The CIO Magazine shootout on offshore services finds India more attractive as an offshore destination than China. Yet another survey echoed similar sentiments. For me beyond a point location does not matter- it is only people, process and program management that matter – I guess the survey’s conclusion in some forms has been influenced by these factors as well.
A survey by Capgemini and ProLogis, a global leader in industrial real estate, suggests that India could challenge the position of China as the manufacturing center of the world in the next three to five years.
Today China is the preferred location for offshoring manufacturing activities while India has been the preferred location for IT, finance and customer service. On the other hand, companies are planning to offshore manufacturing activities primarily to India, over the next 3 to 5 years. One key factor noted in the study is that some of the main manufacturing locations in China are becoming too expensive relative to other countries in the region, which includes India.The study also reveals, offshoring activities to China and India has had limited impact on the corresponding Western operations. Any more switch would happen only when the transition pain becomes lesser than sustenace pain.By looking at the overall average of the activities, the closure rates of the corresponding Western facilities is about 10% and the percentages varied significantly between China and India and are dependent upon individual activities.
Well after all offshoring business is not a zero sum game and growth and volumes makes any comparison a subjective/contextual exercise but clearly growth of the offshoring business is becoming more and more of a centerpiece in every growing business and it is a win-win for all the players.
With outsourcing as a given way of life, we are seeing that the offshoring phenomenon for tech work is seeing an unprecedented growth and shows propensity for more aggressive volume growth. Writing on IBM's progress on this path, the NYTimes article highlights that
the idea is to build networks for producing and delivering technology services much like the global manufacturing networks that have evolved over the last couple of decades. Look inside a computer or automobile and the parts come from all over the world. High-end technology services projects increasingly will follow that formula, combining skills from across the globe and delivered on-site or remotely over the Internet.
As I see it, clearly distributed model of development/support is working well. Ranging from lower complexity, shorter duration, utility-type projects to more strategic ones, outsourcing to countries like India (as long as internal company controls are in place) has proven to be a cost saver and in many ways a performance accelerator. It takes some time for companies to get the rhythm right and once a critical mass is reached things are in general zipping ahead. The issues of improved productivity and enhanced quality wrapped around more robust tools to manage and administer these distributed development efforts. In this evolution, it may also make sense to keep some residual work addressed closer home and this is an integral part of the sourcing framework. A customer-imposed changing of the vendor guard forcing some old school Big 6 leaders to be replaced by a newly ruling set of global industry influencers means that the industry is in the cusp of a major change and with offshoring bringing some cases, the order of fifty percent saving, through well thought out mechanisms, this space will see lot more action for sometime to come. Over a period of time the volumes of residual work onshore may also come under constant review for being offshored. The dynamism and competitiveness in this industry would mean that all stakeholders benefit uniformly.
As I wrote recently, the key thing would be to see the level of innovation and differentiable IP’s that service firms can showcase – this needs to be tied to increased productivity and reduced cost for customers. Ultimately, service players that have invested in emerging areas well ahead and in right measures, stayed close to customers, and focused on efficient execution are well positioned to capitalize on the market as it improves. Companies that will succeed in the services market going forward will be those that embrace the evolution of the software environment, collaborate closely with partners and customers, possess a strong understanding of industry-specific business processes, and have a mature and seamless global delivery capability – all these are achievable only by making right quantum of focused investments in the right direction at the right time.
Traditionally business has chosen to outsource just certain aspects of their enterprise, often with different vendors managing different aspects of their business in order to achieve cost savings. But a new survey by the Brown-Wilson group indicates a growing trend away from outsourcing to outsourcing in which companies focus on fewer service providers and vendors expand into different services to better serve their clients.
The Black Book of Outsourcing survey aims to identify top outsourcing vendors and advisers, as well as industry trends, based on responses by outsourcing decision-makers (survey of over 117,000 invited outsourcing governance officers including CEOs, CFOs, Procurement and Purchasing Officers, CIOs, Human Resources Directors, Strategic Consultants, User Management and buyer decision makers. The focus of the survey is to draw out the outsourcing user experience concerning service providers globally). A quick view of the rankings published at the well researched, recently released report titled the state of the outsourcing industry.
