List of Outsourcing Advisors
After my post on outsourcing governance I received a few emails raising the topic of outsourcing advisory. And that prompted me to do a bit of a deeper dive into the world of corporate matchmaking / marriage counseling – helping companies to find offshore vendors and later on help them with governance and management of the engagement.
This field remains huge and profitable and more so, seems to be growing in leaps and bounds. According to one of the leaders in outsourcing governance, KPMG, 70% of outsourcing users want better governance. That’s not surprising since there many compelling reasons to engage advisors throughout the full lifecycle of outsourcing. The main being obvious – as I often say, outsourcing is a powerful tool but it a complex one and without proper knowledge using of it could be self- destructive; having someone with in-depth knowledge of the tool will spare you some injuries. If you are looking for me reasons consider taking a look at this article.
While doing my micro research I stumbled upon somewhat unexpected problem – I could not find a comprehensive source of companies that provide outsourcing advisory services. After googeling for a couple hours I figured out that a better tool here would be oDesk :) I pinged one of my VAs and she put together a list for me in just a couple days.
Please see below the top ten Outsourcing Advisors from the list based on Alexa rating (probably not the best way to rate them though), in addition you can find more comprehensive list sorted by Name, Alexa Global, and Alexa US.
Hopefully you find it helpful, as usual feel free to suggest new entries, or comment on existing ones.
| Name | PR | Alexa Global | Alexa US | Description |
|---|---|---|---|---|
| IBM Global Services |
8 | 446 | 608 | IBM Global Services claims to be the world’s largest business and technology services provider. It has over 190,000 workers across more than 160 countries. IBM Global Services started in the spring of 1991, with the aim towards helping companies manage their IT operations and resources. Global Services has two major divisions: Global Business Services (GBS) and Global Technology Services (GTS). IBM Global Business Services (GBS) is the professional services arm of Global Services, including management consulting, systems integration, and application management services while IBM Global Technology Services (GTS) primarily reflects infrastructure services. It includes outsourcing services, Integrated Technology Services, and Maintenance. |
| Deloitte |
8 | 6,851 | 4,965 | “Deloitte” is the brand under which tens of thousands of dedicated professionals in independent firms throughout the world collaborate to provide audit, consulting, financial advisory, risk management and tax services to selected clients. |
| Gartner |
7 | 8,659 | 5,056 | Gartner, Inc. (NYSE: IT) claims to tbe world’s leading information technology research and advisory company. They deliver the technology-related insight necessary for their clients to make the right decisions, every day -from CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors. |
| PwC |
8 | 10,816 | 8,629 | PwC firms help organisations and individuals create the value they’re looking for. We’re a network of firms in 158 countries with close to 169,000 people who are committed to delivering quality in assurance, tax and advisory services. “PwC” is the brand under which member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Together, these firms form the PwC network. Each firm in the network is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. |
| Ernst & Young |
8 | 13,374 | 8,634 | Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, their 152,000 people are united by their shared values and an unwavering commitment to quality. They make a difference by helping their people, their clients and their wider communities achieve their potential. |
| Capgemini |
7 | 16,622 | 4,942 | A global leader in consulting, technology, outsourcing, and local professional services. |
| McKinsey & Company |
7 | 17,418 | 15,185 | McKinsey & Company, Inc. is a global management consulting firm that focuses on solving issues of concern to senior management. McKinsey serves as an adviser to many businesses, governments, and institutions. |
| KPMG |
7 | 18,567 | 13,291 | KPMG operates as an international network of member firms offering audit, tax and advisory services. We work closely with our clients, helping them to mitigate risks and grasp opportunities. |
| Boston Consultant Group (BCG) |
7 | 37,830 | 23,291 | BCG is a global management consulting firm and claims to be the world’s leading advisor on business strategy. They partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. |
| Bain & Company |
7 | 40,359 | 28,581 | Bain & Company is a global management consulting firm headquartered in Boston, Massachusetts. Bain is considered one of the most prestigious consulting firms in the world, with 47 offices in 30 countries and over 5,500 professionals on staff globally. |
PO Trip Adviser: China
And now a brief list of travel tips for one of my favorite destinations – China, the country that changes with amazing speed right before our eyes.
If there is anything that I regret about traveling to China it is not spending enough time there, not meeting enough people, and not seeing enough places.
I remember sitting on the Great Wall looking at the hills that look exactly like those on ancient paintings and thinking that for many Americans visiting China could be experience equal to visiting a different world, another planet… Well, that’s also changing rapidly.
- A Visa is easy to get, but it may take a few weeks so allocate sufficient time. Also make sure that you have the travel plan worked out before you apply for Visa as you may need several entry authorizations as cities such as Shenzhen require special handling.
- The most difficult aspect of traveling to China is language, very few people speak any English and you won’t find too many signs in English either. As a result public transportation even inner country air travel becomes challenging.
- China is a reasonably safe country, and when it comes to main outsourcing destinations within country is very safe.
- With petty crime on a raise you should be aware of environment and follow common sense practices such as not carrying large amount of money, protect your passport and valuables, etc.
- The police in China are generally very friendly, though they speak very little English except in Beijing, Shanghai or Shenzhen, where some police can generally speak simple fluent English. If you are lost then ask for directions as they will usually be happy to help.
- Stay in 4-5 star hotels remains relatively affordable. That will also ensure English speaking staff, access to tours, restaurants, etc.
- Driving in China is somewhat strange experience – on one hand I was surprised with how closely some laws are followed, e.g. the speed limit – most of the cars travel ~5 mph below it. On the other hand I saw a lot of erratic moves and turns that were not aggressive just plain dangerous.
- Sightseeing in China can be easily arranged with the help of the vendor or hotel staff. Keep in mind that most of professional tour guides are in cohorts with retailers specializing with ripping off tourists selling you “traditional” china, tea, souvenirs, etc. at 3-5 times the price you can get them elsewhere.
- Eat only in good restaurants or at your hotel. Avoid eating buffet meals, even in high-end places. Not only drink bottled water, but also brush your teeth with it. Most of hotels provide bottled water for free. In restaurants I recommend boiled water / hot tea.
PO Trip Adviser: India
Continuing with a line of travel guides I turn to the most common outsourcing destination – India. There are a plenty of outstanding travel guides for India, so if you are planning to combine business and pleasure, and see places such as the Agra, Rajasthan, and Kerala make sure you study them before you depart. Keep in mind though that most of the most interesting places will take dedicated and possibly considerable time, for example while Taj Mahal is fairly close to Delhi / Noida the trip there is going to take you at least a day.
For those of us who are limited to strictly business, here are a few tips to consider:
- A Visa is easy to get, but it may take a few weeks so allocate sufficient time.
- Safety of travel in India is not what it used to be just a few years ago, yet large outsourcing cities remain quite safe for majority of business travelers.
- Shop around for tickets and ask frequent India travelers for advice. Chances are you can find something 30% less than standard internet rates using Indian travel consolidators.
- Chances are you will arrive in India around midnight. I typically go straight to a hotel right near the airport and start my business day the next morning.
- Stay in nice hotels, 4-5 stars. They are relatively affordable and the high quality service will help you to retain the energy you most certainly need.
