Sunday, March 29, 2009
I read a very interesting article last week in the Financial Times regarding India's struggling outsourcing business. At least that was the tenor of the article, but I am not so sure that it is struggling quite to the degree that the FT claims.
It was apparent a few years back when I worked for Wipro that things would mature and change, recession or no. And natural change is occurring there, albeit at an accelerated rate now.
For where India has been smart, is in spreading its bets - in the last few years more an more work has been coming in from Japan (for example) and the smart executives recognized long ago that the US and Europe were already reaching a point where growth could not continue at the same unrelenting pace. What India has, is a huge amount of highly educated technical folk - and India has continued to invest heavily in education whilst the West has not.
You can't take this huge educational advantage away from India quickly, and insourcing work once it has been outsourced a few years is not a lightweight task. I believe that just like China, India will survive and do well.
Where India may be hit I think is in the call center area - many firms are slowly and at times reluctantly coming to the conclusion in the US and Europe that local support just can't be beaten - and probably never can be. IMHO a lot of outsourced call center work was done simply to cut costs - often to meet a quarterly reporting demand. But it was done at the expense of quality and the value of a local touch. There is a good reason to move call centers back to the right time zone.
And in the US it is pretty likely that the new administration will impose even tougher H1B restrictions, but the outcome of that will be more outsourcing not less - as near-sourcing becomes increasingly difficult to enable and support (see comment on lack of skills above).
So though call centers might be hit, IT outsourcing in general will do ok, its too late now to turn back - and too many things still remain favourable for India. The access to a highly educated technical (and growing) skills base, the cost of change - and the short termism of most Western organizations.
The only thing that could really hurt India, is India itself (witness the horrific events at the Taj in Mumbai, and the implications around the IPL moving to South Africa) - sadly self destruction remains a possibility.