Value of successful offshoring ...is it still Location, Location, Location [and cost]?
For years, B-school students were taught about the significance of environmental and geographic location on success of business enterprises (read “Location, Location, Location”) a theorem that was essentially turned upside down by globalization and flattening world; apologies Tom Friedman.
It is interesting that the debate over “location” continues to come back in different contexts, be it “India vs. China vs. Other Country” or “Bangalore vs. Anytown” or other similar arguments. I am occasionally asked by client managers and executives on my views on Bangalore or India as “the” (read preferred) location for IT outsourcing. Case in point: James McGovern’s comment on my earlier blog is a query of this kind. “Maybe another dimension to talk about is when outsourcing is beneficial but when companies should avoid India for other countries such as Brazil, Jamaica, Trinidad, etc.”
I generally try and skirt the question for a couple of obvious reasons. I spent most of my formative years in Bangalore (name likely to be changed officially to Bengalūru soon), I went to college there, and the nearby town of Mysore, and started my career in Bangalore so I would admit to a personal affinity to the city [The fact that Infosys, my employer, is also headquartered there may be a smaller factor to weigh in]. This said, like many fellow Infosys executives, I have also spent years living and working in different western cities, so I think I can be a bit less sanguine about just Bangalore or India.
Perhaps the same may not be true of the opinionated folks in the cyberspace. If one were to judge the success of a viewpoint by the number of vocal comments it generates on popular blogs, the recent Businessweek article “Outsourcing: Beyond Bangalore” would rank high. And why not? The responses on Slashdot for this article have been extremely opinionated. The article makes for an interesting read and focuses on four key topics
The Search for Lower Costs
Mix of Outsourcing Locations
Benefiting from Geography
Infrastructure Counts
One aspect of the article made me reflect on the biases of journalists and analysts. The article quotes Linda Cohen, vice-president of sourcing research at consulting firm Gartner saying “Ninety percent of all outsourcing deals in the market today have been structured around cost improvement only," prompting the BW author to add that “By the third year of an outsourcing deal, after all the costs have been squeezed out, companies get antsy to find a new locale with an even lower overhead.” .....Statistics, as the old adage goes, can be used to prove (or disprove) anything.
One would like to believe that fellow managers and executives who opt to work on larger offshoring and outsourcing initiatives do a better due-diligence, and don’t “get antsy” to “find a new locale with an even lower overhead” by the third year of an outsourcing deal. And if they do, the driver in exploring offshoring is probably ONLY cost, and not the overall value.
A counter to the BW article comes from Economist magazine in “Outsourcing Growing Beyond India”
Moral of the story: Let journalists and analysts debate the merits of “external factors” impacting offshoring; practitioners like us have to continue to make it work….one project at a time.
Footnote: You may also be interested in my recent column "How project managers can succeed with globalization" in IT Manager's Journal.
