Offshoring - not just about the costs
India looks beyond labour arbitrage
Offshoring to India is often discussed in terms of staff cost-cutting. But speakers at this year's Nasscom Leadership Forum are emphasising it's much more than that, reports silicon.com editorial board member Richard Sykes.
A star of the second day of Nasscom's three-day run was Francois Enaud, CEO of Steria, who spoke about the importance of India and outsourcing with a passion and a directness that impressed.
His theme - identifying and defining the impact of his three key moves in acquiring Integris, Mummert Consulting and now Xansa.
Special Report: Inside India
In February 2007 silicon.com's Steve Ranger visited the Indian tech hotspots of Bangalore, Hyderabad, Mumbai and Pune. Click on the links below to see photo galleries of the cities and companies visited.
♦ Satyam's IT campus
♦ Hyderabad's tech parks
♦ Bringing tech to rural India
♦ High-tech on the streets of Pune
♦ Pune - the new Bangalore?
♦ Boom town Bangalore
♦ Bangalore's Electronics City
♦ SAP and Wipro in Bangalore
Immediate priorities? To transform the new Steria with a strong client-facing culture in Europe, and a new innovation mindset with India at its core. And for India to become the centre for all education for Steria, with the launch of the Steria Academy there, and with India as the emerging corporate centre of gravity.
This was all about a determined corporate vision, global in its reach - certainly not about a simple offshore code sweatshop rooted in labour arbitrage.
An earlier session had given the floor to Ken Brame, the recently retired CIO of US retailer AutoZone, with 4,000 stores to serve.
He described a thrifty and conservative approach to systems modernisation - the use of packaged software across the industry has only just moved ahead of exploitation of in-house developed systems - and the development of AutoZone's relationship with MphasiS in India.
Labour arbitrage is clearly one driver - but with predictions of a shortfall of 20 to 40 per cent in IT staff over the next five years as the US post-war baby boomers generation retire - it's also a move to ensure access to talent in coming years.
Brame provided an interesting background to the protectionist themes emerging in the US presidential primary debates.
Nasscom often seeks to take its members' thinking forward by commissioning major market studies on the opportunities present for Indian industry.
More expert comment on offshoring:Indian outsourcers look ahead
A year back, the focus was on engineering, and this year has seen the launch of a McKinsey study of the fast-growing business of remote infrastructure management (RIM).
Transparency in measuring services remotely delivered - online and in real-time - has increased client confidence in maintaining strategic control while handing over remote operational control.
It's a shift from simple labour arbitrage to a head-on attack on the total cost of ownership, including the productivity of labour, hardware and software assets through standardisation.
As labour is a lesser cost element in RIM, labour arbitrage is not so much the issue - an innovative RIM toolset combined with hard-won, focused and relevant operational experience is.
The second 2008 example of Nasscom at work is a substantial study of India's BPO opportunity, which grabbed attention with the prediction that this has the potential to grow to a $60bn industry by 2012.
But more interesting messages, paralleling those in the RIM debate, came from the panel discussion, which emphasised the need not only to benefit from labour arbitrage but also to find ways of industrialising processes.