- Ask the vendor to arrange all your travel and have a car with a chauffer. Don’t even think about driving in India. The traffic and road system is not for the faint of heart plus they drive on the wrong side of the road!
- Petty corruption is widespread in India, from expediting you through airport customs to dealing with government agencies and employees can involve bribing or “tipping” as it is often referred to. My advice it to stay away from it.
- Make sure you have your personal belongings partitioned among suite cases and carry on. Lost luggage is a fairly common event. Use solid suitcases as mishandling is also common at airports.
- Don’t wander off the beaten track, don’t encourage beggars, don’t visit shady places, don’t leave your valuables unattended, don’t put your wallet in your back pocket, use licensed guides in sightseeing – basically use common sense!
- Eat only in good restaurants or at your hotel. Avoid eating buffet meals, even in high-end places. Not only drink bottled water, but also brush your teeth with it.
PO Trip Adviser: Russia
While working on a outsourcing destinations chapter for my book I realized that tips for travel in many countries could be helpful to those not accustomed to traveling to third world countries and other outsourcing destinations. Of course there are plenty of books, websites and forums covering travel to any place in the world. I am not planning on competing with them in any way, my goal is create a simple list of items to keep in mind when visiting a vendor far away from your home becomes necessary. I am planning to put a couple posts covering few countries that I have a fortune to spend time in and let me start with the one that I lived in for 30 years…
So, here we go – a few tips on traveling to Russia – one of the top Eastern European outsourcing destinations:
- Visas are required and getting one can be a tricky process. Make sure you allocate at least one month for processing the paperwork.
- Unfortunately terrorism and street crime are a part of daily lives in many parts of the Russia. Still, on a relative scale, Russia, and especially the tier-one cities, are safe and great places to visit.
- Shop around for tickets. If you know any Russians who stay connected to their motherland, ask them for help. There are many Russian travel agencies that can find great deals on tickets.
- Staying in nice hotels can be price prohibitive, particularly in tier-one cities. Ask your vendor for help with travel arrangements.
- You can rent a car and drive in Russia. Be prepared for a manual stick shift and very aggressive driving styles. You may face very serious traffic and won’t see any signs in English, so finding your way can be a challenge.
- Ask your vendor to arrange sightseeing for you. Due to large distances and complexities in city navigation, you would be much better off on a guided tour. And I assure you Russian cities and their suburbs have a lot to offer a curious visitor such as architecture, landscape and even shopping.
- Ask your vendor for recommendation when it comes to restaurants. Nowadays, especially the big cities, offer a great variety of styles and cuisines but the cost can be astronomical. Just like many other destinations, not only drink bottled water but also brush your teeth with it.
- Prices are generally quoted in rubles. Currency can be freely converted at banks, hotels or kiosks specifically for tourists.
If you have any suggestions, ideas or tips on travel to Russia please comment or email me, I’ll be happy to update the list.
Search for SWAT
There is famous French expression cherche la femme (find the woman) implying that behind a cause of almost any event there is a woman (well, in its most common meaning the phrase has negative and sexist connotation). Cherche La SWAT or “Search for SWAT” is an approach I have been using and recommend others to use when selecting an IT service partner, offshore vendors included. I honestly believe that behind almost any success in our industry there is a SWAT team…
A couple days ago I had a pleasure of meeting with two guys who’s been running their local technology shop for quite some time now. Both were top notch developers who’ve been in the industry probably at least as long as I, maybe longer. A bowl of outstanding Pho in a greasy spoon Vietnamese restaurant, college campus attire, and potential partnership created special ambiance that is particular conducive for nerd bonding.
After quick introduction and buzz word exchange we realized that we were only a degree apart and for awhile were working for startups that we fiercely competing with each other. We laughed through tears talking about how a company with 2 developers and 12 marketers and no product can put out of business a superb product with 12 talented engineers and 1 marketer behind it and then after sharing similar stories about dot com bust and being screwed by VC and CEOs we finally dove into discussion of technical capabilities of the firm my hosts were representing.
It is amazing how quickly these two guys who are as remote to sales and marketing as naïveté to Capitol Hill were able to give me a sense of comfort in their services and products. I guess many sales guys can take a few tips from these nerds. Well, faking competence takes a lot of competence and thus no need for faking ;)
Probably the main reason for such instant connection was a common mind set and similar language even though spoken with very different accents. What was the most important is that these guys had very similar pitch to what I have been using when promoting my services for very long time. These two guys were representing a SWAT team – Specialists With Advanced Tools.
There are many SWAT team out there, yet they are a tiny minority in the vast pool of IT resources. There are a few things that are common between SWAT teams, in particular they
- are typically comprised of top notch professionals with substantial experience or/and IQ off the charts;
- are typically specialized shops with individual contributors not making claims outside of their domain;
- often are small in size and tightly knit teams, many of their members have history of working together possibly in some other firm(s).
SWAT team pitch is typically around results, quality, and productivity. In development arenas they tend to offer veni, vidi, vici model – pragmatic approach to delivering the product and no concern for recurring tasks, when it comes to providing ongoing services they are typically very pragmatic and process oriented. They do not tend to dazzle you with marketing materials and prefer to quickly cut to the chase. If they want to show off anything than it’s typically their weapons – advanced tools – for example a development framework they developed and refined over the years.
Besides obvious benefits of SWAT teams (efficiency, reliability, focus, etc.) there are a few exceptionally important aspects that set SWAT teams apart from a majority of service providers including most prominent companies. To some degree you can call those aspects “advanced tools” as well:
- Established network of technology leaders and individual contributors of all ranks.
- Time and scale proven technologies, solutions, libraries, patterns, and reusable components.
- Best of breed technology tools as well as process, policies, and methodologies.
- Established relationships with software and hardware vendors.
- Established partnerships with consulting organizations and offshore providers.
I hope by now I made it obvious that SWAT teams are the teams to find and work with. The trick is the “find” part since there are not that many of them and plus there are plenty of imposters. To a large degree that is very much like for employees – “looking for people is very much like digging for gold, you literally need to go through tons of dirt, but you are looking for gold, not for dirt.”
Top Emerging Companies in India IT-BPO
Finding a provider in India could be very challenging process. Sheer number of providers combined with high percentage of body-shops with prevalent mediocre resources, ongoing changes in the industry, recent scandals, cutthroat competition exacerbated by industry decline make up for a daunting process. The process becomes especially complex if you target a small to midsized vendors. Analysts reports are not likely to offer tremendous help here as they often stay with top tier vendors. Naturally you want to seek help from industry organizations, and when it comes to India you can not ignore NASSCOM with its 1200+ members. Recently one of the NASSCOM initiatives yielded a list which you might want to consider: NASSCOM announces the Top 15 – “Exciting Emerging companies to Work for”- 2008. The list offers 15 companies that came from a list of ~400 companies. Rather exclusive group I would say. To my great surprise I actually knew two of the 15 names:
- HeroITES
- Corbus (India) Pvt. Ltd
- AgreeYa Solutions India Pvt. Ltd.
- Nagarro Software Pvt. Ltd.
- R Systems International Ltd.
- Synygy India Pvt. Ltd.
