CIO —
Not so many years ago, the question for many companies was, Should we outsource to India? Today, that question is more likely to be, How much do we outsource? “IBM now has over 50,000 employees in India,” says Gunjan Bagla, principal of Amritt Ventures, a sourcing consultancy. “Add that to the broad success of HCL [Technologies], Infosys, Tata Consulting and Wipro and it is clear that the question of whether to outsource to India is no longer relevant,” he says. “Outsourcing—or its cousin offshoring—is a matter of survival for most major American companies today.”
India remains the top outsourcing destination, according to a report released in January 2007 by NeoIT, a globalization consultancy. Despite concerns over India’s rising wages, attrition and infrastructure issues, and competition from China, Canada and others, outsourcing markets in Bangalore, Chennai, Hyderabad, Mumbai and the National Capital Region of Delhi will grow at a steady pace.
India’s Signs of Growth
Revenue from the Indian IT industry has grown tenfold in the last decade—from $4.8 billion in 1998 to $47.8 billion in 2007, according to the National Association of Software and Service Companies’ (Nasscom’s) Strategic Review 2007. Services and software exports, the mainstay of the industry, are expected to register a 32.6 percent growth for a total of $31.3 billion in revenue. Looking just at exports, India saw its revenue grow from $12.9 billion in 2004 to an expected $31.3 billion in 2007.
Other signs of India’s growth: India’s top outsourcing companies—Consultancy Services, Infosys Technologies and Wipro—all reported strong revenue and profit growth for the quarter ending Dec. 31, 2006. That same month, Infosys became the first Indian company to be included in Nasdaq’s prestigious top 100 companies. In an interview with InfoWorld’s Paul F. Roberts, Infosys CFO V. Balakrishnan said, “By 2010, [technology imports from India] will be close to $60 billion, including services and products.”
All three layers of IT outsourcing—infrastructure, applications and business processes—are growing, says Gartner Analyst Frances Karamouzis. But measured in terms of the number of venture capital deals, rather than in dollars, infrastructure services is “growing like gangbusters,” she says. When Indian vendors experienced huge success in applications, they invested that money into building new offerings, some of which went to remote network monitoring.
Even in the United States, network monitoring had largely been done remotely, so it was a likely candidate for outsourcing. But to entice companies to send this work overseas (which had largely been the domain of heavies like EDS and IBM) required offering something unique. Historically, remote network monitoring had been reactive; service level-agreements promised to have a downed network up in a certain amount of time. To compete, Indian vendors developed a proactive approach: They invested in tools, automation and predictive modeling techniques to determine which servers are likely to go down and fix them in advance.