The report sees reaching the point in the evolution of outsourcing where the “faster and cheaper” and the “better and most innovative” are about to cross critical paths. One key finding in this year's survey is a shifting focus from cheaper and faster performance to a focus on client satisfaction, with managers of client companies favoring outsourcing suppliers that provide better and more supportive innovations, such as responding quickly to help clients manage a crisis. Vendors that ranked high in prior years for saving their clients big money are now slipping lower because they're seen as putting their own company growth goals first, according to Douglas Brown and Scott Wilson of Brown-Wilson Group. Companies that performed best in the 2007 rankings focused on adapting to their clients' strategies rather than applying a cookie-cutter approach, they conclude. While China has seen a tremendous increase in outsourcing investment in the last year, Mr. Brown says it is interesting to note that Chinese companies scored very low levels of satisfaction in the survey.
Finally outsourcing is not just about offshoring . The distribution mix of revenues out of a total of around trillion dollars (expected to touch 1.5 trillion dollars given the growth rate of 30% annually): 4% to India 3% to China, Philippines & SE Asia 57% to United States 36% to global locations excluding US, India and China/Southeast Asia.
Read the full report - it has an excellent collection of data points, measured on various dimensions. A customer-imposed changing of the vendor guard forcing some old school Big 6 leaders to be replaced by a newly ruling set of global industry influencers means that the industry is in the cusp of a major change and with offshoring bringing some cases, the order of fifty percent saving, through well thought out mechanisms, this space will see lot more action for sometime to come.
Financial services are a pioneer of sorts in outsourcing and offshoring and about 40% plus contracts on outsourcing today come from the BFSI segment and generally the other verticals follow the BFSI trends and so its important to watch the performance of the sector and its next moves. I read the published parts of Deloitte's global financial services offshoring report 2007. The full report is available only for the participants of the survey. The report has good statistics about offshoring pertaining to the financial services industry:
- Offshoring has matured at a rapid pace. In 2001, less than 10 percent of major financial institutions had moved processes offshore in 2001. Five years later, over 75 percent of major financial institutions had operations offshore.
- The US and UK banking and capital market institutions continue to lead this shift, but mainland Europe is showing increasing interest.
- Most major financial institutions now operate a sizeable, low-cost offshore delivery function. The industry’s cumulative cost savings for the last four years have risen sharply, propelled by an 18-fold increase in offshore headcount1. Over 2006, average total headcount offshore doubled to six percent of total group staff. More than half of all financial institutions surveyed are now saving more than 40 percent for each business process offshored3.
- The range of savings is polarizing, and is now between 20 and 70 percent per business process.
- An handful of financial institutions are setting the pace in offshoring. They are beginning to outshine their offshoring competitors and achieving stellar performance through the application of best practices. This improvement in performance is conferring significant competitive advantage on these institutions.
- The best offshorers are seeing savings equivalent to 3% of the total cost base. However, at the other end of the spectrum, institutions that have failed to adopt best practices are experiencing a decline in operational performance.
- Relocating 5% of the workforce offshore seems to be the critical number to achieve. This, the report finds out enables business to build a platform for success. The best performing institutions offshore around 12% of group headcount and, on average, save 55% on each business process. The companies whose offshoring programmes are suffering, offshore less than 5% of headcount and typically save 32% per process. The most efficient offshorers take just 15 months to migrate each process, compared to around 25 months for poorer performers. A very interesting report with very relevant and useful statistics.
BusinessWeek's analysis of the US import price data reveals offshoring to low-cost countries is in fact creating "phantom GDP"--reported gains in GDP that don't correspond to any actual domestic production. The only question is the magnitude of the disconnect. The strong earnings growth of U.S.-based corporations is still real, but it may be that fewer of the gains are coming from improvements in domestic productivity. In fact, holding down costs by moving key tasks overseas could be having a greater impact on corporate earnings than anyone guessed-or measured.