- Acclaris Business Solutions Pvt. Ltd.
- Infogain India (P) Ltd.
- Hytech Professionals India Pvt. Ltd.
- Nucleus Software Exports Ltd.
- Sopra India Pvt. Ltd.
- Cactus Communications Pvt. Ltd.
- Interglobe Technologies Pvt. Ltd.
- H5 Asia Pacific Pvt. Ltd.
- Saba Software India Pvt. Ltd.
While the focus of the survey was to identify the best small and medium sized IT-BPO companies to work for, it serves as a great list of the best small and medium sized IT-BPO companies to deal with as there is typically very strong correlation between those two.
oDesk Freelancer Stats and Mashups
A few posts ago I mentioned a report covering some insights on international freelancing community that was made available by oDesk. Sine then I had a chance to take a deeper look at oConomy and found information there even more interesting and insightful. oDesk did a great job on presenting freelancer statistics in chats and Google mashups.
Of course when it comes to picking an offshoring destination freelancing data needs to be taken with a grain of salt. In particular a freelancer’s rate is a product of many criteria and only portion of those are locale-dependant. Freelancing through aggregators / monster boards like oDesk is still in its early stage, over time the rates and other stats will have a greater degree of correlation to local salaries, availability, etc. However, even today, these figures provide an interesting reference in terms of understanding the local dynamics. Let’s take for example geo distribution for Russia vs. population and rank for top 10 cities on oDesk list:
| oDesk Rank | City | Number of Providers | Average Charge Rate | Average User Score | Population | Rank |
| 1 | Moscow | 486 | $19.39 | 4.21 | 10,470,318 | 1 |
| 2 | Omsk | 444 | $16.12 | 4.28 | 1,134,016 | 7 |
| 3 | Taganrog | 207 | $15.82 | 4.28 | 281,947 | 66 |
| 4 | Saint Petersburg | 200 | $17.76 | 3.69 | 4,661,219 | 2 |
| 5 | Novosibirsk | 121 | $16.75 | 4.34 | 1,425,508 | 3 |
| 6 | Tomsk | 98 | $15.83 | 3.99 | 487,838 | 34 |
| 7 | Rostov-on-Don | 69 | $15.28 | 4.15 | 1,068,267 | 10 |
| 8 | Nizhniy Novgorod | 44 | $15.11 | 3.28 | 1,311,252 | 4 |
| 9 | Smolensk | 34 | $14.24 | 3.54 | 325,137 | 56 |
| 10 | Irkutsk | 32 | $24.13 | 4.62 | 593,604 | 24 |
As you can see the figures are somewhat counterintuitive. Take for example Taganrog a small city in the same region as Rostov-on-Don which is roughly 3 times bigger and considerably richer as well, yet freelancer community is 6 times the size of Rostov-on-Don’s. Taganrog is even ahead of Russia’s second largest city Saint Petersburg. Most likely these figures confirm that freelancing community’s embrace of oDesk services is in its humble beginnings and that more business will flow to companies like oDesk, Guru, eLance and others.
I hope oDesk keeps oConomy live and updated with the latest info, it would be also great to see their competitors to follow in suite.
Researching Offshore Rates
Questions about offshore rates in different geographies, for different positions and roles come all too often. I covered a few aspects of this subject in my earlier posts, for example Offshore Developer Rates and Negotiating a Fair Rate. One of the points made in these posts was that the rate is just a contributing factor to the bottom line – the Total Cost of Outsourcing. Nevertheless, the rate is important and getting information about what’s fair for a specific position, geography, region, etc. could be extremely valuable, especially during the initial stage of the vendor selection.
Getting ballpark figures for the rates is very simple; all you need to do is just ask. The trick is to understand trends and the negotiation space. For example when a few weeks ago a mid-sized nearshore provider suggested that their standard billing rate is 35-40 USD for QA engineer and 40-50 USD for Java Developer I knew that I am talking with someone with a lots of guts or sense of humor.
In a large degree rates are marked up wages. The mark up includes many elements such as employee benefits, operations overhead, sales and marketing overhead, G&A, and so on plus expected margin. When dealing with large providers (public companies) many essential facts and ratios could be found in financial docs that are open to general public. Small vendors can be better at some cost cutting techniques but they loose on the “economy of scale” so the chances are the key ratios would be similar. In that light the question of fair rates comes down to salaries and expected margins.
When you negotiating with an offshore vendor the margins are the negotiation space; they can not typically fall below minimally expected and of course never cut into salary. That’s unless the vendor operates under famous model “we lose money on every deal but we make up in volume”.
Consider an example: you pick a couple vendors that appear to be fairly similar in most aspects; one of them has ODC based in Shanghai and anther in Shenzhen. Both vendors offer you the same rates. Which of them is more likely to offer steeper discounts? As you can imagine knowing that salary a developer can expect in Shanghai is ~15% higher than in Shenzhen would be helpful.
To determine the salary that an average vendor needs to pay to its employees you would need to go through some research. The figures change constantly, substantially and depend on many parameters – local economic situation, dollar exchange rate and specific location being the most important.
The best thing is if you can get your hands on a credible research, those could be rather expensive though. If that is price prohibitive you should talk with your omnipotent friend Google. It is amazing how much info you can find. For example just look at this jewel – Salary Trends in China Present New Business Opportunities. Barak Paztal, the author of the post used one of the best ways of discovering current salary and salary trends – he went through backdoor of popular job board to present data which is priceless for those planning to outsource or build their own shops in China. For example did you know that “General trends show that over the last 12 months salaries have been decreasing in China. The average decline from an annual salary of $5,344 hovers at 11%, or $4,977.” BTW, that’s about 7 times lower than in the USA. Or look at that:
“Software engineers in China regularly earn 44% more than the average. They will earn an annual salary of $7,200, while in Beijing they can expect to earn an additional 30% or $9,360. Companies seeking to hire software engineers can save up to 40% of salary costs by hiring in cities like Dalian, the software outsourcing center of China where the average salary is $7,056 or Jinan, with 5M people and few hours by train from Beijing with an average salary of $5,760. Office space in these areas can also help to dramatically reduce costs, in particular now that they have reached peak levels, as demonstrated in Beijing following the Olympics.”
When looking for just ballpark assessment you can do away without the access to backdoor of the job boards. Just browsing through sufficient number of job ads will give you a great preview. Another simple way to get high level salary info is through rates available on freelancer sites such as elance.com, odesk.com or guru.com.
Once again since the goal here is not competitive intelligence but trends analysis the ballpark estimates would do just fine.
Top India Cities for IT Outsourcing
I just stumbled upon an interesting post – The Top Ten Cities for Outsourcing in India. Bala, a Software Programmer working in Chennai, India refers to several major studies by big name industry analysts that produced the top 10 list. India has 35 major cities, not all of them are good offshore outsourcing hubs, for example India’s financial capital Mumbai is not one of those.
The list includes top 10 outsourcing destination in the following order: Chennai, Hyderabad, Bangalore, National Capital Region (NCR) includes Delhi and its surrounding suburbs, Pune, twin cities Chandigarh and Mohali, Kolkata, Mysore, Thiruvananthapuram and Coimbatore.
