Friday, February 04, 2011

Offshoring: not as simple as its often reported

A couple of footnotes to my last blog post on Capers Jones book, Applied Software Measurement. One of the points I noted was Jones suggestion that rising prices and costs in India and elsewhere would mean IT offshoring loose its financial benefits from about 2015 onwards.

Jones, by the way, later says that Indian and Chinese outsources are aiming to compete on quality not price in the long run. So we can expect to see the nature of offshoring change.

Shortly after posting that blog entry I noticed a piece in The Economist on the Indian ID programme, Identifying a billion Indians (27 January, subscription required.) The Indian Government is embarked on a scheme to give unique identity numbers to the entire population.

The first thing that first got my attention was not that this was an IT based scheme (no surprise there) but who was doing it. Not Tata (TCS), not Wipro, not Infosys. It is Accenture and L-1 of the US and Morpho of France. I’m sure much of the work is being done in India but the Indian Government has given the work to foreign firms. Lets give a round of applause to the Indian Government for not feeling compelled to give work to local firms.

And then lets note that offshoring/outsourcing goes both ways. Its not all about US and Europe loosing out to India or China. It goes the other way too.

The second thing that got my interest was this: the work is split between these three firms: 50%, 30%, 20%. Progress is reviewed regularly and work reallocated. The most effective firm during any one period gets the bulk of the work next time. That is a very enlightened way of working and gives real incentives the firms to do their best. It also shows flexibility with contracts.

Separately, some US readers might be please to learn that Financial Times reports that the big Indian outsources plan to do less work with US firms. European readers won’t be so happy to learn that Europe will replace the US as their target.

The reason: not competition, not prices or quality. US Visa prices.