By BusinessWeek's admittedly rough estimate, offshoring may have created about $66 billion in phantom GDP gains in the last three –four years. That would lower real GDP today by about half of 1%, which is substantial but not huge. But put another way, $66 billion would wipe out as much as 40% of the gains in manufacturing output over the same period
Dark matter and phantom GDP are related to each other. U.S. corporations help bring their foreign suppliers up to speed ("dark matter"), who then can ship low-cost goods back to the U.S. ("phantom GDP") This supply-chain loop is one of the realities of today's world but it's completely missed in the government data. Depending on your attitude toward offshoring, the existence of phantom GDP is either testimony to the power of globalization or confirmation of long-held fears.
My View :I hope that Michael Mandel has got his facts right and has used acceptable means in computing the data. The fact of the matter is that more than 50% of the profits on the S&P now come from overseas, this has gone up from 1/3 in 2002. Clearly international production outside of the US is the part that is growing. The reality is that the high profits as a result of low cost overseas capacity utilization has come in handy to cover up inefficiencies in planning, management, execution, personnel development. As this appears to be a relatively easy option( it’s deceptive to think that offshoring is easy), I think all these areas have deteriorated, because low cost labor is where the profit margin is, and the companies are chasing that over a cliff, sacrificing ignoring their latent strengths. That’s the key thing that the US enterprises need to focus on to create better quality growth for its stakeholders. A recently released Hackett study shows that the Fortune 500 could generate over $91 billion annually, or about $182 million on average per company, by strategically combining "Lift & Shift" efforts, which move back office processes overseas without first improving them, with "Transform & Shift" initiatives, where processes are optimized and then taken offshore. This way, the companies can potentially increase these savings by over 50 percent by selectively integrating transformation and process improvement efforts into their globalization initiatives Clearly, the U.S. economy no longer stops at the water's edge. Global corporations often provide their foreign suppliers and overseas subsidiaries with business knowledge, management practices, training, and all sorts of other intangible exports not picked up in the government data. In return, they get back cheap products. Generally speaking, part of the productivity enhancing effects from material offshore outsourcing is driven by firm-specific strategic elements such as increasing the focus on core competences.Its clearly time to think of the US ecocnomy as a global enterprise.This clearly takes precedence over every other point on this topic and any attendant issue need to be examined from this perspective.
I have been highlighting the challenges in scaling up in china – when I wrote that resource scaleup disappoints.
Forrester finds that while Chinese services firms are supporting a vibrant local IT market, China has not achieved the offshore growth that people expected. Japan remains the dominant location for China's offshore clients. But given the lack of offshoring and IT services sophistication of most Japanese firms, it has not been a growth engine. The report shows that to date the market has not taken off as expected. While there continues to be demand from Japan and multinationals with operations in China, the offshore business from the US and Europe has been slow to materialize. In fact, China's percentage of GDM resources for the top services firms like Accenture has dropped, while India and the Philippines have seen far greater investment. The report rightly points to set of concerns impeding growth - attrition, captive centers bidding up wages, and a lack of experienced managers and technical leads. In addition, the appreciation of the yuan against the dollar hurts .Most of the local players work on project mode and their account reach is quite limited in numbers. In contrast the scaleup that we notice in Indian headquartered companies are beginning to see more momentum. In short, the market demand does not match government & service provider expectations and so it continues to be a story – testing, data management, and product development services may be a focal area for growth.
Estimates suggest that the top 10 local chinese service providers have together in all employ 12000 consultants for offshoring engagements. To understand the way the top 50 service players are executing lets looks at this - The top 50 IT services vendors employed 1.7 million employees at the end of their most recent reported financial years. This is almost an increase of 13% of the comparable total of 1.5 million from the previous year. Much of this growth has been driven by the major offshore sourcing suppliers, with the top five players adding 88,000 new staff last year taking their combined total headcount to 307,500. TCS, Wipro, Infosys, Satyam and Cognizant are poised to add a further 100,000 new recruits between them in fiscal 2007. Its just not the scale alone matters but again it is an important issue to be considered. China may never become a big force on IT services. At best it can play a supplementary role but it remains to be seen how this evolves.