Pros and Cons of Outsourcing to Brazil
A couple months ago I was talking with Alexandre, a project / account manager from a mid-sized service provider based out of Campinas, an industrial city North of Sao Paulo, Brazil. Alexandre’s team did a great job on one of my past projects and we continue to stay in touch after the engagement ended. The question of Pros and Cons of Brazil outsourcing inevitably came up and I committed to writing this post after some follow with my network and learning a bit more about the destination.
Brazil, the first country in the famous BRIC acronym is not one of the first names that come to mind when you consider IT offshoring destinations. I am sure that overtime that will change and Brazil will gain a permanent spot on the list of top players in technology outsourcing. You would probably agree with me if you look just at the list of Pros of that destination; the Cons may affect your opinion but won’t dramatically change it.
Let’s start with Gartner rating for Brazil which I agree to some degree:
English Skills. English is a very popular skill and not hard to find with technical professionals in Brazil. However, it’s no match to what you find in India. As a matter of fact when you focus on technical skills sooner or later you will find yourself compromising on English fluency.
Government Support. Very interesting topic. According to my connections in Brazil government is unusually supportive in developing IT outsourcing however results of it remain to be seen.
Infrastructure. Unless you partner with a very small provider located in a remote province city you will find infrastructure that meets reasonable expectations. In my / my network experience telecom and other aspects of the infrastructure are excellent.
Labor Pool / Access to Resources. Brazil employs one of the largest IT communities in the world. The IT work force is large and experienced. This is also a highly educated professional work force as Brazilian universities are fairly competitive to get into and rather inexpensive to stay in. Of course in sheer numbers Brazil falls far behind India and China. Finding top-notch technical resources in Brazil is not easy like everywhere else in the world, yet is possible, even when it comes to cutting edge technologies and methodologies.
Educational System. I can not completely agree with Gartner here, while education system in Brazil is not as stellar as in Argentina or Canada when considered from IT stand point it’s at least at par with Chile and Mexico. In my experience the quality of recent grads with CS degrees is very good and that’s rates high on my book.
Cost. Pure comparison of the rates with India or China puts Brazil in serious disadvantage. Based on a limited sampling of rates I had access to it is 30-80% higher than rates for comparable resources in India. The difference could be even higher if you try to take into consideration the tier of the city and vendor. On the other hand, as I mentioned numerous times, rate is only a guideline to cost, the total cost of outsourcing has a considerably lower difference.
Operating Environment. Air travel to Brazil is convenient and affordable. Sao Paulo is a 10 hour direct flight from Atlanta, GA. Small time difference and thus no jetlag make a huge difference in overall comfort of travel. Finding excellent and fairly affordable hotels, restaurants and other creature comforts is easy. With a little support from your vendor chances are you will stay in safe areas and won’t need to deal with crime which is unfortunately a serious issue in the country. Getting things done requires understanding of the system and is manageable. One of the big Pros of the country that came up many times in my discussions was absence of natural disasters
Nearshore advantage. When it come to US based customers Brazil offers nearshore model which is an advantage of high caliber especially for agile projects. Time difference, travel ease, low cultural barriers, etc. institute a huge Pro for Brazil which offsets its high rates to a large degree.
Cultural Compatibility. In my experience as well as according to everyone I checked with cultural differences are very easy to deal with. As a matter of fact when I asked around within my network I heard more about cultural similarities rather than differences. Of course the differences are there and they can not be ignored, here are just a few to consider:
- First and foremost language issues makes a huge imprint on communications, watch out for idiomatic expressions and professional lingo.
- Work / life balance. While many of guys in my Brazilian teams worked crazy hours the attitude towards work / career / life balance was quite different, and that is particular notable if there is a beach nearby.
- In my experience working with Brazilian teams as I noticed that it developers very long time before they could to offer their opinion or disagree with USA team members. That was quite different from Indian “never say no”, it appeared more like fascination with US tech workforce and overly humble judgment of own abilities. Very similar sentiment came from my network as well.
- Facts and technical quality of the solutions carried less weight with Brazilian team than perceived “authority” of individual. There was also much higher level of sensitivity towards “people feelings” than the one you would typically observe in the states; sometimes to determent of the project.
- And, in my opinion, common for the entire region tendency to put very high emphasis on theory and academic values versus pragmatic business decisions.
Resource Quality / Technical Capability. IT outsourcing in Brazil doesn’t seem to be in the same cut-throat competition with other IT employers as in India. It seems that Brazil is still in a stage when working for outsourcing company considered prestigious and highly desired job. In that light getting your hands on top notch resources is still possible.
Turnover Ratio. Turnover ratio claimed by the vendors is low and that has been my experience as well. My limited scope survey gave very positive results with average about 13%. The attrition was also of general nature mainly family issues or education. Not too much of job hopping or inter-company transfers.
There is one more issue worth mentioning – finding vendors in Brazil is not as easy as it should be. Hopefully the latest efforts of several outsourcing vendors combined with the government support give us a solid provider directory which will help us in finding those perfect matches made in IT heaven. But for now consider these links as the humble beginnings – www.softex.br, www.brazil-it.com, www.actminds.com, and www.brasscom.org.br.
oDesk: Freelancing Destinations
Very interesting statistics made available by oDesk, a freelancing marketplace that now tops 150,000 individuals worldwide in over 100 countries. Freelancing geography as seen from oDesk perspective appears quite different from what we see in trends on geography of regular IT outsourcing, for example US freelancers offer strong competition and reasonable costs. The list of top freelancer countries also includes Canada, Russia and Ukraine rather than China and Brazil.
CANADA
Total Number of Providers: 3,581
Average Hourly Rate Charge: $19.60
Average Feedback Score: 4.32 (out of 5.00)
INDIA
Total Number of Providers: 27,454
Average Hourly Rate Charge: $12.52
Average Feedback Score: 4.01 (out of 5.00)
PAKISTAN
Total Number of Providers: 5,960
Average Hourly Rate Charge: $11.13
Average Feedback Score: 4.36 (out of 5.00)
PHILIPPINES
Total Number of Providers: 17,213
Average Hourly Rate Charge: $6.33
Average Feedback Score: 4.30 (out of 5.00)
RUSSIA
Total Number of Providers: 2,721
Average Hourly Rate Charge: $16.86
Average Feedback Score: 4.31 (out of 5.00)
UKRAINE
Total Number of Providers: 2,929
Average Hourly Rate Charge: $15.96
Average Feedback Score: 4.36 (out of 5.00)
USA
Total Number of Providers: 52,637
Average Hourly Rate Charge: $18.32
Average Feedback Score: 4.40 (out of 5.00)
Gartner’s Top 30
Selecting offshore destination just got easier – Gartner has its new list now. While I am often skeptical about info you can get from Gartner reports, in particular in its application to small to medium sized businesses, I believe in its value as long as it’s taken with a grain of salt. “Determining the country or countries that are best placed to host offshore IT operations is a daunting task for many organizations, according to Gartner, Inc. This year, Gartner has assessed the suitability of 72 countries as offshore locations, and has announced its ‘Top 30’*. The analysis showed that the dynamic nature of the market has seen a number of countries position themselves as credible alternatives to the BRIC countries (Brazil, Russia, India and China)…“
“In 2008, Gartner’s top 30 locations for offshore services, by region, were:
- Americas: Argentina, Brazil, Canada, Chile, Costa Rica, Mexico and Panama
- Asia/Pacific: Australia, China, India, Malaysia, New Zealand, Pakistan, the Philippines, Singapore, Thailand and Vietnam
- Europe, the Middle East and Africa (EMEA): the Czech Republic, Egypt, Hungary, Ireland, Israel, Morocco, Poland, Romania, Russia, Slovakia, South Africa, Spain and Ukraine
Although only seven countries from the Americas appeared in the final list of 30, these countries are becoming an attractive proposition for the largest buying market for offshore services – the US. “
See more on Gartner Identifies Top 30 Countries for Offshore Services in 2008.
