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Offshoring realities

Print edition : Oct 07, 2005 T+T-

The Offshore Nation: The Rise of Services Globalization; by Atul Vashistha and Avinash Vashistha; Tata McGraw-Hill, New Delhi; Rs.750.

FIFTEEN-DOLLAR tee-shirts were on sale through the Internet last year, in medium, large and extra large sizes, emblazoned with the legend: "My job went to India and all I got was this lousy tee shirt."

A cartoon in a California newspaper showed legislators in the State capital building in Sacramento debating on closing their yawning budget gap by outsourcing all their jobs to India, even as pigeons outside enquired about the way to New Delhi. Another cartoon had an American bank displaying a notice: "All work at this branch outsourced to Mumbai", with a smaller sign that said: "Coming soon at this location: `Star of India' restaurant."

For most of 2003 and 2004, India was the butt of almost all outsourcing jokes in the United States media; the fun often replaced by paranoia, when commentators such as Lou Dobbs of CNN and, briefly, U.S presidential aspirant John Kerry decided to make a campaign issue out of jobs lost to offshore operations. But paranoia cannot survive for too long in the face of stark business realities, and the overwhelming economic advantages of outsourcing many business processes to convenient locations such as India is something few global corporate entities can afford to ignore. No one is so insensitive as to say: "Outsourcing is here to stay: We have to like it and lump it - or our competitors will go the same route and steal a march on us" - but this is the situation in a nutshell.

Which is why an informed and authoritative guide to the global outsourcing options beyond their own shores is something thousands of U.S. and European businesses would welcome - if they can find one. The Offshore Nation might well be what they were looking for.

The book is authored by the Vashistha brothers, Atul and Avinash, who, since 1999, through their San Ramon, California-based company NeoIT, have been advising hundreds of U.S.-based outfits, large and small, that were looking to find an offshore location for some of their operations. Atul is NeoIT's chief executive officer and Avinash is its founder and managing director. Both are `sons' of Bangalore, the city that more than any other on earth has come to symbolise the movement of Information Technology-enabled services (ITES) to new centres with a compelling cost advantage.

Theirs is not the first book on the subject. Last year saw at least two good `reads' on the outsourcing theme: What's this India Business? by Paul Davies (Nicholas Brealey; $29.95) and Outsourcing to India by Mark Kobayashi-Hillary (Springer-Verlag; euro 49.95) (Frontline, September 10, 2004). But unlike these publications, the Vashisthas' offering is not restricted to an India perspective. Indeed, at the book launch function in Bangalore recently, Avinash Vashistha told this reviewer that Indian Business Process Outsourcing (BPO) players needed to "aim a little higher than call centre-type opportunities" because the paranoia in the U.S. had not really gone away with the presidential election of 2004. In fact, new `pockets of excellence' in IT-enabled services were emerging from unexpected quarters - such as Russia, he added.

That may be one reason why the book looks at outsourcing as a borderless, global phenomenon - and the core of the book is a hard-nosed comparison of offshoring destinations: India, the Philippines, China, Russia, Canada and Ireland, using criteria such as government support, infrastructure, educational system, cultural compatibility and proficiency in English. This chapter alone should serve as an amber signal to the Indian ITES industry: while we tout our Raj legacy - a large human resource skilled in written and spoken English - our call centre kids still have to learn to understand the American idiom (and the significance of events such as Super Bowl), while for their counterparts in Manila, this might well be a part of their genes. Importantly, this section also highlights up-and-coming competitors such as the Czech Republic, Poland, Hungary, Mexico, Malaysia, Vietnam, Singapore, Israel, South Africa and Brazil; nations that are slowly and steadily creating their own unique selling points (USP) in the outsourcing business.

The two avatars of outsourcing - third-party operators and `captive' units run by the parent organisation - are well treated and the trade-offs candidly explained. The total cost of offshoring is something that is not always easy to quantify. The immediate benefits of what is known as "arbitrage" - the raw price difference in hourly wage rates - may soon be offset by hidden costs of management changes, training, site visits, monitoring... and the authors spell these out with stark numbers. Their long experience of dealing with corporate houses that have considered the outsourcing option gives their book the smack of professionalism that most other works might lack.

But at the end of the day, they have been long enough in the business of outsourcing advisories to know that they are dealing with something inevitable and unstoppable: The choice before aspiring corporate kings is no longer the old two-step: (1) Should I outsource some of my operations? (2) If I have to outsource, should I do it offshore?

The only real question is: How best can I embrace offshored outsourcing in a way that will lessen the future shocks to my economy?

The Vashisthas say: "The Offshore Nation is here." They leave unsaid but implied: "Make the best of it, buddy. Because it ain't going away."