in BPO and Application Services but the enormous flow of projects and clients has relaxed them to a great extent and has reduced the over all quality. The struggle to be on the top is no more there as they have already touched the peak and nothing else is left to be proven. If I were to place India on the BCG matrix I would say that they are somewhere between the cow and question mark stage.
Ali Zaidi
W: www.ephlux.com
E: ali.zaidi@ephlux.com
L: http://www.linkedin.com/in/alizaidi2008
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