Also see good insight in NetworkWorld reaction By John Ribeiro India’s competitors catching up as outsourcing hotspots.
Offshore Interviews: Personality Aspect
There are several common misconceptions about interviewing for “personality” with the offshore resources:
- It’s irrelevant. These are not employees I am hiring, why would I care about their personality?
- It’s the same as with local resources: what’s good for the home team is good for the offshore.
- I let my gut decide or I am good at reading people and I do not need any help here.
Let me start with debunking those myths:
The first one is the easiest. Of course it’s relevant; just think about how much damage a QA engineer without attention to details can do, or how much “value” a Project Manager with no appreciation for authority and processes would bring to a project.
Why isn’t it the same in that case? In some aspects it is, for example for your staff QA engineer you would be interested in someone who has great attention to details, eye for imperfections, appreciates structure and processes, doesn’t mind repetitive work, etc. All these personality traits would be great assets for your offshore QA engineer as well. The difference comes with dynamics of the employment arrangement.
Generally you can not count on keeping offshore resources on your project over two years, after that they are likely to move on; as a matter of fact for the purposes of personality casting you would be looking for just one year in offshore case; hopefully you have a better longevity with local resources, let’s say 3 years. Over that period of time some personality traits will play a role that are not as important when it comes to one year. For example you are looking at résumé of someone who changed his job once a year; that might be a showstopper for staff position but could OK for offshore resources. What about their ambitions, desire to learn new technologies, track record of continuing education, etc. Many aspects of personality become irrelevant when you are looking for offshore resources or turn to opposite.
Another important aspect of personality interviews is the team diversity. I am not talking about race, religion, etc. instead it’s a diversity of the team. I believe in diversity of personality and when building local teams I prefer to have a well balanced but diverse team. For example you need people with “big picture” view as well as “detail” view; you need process fanatics and “break all the rules” mentality. When properly cast and well balanced diverse teams perform much better than homogeneous organizations. Of course casting is a key here, e.g. you do not need a social butterfly to work nightshift processing firewall logs. When it comes to offshore team diversity could mean unnecessary complexity and unpredictability.
One more important consideration in that regard is the fact that careers of offshore resources are not in your hands. In that light again many aspects of personality become irrelevant when you are looking for offshore resources or turn to opposite.
Now, on “I let my gut decide” topic. That’s a common approach to personality interviewing not only in offshore but for staff position all across the industry. I know that some managers are just darn good at reading people and even they make mistakes. I consider myself above average in that skill, mainly because I invested great deal of effort and education in it, and yet I make mistakes, sometimes serious ones. If your gut (intuition) can pinpoint attention to details, ability to strive under pressure, appreciation for processes, impeccable integrity… or an another side dishonesty, habitual irresponsibility, lack of work ethics… well, you probably are working as FBI profiler or psychic reader :) Intuition is important and you should listen to it, no doubts about it. You just should not rely on it or just only on it when selecting members of the team, especially when working remotely, over a phone, and across the cultural differences.
Now, a really hard question: how to define personality match while interviewing offshore developers? Personality interviews are tough to begin with, offshore exacerbate the complexity of the task. The approach I typically use includes several steps:
- Simplify an ideal personality profile. For example for Black Box Tester I’d be looking only for several personality traits absence of which would be a show stopper: attention to detail, ability to handle stress, and respect for the structure / process.
- Communicate the desired profile to my vendor with a hope that the screening catches at least obvious mismatch cases.
- Prepare a few open-ended questions that cater to discovery of those specific traits. For example, “Based on your prior experience please describe a situation when you ability to handle stress helped deliver on engagement objectives”.
- Take the answers for the face value. If the candidate can fake the answer hopefully they can fake the personality trait till the time the move on to a different project.
- I usually have a few questions ready but do not necessary ask them all. Sometimes the candidate would fail a few ones just because those are unusual questions, not something they have been condition to hear. But if they can’t learn the drill after I’ve asked them a few questions, it’s not the person I’m interest in hiring anyway.
Offshore Interviews: Basics
There are plenty of books, articles and various materials on the Net pertaining to technical interviewing. There are several substantial differences that need to be accounted for when dealing with offshore resources. The first one is a mindset.
Many people who outsource large scope IT initiatives outsource interviewing as well. They see sourcing (finding, interviewing, negotiating, etc.) activities as responsibility of vendor. In addition many vendors not only prefer but insist on keeping that activity internal to the vendor.
Depending on the scope of outsourcing initiative and your own bandwidth you my elect outsource the sourcing completely or to some degree. In my opinion that is the area where you need to stay involved. Quality of the resources is one of the highest risks for offshore outsourcing, and one of the factors that affects total cost of outsourcing at a very high degree. You should only outsource it if you believe that the vendor can do a very good job in sourcing, and how can you get there? – only by interviewing their resources. So interviewing is unavoidable, at least during the vendor selection process.
More so when you move into the first stage of engagement and your vendor puts together a team, how can you control the process and ensure that the team has quality resources? Amid of engagement when inevitable turnover kicks in how can you control that the quality of the resources is not going down? The uninspected deteriorates. [Dwight David Eisenhower] Only by getting involved in the interviewing.
I believe in the following interviewing schema:
- Vendor selection stage. Interview a fair sampling of resources that are “softly” committed to the engagement. The size of the sampling depends on the size of the engagement and your bandwidth. The goal of this interview process is not to pick members for the team, it is to form your opinion of the vendor capability to build a team.
- Kick off / Team Building stage. Interview all/subset of the team for the engagement. The scope of the interview depends on the size of the team and your bandwidth. For small teams, say under 20 people, “all” is the goal. For mid sized and large teams the leaders of the team and other key members must be interviewed. A fair sampling of the rest of the team must be interviewed as well.
- On-going engagement. Interview replacements for all key team members. Do a spot-check interview for new members.
And for now just a few tips on interviewing process:
- During Vendor Selection stage I typically use speed-dating style interviewing with individual interviews limited to 30 minutes covering ~20 people a day. It is important to have at least two people involved in the interview process working together, one of the main reason for that is a continues feedback and support they can provide to each other to stay on the top of the process and increase quality of discovery.
- Interviews during the Kick off / Team Building stage and ongoing engagement should be substantially more involved, especially for the key members. That typically means multiple people involved in the interview on your side, several dimension of interviewing, e.g. technical, personality fit, etc. The investment in the interview process has a very high return, however it still need to be weighed against the contract terms and the scope of engagement.