I find Forrester’s coverage streets ahead of its competitors particularly when it comes to global delivery and enterprise software – very timely, extremely well focused, matter-of-fact research all based on actual data. Others are mostly getting drowned by their own arrogance while AMR comes a close second. I liked Bruce Richardson’s and by extension AMR’s coverage of offshore market dynamics – this got further reinforced when I met AMR’s Bruce Richardson - I like his perspective on the potential advances that the Indian headquartered service providers could be making in the near and medium term.
This is a continuation of Bob Cringley's latest post on IBM. Any change is painful - massive change would bring out more massive upheavels - this is true of all organizations around the world. I have no idea whether Bob's information is right or not - am assuming that he has all the facts with him. Since it aligns with general news that we hear in the marketplace, it is worth examining the changing marketplace and leave it for readers to assess if IBM is indeed making the right moves. Recent studies of the global services market clearly rank IBM Global Services as the he largest services vendor in the world – a position it has held for more than a decade. It reportedly reported $48bn in sales in 2006 - this is more than double that of its closest competitor EDS, with $21.3bn. IBM’s individual market share stood at 8.7%, and the services market is highly fragmented. The point to note here is that IBM’s top line rose by just 1.8% last year, a consequence of slow contract signings in previous years. In contrast, some of IBM’s closest competitors – notably EDS, Fujitsu and Capgemini - reaped the benefits of successful restructuring programs during the last few years to return healthy growth rates of 7.6%, 8.3% and 10.3% respectively.
To understand the way the top 50 service players are executing lets looks at this - The top 50 IT services vendors employed 1.7 million employees at the end of their most recent reported financial years. This is almost an increase of 13% of the comparable total of 1.5 million from the previous year. Much of this growth has been driven by the major offshore sourcing suppliers, with the top five players adding 88,000 new staff last year taking their combined total headcount to 307,500. TCS, Wipro, Infosys, Satyam and Cognizant are poised to add a further 100,000 new recruits between them in fiscal 2007. Its just not the scale that matters alone. I firmly believe that investments make the difference in securing the future of service players. The whole service industry and enterprise software industry plays on the customer inertia and lack of an alternative. Whats that disruptive model that would shake up the services industry – clearly offshoring played that role to an extent but the laggards seem to be catching up here/atleast make up an appearance of catching up. Seen from a service industry perspective, next technology breakthrough heralding new opportunity could help them rejig their model – like what BPR/ERP wave did earlier or the dot com era – SOA is still many years down the line. Seen from a customer perspective, how does one lock themselves out of this ? Seen from an investor perspective, how to value service companies where increasingly the differentiation factors seem to be just the scale and historical presence.These are definitely key concerns. Innovation inside consulting and service organization needs a different mindset to foster and manage - clerical approach shall have deleterious effects. The key thing would be to see the level of innovation and differentiable IP’s that service firms can showcase – this needs to be tied to increased productivity and reduced cost for customers. Ultimately, service players that have invested in emerging areas well ahead and in right measures, stayed close to customers, and focused on efficient execution are well positioned to capitalize on the market as it improves. Companies that will succeed in the services market going forward will be those that embrace the evolution of the software environment, collaborate closely with partners and customers, possess a strong understanding of industry-specific business processes, and have a mature and seamless global delivery capability – all these are achievable only by making right quantum of focused investments in the right direction at the right time. So, if you want to see where the well established service firms are headed – I would think look at their business model, closely scrutinize the investments that are being made – the quantum & nature of such investments. All other things being equal, this would make the difference between winners and laggards. IBM's reported move as spelt out by Cringley shold be seen against this background of global change and challenges that service players face moving forward.
While writing on captives, I concluded that today’s reality is that barring those that are focused on product development, or support functions involving multiple of hundreds of people working or those focusing on research – the R part of the R&D line item, most of them are grappling with which exit option to choose - ranging from closure to outright sale.
