Flexible Outsourcing Model Keeps India on Tap

3 Questions:
Flexible Outsourcing Model Keeps India on Tap
Outsourcing for Strategic Advantage, July 13, 2005

With Gurvendra Suri, CEO of Optimal Solutions Integration Inc., a Dallas-based enterprise-technology consulting firm. Optimal Solutions offers a flexible delivery model that includes onsite, domestic rural and offshore options.

Question: Recently, the press has reported that India's IT wages are starting to climb. How do you see these rising wages affecting the offshoring industry in India?Suri: There has already been a great deal of debate regarding India vs. the rest of the world. While emerging entrants such as Eastern Europe and countries such as China will certainly gather some interest based on low pricing, we remind our clients that it is not a simple question of the lowest hourly price dictating the best value. While low price is certainly a consideration, it is only one part of the equation that determines total costs. For example, the expense in terms of managing offshore IT relationships — which some put in the range of 8 percent to 10 percent of the contract's value per year — must be considered. Newly emerging offshore suppliers can often exceed this threshold simply because their processes and methodologies are not as well established as those of Indian vendors. They can require more handholding and supervision, and the cost for this should not be overlooked. On the topic of execution, it is well known that the transition phase is the most problematic and costly period in offshore outsourcing. Again, Indian suppliers excel in this area given their experience and the maturity of their processes. While it might take approximately three months for a competent Indian supplier to work through this aspect of an engagement, a firm with limited experience who must learn the transition process in general, while concurrently struggling with the actual transitioning of the client's knowledge, can easily burn twice this amount of time. Adding this extra time and expense to an engagement clearly demonstrates the Indian advantage, even with a higher hourly cost. Legal fees and the costs of arranging contracts also must be considered. The Indian legal system is very similar to the British system and very easy for U.S. companies and their legal counsel to understand and negotiate. This is not always the case with other geographical regions where the legal systems and processes are either unknown at best, or unenforceable in the worst-case scenario. It is our experience that when one considers the overall costs (many elements of which are largely ignored) the decision to tap India is clear and justified.
Question: Will these higher rates affect your clients and your flexible delivery model?Suri: We are not heavily involved in those commoditized areas of pure-play offshoring where profit margins are sustained solely by low hourly wages. The bulk of our work is in developing, implementing and customizing global enterprise systems for large organizations. In this context, the cost savings provided by our offsite development resources are still compelling. We do not anticipate that rising rates in India will significantly impact our ability to deliver secure reliable, competitively priced services.

On-demand ERP player launches India ops

Intacct Corporation is looking at India for development and also to engage the market.

Wednesday, July 13, 2005

US based ERP software provider Intacct Corporation has announced the launch of its Indian operations. With the belief that all software including ERP would be delivered as a service in future, the company looks to deliver ERP software services to ISVs, BPOs and enterprises in India.
Intacct, which is IBM's only ERP on demand partner, focuses on developing and servicing the company's expanding suite of web-based ERP applications. IDC expects the worldwide sales of software as a service to grow 21 percent a year, and touch $10.7 billion in 2009.
Intacct CEO Robert J Jurkowski said, “We already have alliances with Indian BPOs like Outsource Partners International and GHS Holdings. We hope to expand this further so that BPOs can provide ERP support and services for their customers.” Intacct started its operations in India in 2003 through a partnership with Minsu Infosystems Pvt Ltd. Now, it plans to merge with Minsu and double its engineering staff, which stands at 29, by the year-end.
Intacct engineering VP Nagraj Prabhu, who will head the India operations, said that all the innovation and IP at Intacct would be created in India. He also said that the company plans to eventually shift sales and support functions to India.
A privately held company, Intacct is funded by Deloitte&Touche, Goldman Sachs and others

Accenture to hire up to 30,000 in Asia

Accenture, the outsourcing and consulting company, is planning to hire up to 30,000 workers across China, India and the Philippines.
Board members announced their intentions to strengthen offshore business in a conference call last week.
Accenture currently employs 19,000 people in the three countries. The company said that, depending on demand, it could grow that number to between 30,000 and 50,000 over the next three years.
"We have recently made an important decision in our offshore strategy to dramatically expand our global delivery network," said Steve Rohleder, Accenture's chief operating officer. "We're actively recruiting in key locations throughout our global delivery network. Our approach is to defend and extend our position in the marketplace.
Rohleder added that the company is not limited to expanding in those three countries.
"If we get into a situation, for example, in India where a specific city has reached saturation from a salary standpoint and from a cost structure standpoint, we have the flexibility to move and to grow a different location--not only within India or China or the Philippines but also outside, say in eastern Europe or Latin America," he said. "And we have actually started that process as well."
The company made the announcement as it stated that its net revenue for its fiscal third quarter ending May 31 was $4.08 billion, the highest in the company's history.