- The investment in interviewing process should be proportional to the expected value of the resources, e.g. technical lead for the project vs. black box tester. The process of selecting key members of the team deserves as much vigor and attention as if you are selecting full time employees. On a typical s/w development engagement the key members of the team include project manager, tech lead, QA lead, business analysts, and some senior engineering contributors.
The process of a full scale interview is similar to one for fulltime employees. It is easier to some degree as many non-technical issues, e.g. salary, do not need to be covered. It has its own challenges though, for example obvious issues of remote interviewing. I will cover interviewing in a separate post.
Pros & Cons of Outsourcing to Latin America
Latin America offers one of the best options for nearshore outsourcing for the USA and Canada. It also offers great resources for Spanish localization projects getting increasing important in the states. Latin America offers a large spectrum of options roughly corresponding to the countries in the region covering almost entire alphabet from Argentina to Venezuela. Each country has its own specifics and its own set of Pros and Cons; the differences between countries could be dramatic, compare for example political climate in Mexico and Venezuela. There are still enough commonalities to considering covering of Pros and Cons for the entire region.
Infrastructure. The quality of infrastructure varies greatly from country to country but it’s quickly catching up to the required standards across the region. In countries leading of LA outsourcing – Argentina, Brazil and Mexico the infrastructure is likely to meet or even exceed your expectations, but even in countries far behind the quality is still acceptable. I was surprised how solid the infrastructure was in Chile or some cities in Bolivia. One thing is extremely important – the high quality infrastructure could be found mainly and sometime only in industrial areas of these countries. It is not at all as pervasive as it is in the USA. You must validate infrastructure sufficiency before moving forward with the vendor. The simplest way to do it at superficial level is to request a video interview over Skype.
Operating Environment. Flying to Sao Pao and getting to your vendors’ HQ is Campinas takes a while but small time difference makes it much easier to deal with than while travel to China or India. Working in many of the LA countries would not be extremely complex, challenging or dangerous. You have to know where to go and where not to but chances are you will be safe and can get your job done. Chances are your vendor operates from some of the country’s most industrially advanced area with decent standards of living and acceptable infrastructure. Of course language and cultural differences can create some challenges typically easily dealt with considering general hospitality of the region and with a little help from the vendor. All that ease falls of the cliff as you step out beyond the borders of the industrial areas. Destitution of the rural areas for most of LA countries is truly disturbing; my honest advice – leave these areas to National Geographic and Peace Core…
Skills Availability. Skill availability for high tech occupations depends on specific country / city. In general it could be characterized as medium to low. Generally you can build a small team of Java or .NET developers in somewhat reasonable timeframe, but size of the talent pool is microscopic when compared with India and China. The quality of the pool helps to some degree make up for its size, but only to some degree. In my experience putting together an 8 member team of high quality Java developers / QA engineers took over 4 months. I have to say that my quality requirements were very high and I was looking for somewhat unusual set of specifics. When you are after more run of the mill skill set you probably would have easier time. Legacy technology skills and enterprise applications skills are even less common.
English Skills. Not as good as you’d expect… and why would you even expect? I worked with many countries in the region and in each of them I met engineers who spoke English better than I, but in general you have to be prepared for language barriers or for substantially impaired hiring if you make fluent language skills a mandatory requirement. Written communications appear to be in better shape across the board; however, they still cause a drop in productivity for many of the team members.
Cultural Compatibility. I find cultural differences with LA workforce some of the easiest to bridge. That could be me personally as there are a plenty of differences to be notes. A few most important areas that I have observed while working on technology projects:
- Developers on LA teams took very long time before they could to offer their opinion or disagree with USA team members.
- Facts and technical quality of solutions carried less weight with LA team when it came to conflict with personnel influence. For example a less efficient solution was accepted just because it had a lot of hours invested by the team members. To appease someone / protect their feelings was enough of a motivation in making core technical decisions.
- A very high emphasis on theory and academic values versus pragmatic business decisions.
Take a look at Cross-Cultural Communication Between Latin American and U.S. Managers for a good list of the most significant differences.
Rates. LA offers great variety of rates that depends on the country from relatively high in Argentina and Brazil to moderate in Chile, Bolivia, and Uruguay. While the rates by themselves tend to be on a high side they are fairly attractive when taken into consideration with “the entire package” that includes short / no time difference.
Resource Turnover. LA countries offer better turnover rates than many of other regions. At the same time turnover on some of my / my friends’ projects outsourced to LA showed fairly high ratio. That seemed to be related more to a specific company rather than the region.
Resource Quality / Technical Capability. Quality of resources varies greatly from a country to country, from a city to city, and specifically from a provider to provider. However, in general technical capabilities of the resources are quite impressive / above average. I was able to find people with in-depth understanding of cutting edge technologies and with proven experience of working with fairly recent methodologies in many countries across the region. There is also no shortage of resources when it comes to mainstream skills such as Java / .NET / C/C++. Legacy technology skills and enterprise applications skills are less common though.
Of course one of the most significant Pros of the region it’s nearshore advantage, mostly linked to little / no time difference. The impact of it is difficult to overestimate – small time difference, similar holiday structure and bridgeable language differences makes working with teams in LA a great experience.
Generating a List of Prospect Vendors
Fining an offshore provider is much more difficult than it should be considering the supply abundance. Yet the complexity starts right with the first step – generating a “long” list of prospect vendors.
The easiest and probably the least meaningful way to find providers is just publicly announce you needs, for example post a question on LinkedIn. The problem with this approach is that if you are CIO or VPE chances are you are already getting plenty of annoying cold calls from offshore suppliers. Public indication that you are searching for an offshore provider is only going to increase the spam and cold call inflow. Of course you can elect respond to the unsolicited emails and cold calls, in the end of the day most of them are produced by real companies, and quickly build a very long list of the prospect vendors. The problem with this list is that all prospects are unqualified and you have to go through very laborious process of separating good leads from gazillion of bad ones.
The next set of options comes from using public sources. Public sources in this space are far from perfect and won’t necessary fit your needs they are however worse considering:
- Directories from outsourcing associations are not bad. They typically offer basic information on about companies in a specific geography. For example if you are looking for offshore companies with ODCs in Russia go to Russoft.com. The directory it offers is fairly up to date. The main problem with it as with other directories is that the key information relevant to vendor selection is missing or difficult to find.
- To 100 lists such as The 2008 Global Outsourcing 100 and other similar sources are only good for finding companies such as Tata, Satyam, Accenture, etc. I personally also do not have much trust to those lists having been exposed to what it takes to become one of the companies mentioned there. However if you motto is “you can not be fired for hiring IBM” those could be the best source of prospect vendors.
- There are a large number of companies that offer anonymous access to vendors, for example www.elance.com, www.guru.com, www.odesk.com. These companies typically position themselves as a middle man between supplier and provider. That might be fine for small projects but not for any sizable offshore initiative. There are a few more serious problems with these companies, one of the most serious issues being that the sites are full of low quality freelancers and fly-by-night firms digging through which is a painful experience. The vendor rating that the sites offer helps in the selection process only to some degree.
