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Eight Reasons Why Outsourcing to India Could Hurt Your Business

Though India may be the leader for offshore IT outsourcing, there are many reasons why U.S. companies should consider other options.

By Stephanie Overby

October 16, 2007 — CIO — "To outsource to India or not to outsource to India?" A smart and ultimately successful decision to outsource an IT function is rarely arrived at by answering such a simple (and Shakespearean) question. But it's a good start.

India remains the undisputed leader when it comes to offshore outsourcing of IT services. In fact, Gartner recently reported that India's top six outsourcing providers (Tata Consultancy Services, Infosys, Wipro, Cognizant, Satyam and HCL Technologies) were servicing 1.9 percent of the $672 billion IT services market in 2006, despite their smaller size. And Gartner predicts that two Indian companies (which grew an average of 42.4 percent in 2006, compared with a 4.3 percent growth of the market leader during the same period) will be in the global top 10 by the end of the decade.

However, a confluence of adverse conditions, from rising prices to failing infrastructure to employee turnover, have caused some IT decision makers to shy away from the offshore outsourcing stalwart. In fact, by 2015, predicts AMR Research, India will be just one hub among many from which companies source IT skills, including other offshore, nearshore and onshore options. The following are a few reasons why you might want to make the shift away from India sooner rather than later. (For the other side, see " Seven Reasons Why Outsourcing to India is Good for Your Business ."

1. Pathetic Infrastructure. Still.
Ten years ago, if you were an IT pioneer offshoring to India, you had to deal with terrible roads, frequent blackouts and crumbling physical infrastructure. At the time, you wrote it off as annoying. Maybe even kind of exotic. Besides, the money you were saving by outsourcing the work was worth the trouble. Not much has changed today, except there are probably 10 times as many people taxing the systems.

"It's an issue that seems to be progressively heading in the wrong direction," says Paul Horowitz, partner and outsourcing leader for PricewaterhouseCoopers. "India has not made as much investment in its physical infrastructure. Also, the IT infrastructure needs to keep pace with other organizations. It's an infrastructure breakdown." It can take an hour to get from one point in Hyderabad to another point in Hyderabad. Or to make the mile-long trip from the Bangalore airport to your hotel. "The view from corporate America is that India may churn out more and more IT graduates every year, but if they don't keep up on the infrastructure side, you absolutely have to look elsewhere," says Horowitz. "Clients don't want to deal with it. It's the number-one reason people are looking at alternatives to India."

 

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