Christmas came early to India this year.
Just before the holiday, several big American companies were competing to see which one could invest more money in the subcontinent.
Intel was first out of the gate, saying it would spend a billion during the next five years. The following day, JPMorgan Chase said it planned to double its Indian workforce. And then Bill Gates, visiting New Delhi, announced that his feisty little software outfit planned to invest $1.7 billion (take that, Intel!) and hire 3,000 new people in India during the next four years.
Sniffing a trend, McKinsey predicted that global outsourcing services would earn $110 billion by 2010, with India copping about half of that. That’s the good news. The bad news, according to McKinsey, is that India by then would have a shortfall of about 500,000 skilled workers and would need to build, oh, 10 or 12 brand-new cities to meet the demand for housing, office space and infrastructure created by all these new workers and all this new work.
Pretty heady stuff. And, of course, it’s all good, not to mention inevitable. As long as it’s cheaper to send work abroad, work will go abroad, especially now that location, location, location doesn’t much matter. Bangor or Bangalore, it’s all the same to the ones and zeros.
In the long run, rising standards of living abroad will make for a safer, happier world for everyone. The question for CIOs isn’t “Should I outsource?”; it’s “How should I outsource?”
This issue marks the conclusion of a three-part series about outsourcing strategy and success models, defined in original research by MIT’s Center for Information Systems Research and CIO, and reported and written by our own outsourcing savant, Senior Editor Stephanie Overby. (The whole series can be found by going to www.cio.com/specialreports.) Her story in this issue, “Big Deals, Big Savings, Big Problems,” Page 60, examines the most complicated and least successful of three types of outsourcing arrangements, the strategic partnership, in which a company turns over a whole range of IT functions to a third party (either offshore or on). These relationships fail about half the time; Overby shows how to be part of the half that succeeds. Oversimplifying wildly, the key is to remember that you’re outsourcing the work, not your responsibility for it. You can’t outsource that because there’s a fundamental disconnect at the heart of every outsourcing relationship. As Ontario Power Generation CIO Dietmar Reiner neatly puts it, “The service provider is motivated by profit, and we’re looking at cutting costs.”
See the problem?
And, of course, the problem is compounded when such complex relationships span continents and cultures.
No one imagines that this march toward globalization will be a walk in the park. However, in this issue’s Keynote column, “How to Ease the Pain of Globalization,” Page 26, Catherine L. Mann describes a number of ways in which we can usher in this brave new world with a minimum of anxiety and distress.And that would be good. Because, if you look around, it’s already here.