Another set of options comes from using outsourcing consultants of all types and calibers, this approach have plenty of challenges as well:
- Gartner and other similar sources are expensive and slanted towards the needs of large / multinational corporations. They offer a great a great “corporate” insight into outsourcing world. These sources are probably most meaningful for large companies and significant scope engagements.
- Mid-level / low level consulting firms offer fairly good advice at a decent price. However that approach’s first challenge is right on the surface – finding decent consultant organization to begin with.
- Low-level small consulting firms or individual consultants specializing in offshore selection offer even better price performance which is more than offset with narrow view, legitimacy of sampling, and scope of penetration in the offshore market. Also with both mid-level and particular low-level consultants what is your assurance that they are not tethered / attached to a few offshore vendors that they represent on an “unbiased” basis?
An option which by my limited scope survey is used the most is professional networking. Reaching out to your professional network via email or other means is likely to generate enough prospects and offer some pre-qualification of the leads. You need to be careful not to blast your network and just reach out to colleagues with knowledge of the subject and somewhat similar interests in terms of engagement.
And the final option is working with me… A big caveat here – for me offshore consulting is more of a hobby rather than a business, so I do not do it often. I did started working on developing an offshore vendor directory which would help people with this and other vendor selection tasks, but, again, that is a project financed out of my pocket that doesn’t get much attention. I still hope to get the initial directory out by the end of the year though.
Pros & Cons of Outsourcing to Canada
Once again an interesting question asked on LinkedIn IT, this time by Vladimir Kondratenko – Pros and Cons of Outsourcing to Canada. My recent experience with that region is rather limited so I decided to make a few calls / send a few emails and connect with my colleagues who have first hand experience in doing that. It was a bit of challenge but I managed to find a senior technology exec who outsourced a small portion of his portfolio to an outsourcing company based in Ottawa, the information he shared with me very much confirmed my somewhat knowledge and expectations. Outsourcing to Canada is an interesting phenomena indeed and it offers its own Pros and Cons, very few Cons I have to say:
- Political atmosphere and legal system makes working with Canada outsourcing extremely easy and far less risky than probably any other country in the world. Recently with Canadian dollar shooting 25% above average made it the least likely place for outsourcing as well. Now when the exchange rate is back inline with what it used to be Canada can offer great options to some offshore buyers in IT space.
- Language, cultural closeness and no time zone difference with the USA are huge pros of Canada making it a superb location for outsourcing. Generally as long as you are fine with telecommuting you can’t tell the difference between working with developers in Detroit or Toronto. There are of course some cultural differences steamed mainly from significantly different social support structure. Also appreciation of life values versus business success appears stronger in Canada than in the USA. I would say that these differences are not likely to affect outsourcing engagement a great deal.
- Taxes and other elements that constitute government support for outsourcing are mediocre at best, on the other hand employee lifestyle issues are well taken care of; think free education / healthcare / etc.
- Education system in IT space is decent with very few top-notch schools but no match to the USA or India. Also many It professionals receive a great deal of professional education from the same sources than people in the USA.
- IT and telecom infrastructure across the country is excellent, with prices close to those in the states.
- Data and IP security is non issue. Well, as non issue as it is in the USA. A few Data Centers that I saw in Canada were in shipshape, SAS70 compliant, etc. Power and other infrastructure dimensions related to climate, etc. are more reliable than in many places in the USA.
- Personnel turnover is medium to low, and if you exclude a couple cities like Toronto is actually very low. Key personnel turnover is very low.
- Labor pool / access to engineering talent is decent, but no match to China or India by any stretch of imagination. Interesting dynamic worth mentioning for this case. General size of the pool is somewhat small however it’s much less polluted and quality / quantity balance makes it possible to staff projects in relatively short time frame.
- Quality of the talent pool is well above average; as I mentioned above the talent pool is less polluted, more so, advanced educations system and easy access to multiple means of professional education caters to generally higher quality.
- Of course there is price to be paid for all those great things and that is a high rate. It’s still much lower than the rate you’d pay for local resources in San Francisco or Manhattan, but is very close to what you can find some rural areas of this country. The cost are so high that exchange rate can practically kill any cost advantage and with overhead of offshore engagement make the total cost of outsourcing above cost of sourcing it locally.
Pragmatic Outsourcing vs. Gartner
You may have seen latest Gartner view on offshore destinations via Gartner rates offshore outsourcing hot spots or variety of other sources. I find Gartner view quite interesting, informative yet sometimes not very relevant to needs of software product companies. In this particular analysis the information is very good and applicable to a large degree with exception of a few important areas where data is misleading when applied to IT and Software Outsourcing specifically for small to mid-sized companies.
An obvious disclaimer here – my opinion is based on a fairly limited sampling – my own observations, recent experience and analysis plus some supporting data from several people in my network with relevant experience and knowledge.
If review had been based on viewpoint of IT/SW professional the rating for Labor Pool, Infrastructure, Cost & Data and IP Security and Privacy would have been different, for example Labor Pool in Uruguay when it comes to software developers is not nearly as bad as the survey presents, and as a matter of fact it is better than in Costa Rica and Mexico. Some other ratings seem seriously off even to an uneducated eye, take for example cost of resources in Russia marked by Gartner as Very Good; I’d say they have not been in Moscow recently.
But a single rating that prompted me to make calls, talk with many people and write this article was rating for Data and IP security and Privacy in China as Poor. Anyone who went through on-site visits with major IT Outsourcing vendors in China would tell you – there have been huge advancements in that arena, the quality of Data and IP security that the vendors could provide is very impressive. As my friend, a VP Engineering for very successful SF startup, told me – “I’ve seen the Great Wall of China, but what really impressed me was the Great Firewall of China I saw during my trip to Beijing…”
Americas:
| Americas | Source | Argentina | Brazil | Canada | Chile | Costa Rica | Mexico | Uruguay |
| Labor Pool | Gartner | F | G | V | G | F | V | P |
| Pragmatic Outsourcing | F | F | G | G | F | F | G | |
| Cost | Gartner | V | G | F | V | G | V | V |
| Pragmatic Outsourcing | G | G | P | V | G | G | V | |
| Data and IP Security and Privacy | Gartner | F | F | E | F | F | V | F |
| Pragmatic Outsourcing | F | G | E | G | F | G | G |
Europe+
| Europe, Israel, S. Africa | Source | Czech Rep | Hungary | Ireland | Israel | N. Ireland | Poland | Romania | Russia | Slovakia | S. Africa | Spain | Turkey | Ukraine |
| Labor Pool | Gartner | G | G | G | G | P | G | G | V | F | F | G | F | F |
| Pragmatic Outsourcing | F | G | F | G | P | G | G | G | P | F | G | F | G | |
| Cost | Gartner | G | G | F | F | F | G | V | V | V | F | G | G | V |
| Pragmatic Outsourcing | G | G | P | F | P | G | F | F | G | F | F | G | G | |
| Data and IP Security and Privacy | Gartner | V | G | E | E | E | G | G | F | V | V | V | G | F |
| Pragmatic Outsourcing | V | V | E | E | V | G | G | G | F | G | V | G | G |
And Asia
| Americas | Source | Australia | China | India | Malaysia | New Zealand | Pakistan | Philippines | Singapore | Sri Lanka | Vietnam |
| Labor Pool | Gartner | G | V | E | G | F | F | G | G | F | F |
| Pragmatic Outsourcing | G | V | E | G | F | G | G | G | P | G | |
| Cost | Gartner | F | V | V | G | F | V | V | F | V | E |
| Pragmatic Outsourcing | P | E | V | G | P | V | V | F | E | V | |
| Data and IP Security and Privacy | Gartner | E | P | G | F | E | P | F | V | P | P |
| Pragmatic Outsourcing | E | G | V | F | E | P | F | V | P | F |
Pros and Cons of Outsourcing to India
India offers the most developed, experienced and sophisticated outsourcing community. No surprise – embedded advantage of ESL, huge supply of IT talent, and low standards of living made it a top destination for IT outsourcing long time ago. Y2K and management talent solidified the success creating multi-billion dollar giants and changing ethnic landscape of many cities in the USA. As I mentioned in Offshore Vendor Selection: Choosing the Destination “if your risk tolerance is low and/or your organization is new to outsourcing go to India, you can not get fired for hiring IBM. Go to India if you have to choose on a spot, or have little knowledge of outsourcing, or have to deal with large scope ERP implementation, or … as a matter of fact if you have to ask this question chances are you should consider India as your top destination.” Now let me put a few bullets here supporting my statement:
Infrastructure. Unless your partner is tiny and located in a 3rd tier city you won’t have any problems with infrastructure. Well, you may have to deal with some irregularities in connectivity due to some natural disasters, it gets quite rainy during monsoon season out there, but I tell you that: we use AT&T as our internet provider in our San Francisco office and once in a while they drop connectivity despite blue sky and sun outside. With a huge supply of IT services in India you can find infrastructure that would cater to most ridiculous demands.
