Offshoring Yet?

In a recent ASTD (American Society for Training & Development) survey, 97.4% of the respondents said their organizations have a skills gap or will have one within a year. But only 8.24% of them said they are considering outsourcing to remedy the gap.

Has your organization considered outsourcing or “offshoring” to India? Have your competitors?

India has become a resource for a wide range of services. This phenomenon involves more than call centers. Many organizations are now looking to India to fill their skills gap.

What’s next for the offshoring-to-India phenomenon? Let me make a few predictions based upon a recent article by Stan Gibson, some informal discussions I’ve had with clients, and a recent McKinsey study.

Gibson’s article, “India 2.0,” was published less than one month ago. The 2.0 refers to the next generation of the India phenomenon.

India’s technology companies have been on an exciting ride for more than a decade. The industry’s revenues have grown 200 times in the last 15 years (eWeek Magazine). Companies such as Infosys Technologies, Tata Consulting, and Wipro have experienced incredible growth and profits.

India’s technology companies have been operating at only 30 cents on the dollar compared to developed countries, such as the U.S. This has made India the “go-to” source for low-cost services. India’s English-speaking skills add a great advantage to its already strong position.

But, what about the next generation of Indian companies (India 2.0)? Ramalinga Raju, chairman of Satyam Computer Services in Hyderabad, India, said, “The last 15 years is the end of the beginning.” Wages are already beginning to rise. Are Indian companies prepared to respond to a changing world? Yes.

In a recent conference in Mumbai, India, companies expressed a collective desire to increase innovation and to globalize. Apparently, India will follow Japan’s model to becoming an economic power. Japan started with low-cost products fifty years ago and eventually moved up to high-end, high-quality products. Will India do the same thing in services? I think so.

Stan Gibson reports, “Indian companies are eager to develop, patent, and license their own IP (intellectual property), instead of just working on projects where their customer retains rights to newly formed ideas.” Gibson goes on to predict that Indian companies will soon begin selling software products.

Education is a critical issue when predicting the future of the outsource-to-India phenomenon. The Indian system has been successfully training tens of thousands technology workers. But a recent McKinsey study found that India will need 2.3 million IT and business process outsourcing workers by 2010. Indian universities simply will not be able to meet the future need at current rates of growth. McKinsey predicts a shortfall of 500,000 workers. There is already wage inflation in excess of 10%.

What will the effect of these trends be on developed countries such as the U.S.? Maybe you should start the discussion at your organization.

To read more about this and related topics, check out my website, www.mikebeitler.com.