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:

  1. HeroITES
  2. Corbus (India) Pvt. Ltd
  3. AgreeYa Solutions India Pvt. Ltd.
  4. Nagarro Software Pvt. Ltd.
  5. R Systems International Ltd.
  6. Synygy India Pvt. Ltd.
  7. Acclaris Business Solutions Pvt. Ltd.
  8. Infogain India (P) Ltd.
  9. Hytech Professionals India Pvt. Ltd.
  10. Nucleus Software Exports Ltd.
  11. Sopra India Pvt. Ltd.
  12. Cactus Communications Pvt. Ltd.
  13. Interglobe Technologies Pvt. Ltd.
  14. H5 Asia Pacific Pvt. Ltd.
  15. 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:

offshore1

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)

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