Operating Environment. Flying to India is far from fun especially from the west coast, in particular if your company doesn’t cover first class travel. 30 hours in transit plus you arrive there in the middle of the night. Unless you time your trip well the nature would great you with heat and humidity. Flying back could be so much better if you did not need to deal with airport lines and crowds. The good part, that’s pretty much the extent of the adversities. Chances are you will be staying in a good hotel, will have a personal driver, eat in good restaurants, and even corruption is wide spread in India at all levels you most like won’t need to deal with it.
Skills Availability. That’s is one of the strongest Pros of the country. No matter what skill you are looking for there will be at least 10,000 people who have it. Well, more seriously, the supply of IT talent in India is outstanding, some areas more than others of course. Mainstream technologies of today and yesterday – Java, .NET, C/C++, ERP, Cobol, etc. – have substantial oversupply. You also can find a lot of talent even on a cutting edge of the technology. The quality of the talent follows the bell curve and nowadays the median has gone up comparing to late 90th.
English Skills. Well, that’s a hidden gem isn’t it? Of course with English being widely popular in India the main issue you would need to deal with would be an accent. Maybe some idiomatic expressions, some speech forms, etc. but generally it is not an ever a showstopper and forms a huge Pro of the country.
Cultural Compatibility. While there are a plenty of cultural differences between India and USA I would put the Cultural Compatibility in a category of Pros, here are a few reasons:
- The cultural differences on business side were not so dramatic to begin with considering history of British influence on legal and business system of India.
- Resources from India have been in this country in large numbers and for a long time. People in the USA learned the differences, behavioral patterns, and idiosyncrasies to a pretty good degree.
- Many Indian vendors invest a great deal into cross-cultural training as well as in accent training. As a result the gap between cultures is narrowing considerably.
There are of course cultural differences that are deeply embedded in people’s psyche, here are a few most notable:
- “Never say No” or “Yes to Death” – while working with Indian resources you always need to keep in mind that they might have a very difficult time say “No” in any shape or form. “Can you do that? – Yes, we will do Nick.”, “Do you have access? – Yes we do Nick”. That doesn’t mean that they can cater to any need or demand, they just can’t say NO.
- No bad news is a no-news. While the times of chopping off bad news barer heads are over, the habit is still there. So if you do not hear about bad news, it doesn’t at all mean that everything is going well, it just simply means that you do not hear / do not know what is going on.
- Motivational hierarchy. Of course Maslow’s Pyramid rules. But there is a plenty of subtle differences in how its upper levels translate for a specific culture. Not bad / not good – just different. For example, personal success in India outsourcing is often measure in number of people the person supervises. “I have 100 people under me…” That pushes good developers away from the technical track towards managerial with inevitable profound negative impact on technical abilities of the organization.
Rates. India rates fall neither into Pro nor into Con category. They are benchmark against which other rates are compared. And I guess that makes for a nice segue into Cons discussion:
Resource Turnover. Turnover is very high, it is high to a degree that it almost outweighs all pros of the region. See my earlier post Myth for more thoughts on the subject.
Resource Quality / Technical Capability. IT Outsourcing proved to be a rather lucrative business for many social groups in India – entrepreneurs, engineers, education providers, etc. Millions of people moved into the field in the Golden Rush of the century. As a result average quality of resources started going down to a degree that even time-proven trademarks of quality do not work anymore. Not long time ago I was stunned when I had to fire a consultant for incompetence; the stunning part came from the fact that he had a master degree from IIT.
One more Con related to the Golden Rush is worth mentioning: huge number of companies with a large number of low quality fly-by-night vendors makes it extremely difficult to find a right provider. It’s very much like looking for gold – you have to go through the tons of dirt to find the right substance. However, you are looking for gold, and one thing I am certain of is that you can find that gold in India.
eBook
The Pragmatic Outsourcer series consists of 5 volumes, each covering a different phase of the outsourcing process. Volume 1: Making the Decision is available today for your free download. Volumes 2 through 5 will be available during 2010.
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Mumbai Sad Nomination
An interesting and very important aspect of selecting an outsourcing destination is the location safety. And it is quite different from what it used to be just a few years ago. The recent terror in Mumbai brought a lot of attention to the subject and put Mumbai in the top ten riskiest places. Here is a how the list looks today:
The Most Dangerous Ten
1. Jerusalem (Israel)
2. Mumbai (India)
3. Rio de Janeiro/ Sao Paulo (Brazil)
4. Manila/Cebu/Makati (Philippines)
5. Delhi/ Noida/ Gurgaon (India)
6. Kingston (Jamaica)
7. Kuala Lumpur (Malaysia)
8. Johannesburg (South Africa)
9. Bangkok (Thailand)
10. Bogota (Colombia)
The Safest Ten
1. Singapore
2. Dublin (Ireland)
3. Santiago (Chile)
4. Krakow/Warsaw (Poland)
5. Toronto (Canada)
6. Prague/Brno (Czech Republic)
7. Budapest (Hungary)
8. Monterrey (Mexico)
9. Beijing (China)
10. Cairo (Egypt)
See more in Mumbai named second most dangerous outsourcing location by Matthew Scott
December 12, 2008 Posted by Nick Krym | News, Articles, Thoughts and Comments, Offshore Vendor Selection | Offshore Risks, Offshore Tips, Outsourcing | 1 Comment