Q & A | VINNIE MIRCHANDANI – Outsourcing Risk Management

VINNIE MIRCHANDANI has spent nearly two decades as a multinational consultant with Price-waterhouseCoopers, Gartner and now with his own Chicago-based company IQ4hire. These days he’s casting an acerbic eye toward IT service providers, helping clients better manage their systems integrators and consultants.

Q: Outsourcing software development to countries such as India is very popular. But you’re more cautious. Why?

A: The risk factor has increased. Buyers’ expectations are going through the roof, and sellers are becoming very fragmented. The buyers who helped open the market were sophisticated, understood the risks and had strategies for dealing with them. Now we’re seeing mainstream companies from places like the Midwest handing projects over to second-tier Indian firms that don’t always have the required depth. And people are getting burned. Compared with software procurement, service procurement has never been very sophisticated. Companies take six months for software selection, yet jump into bed with the first Indian company that they meet.

Q: So what exactly are the risks?

A: The good news is that they are more managerial than technical. Indians tend to avoid confrontation and aren’t as aggressive in terms of project management when things start to go wrong. The work ethic is different as well. Compared to the U.S. model, the Indian model is closer to the European work model?there are evening cutoffs, for example, and weekends are sacred.

Q: What’s your advice to U.S. companies that are contemplating outsourcing

to India?

A: More than ever, it’s caveat emptor. It’s still a compelling business model, but it’s become so wildly successful that buyer and seller expectations are going to be hard to keep up. Buyers who think projects will come in at 20 percent of the U.S. cost are simply naive; realistically, the costs are 60 percent to 70 percent.