Vinnie points out that the drivers for setting up captive units are margin protection, IP protection, ability to realize some capital gains upon eventual sale. Vinnie – you are definitely right, Symphony & GlobalLogic have reportedly bought over a few captives( Forrester points out that those bought out were actually stagnating/struggling units).I have also pointed out earlier that firms that are focused on product development on a medium to large scale, or support functions involving multiple of hundreds of people working or those focusing on research – the R part of the R&D line item would find it attractive to run captives. Software product majors employing huge numbers or those focusing on niche(s) generally manage to run captives to their corporate satisfaction. But cost advantages and scaling up are proving to be far more difficult things to achieve.
My experience in talking to captive managers who have run captives suggest a sense of dissatisfaction and a majority of them have failed to meet their HQ expectations – on multiple fronts. The issues that run captives to the ground include busting of the myth that they can be in general be more profitable – the loaded costs of captives are on an average more than the loaded costs of third party service providers( even when factoring in a reasonable margin for service providers). Forrester is bang on when it reports that generally, over time, service providers can manage the inflationary pressure, improve productivity measures much better, for high end works.
Hindustan Lever sold its captive unit Indigo recently to Cap Gemini. The valuation, it was widely believed was very subdued as Levers made it look as if a cost center was getting sold. HLL, one of the largest multinational operating in India (it recently lost its largest multinational status in India to Nokia) unarguably India’s corporate icon and Unilever’s crown jewel would not have taken such a decision without working out its near and medium term benefits. Its likely the case that HLL must have thought that sustaining captive BPO center may not be the best option available in front of it – seem from an expertise, economics ascaling up perspective & near-medium-long term valuations. Apple failed in running a successful captive unit in India. There are number of additional examples that come to my mind - Citi, Deutsche and a lot more. Firms like Yahoo & BEA are fine tuning their approach. Amongst the notable exception in running a successful captive is Dell,which seems to be going from strength to strength. In my view, where having a captive is not a strategic decision( should be well justified and unbiased), the era of having captives for the sake of having one, in the hope that in present or in future, in some form benefits may be forthcoming looks doubtful.
We’d all be better off if the Congress would forget about the phony crisis of immigration and concentrate on doing things that improve the health, education, and job opportunities for America’s less fortunate masses. That would be a worthy cause for Dobbs to get behind, too.
I just can’t avoid referring to John Hagel's insightful and thought-provoking article on this topic. Few days back, I read his brilliant rejoinder titled, “blindness to globalization” that he published on the perspectives shared by economist Alan Blinder in the Wall Street Journal. Amongst other things, Blinder claimed that the US can potentially lose some 40 million jobs to outsourcing in the next few years. Hagel's builds the rejoinder on multiple fronts: He thinks that these projections are faulty in that they are much too static in their view of potential job movements.
They rely on the infamous ceteris paribus qualification – i.e., all other things being equal. Of course, other things are never equal and the dynamics in competitive strategies and talent development initiatives could shift the actual movement of jobs significantly in one direction or another. He argues quite brilliantly that, it's a mistake to assume jobs are zero-sum: outsourcing can actually create jobs as well as move them.
He also adds that America should prepare its future generation to think more globally.
The offshoring trend needs to be understood within this broader context. We are moving from a world where demand can be forecast and resources "pushed" to the right place at the right time to a world where we need to flexibly "pull" resources wherever they reside when they are needed.
He concludes
Traditional educational institutions represent classic examples of push programs. We project far in advance what students should learn and then develop curricula and programs to push that knowledge at the appropriate time. Just like the push programs in business, that model is now coming apart at the seams.
The answer is right within these statements – education and mindset change is the key to prosperity – in this globalizing world, this is true for both developed economies & developing economies!! Some solutions are universal & absolute in nature!!
I have been travelling a lot in the last ten days and there had been times when I just could not even manage to get internet connections. Most part of the time, I just could not get the time for connecting while where I could manage to squeeze some time, the connections were simply non-existent. Where on earth you wonder – well, I was for most part of the time in Perth, Western Australia!!. Now in my travel , a key executive of a major corporation sitting next to me asked me to answer the question - What are the primary qualities that you should look for in an outsourcing partner, and is there a mechanism to measure and rank them? The last thing that I wanted to do in a long flight was to talk business and anyway it was an interesting conversation. The gist of my response: First and foremost it would depend on the nature of service that is planned to be /getting outsourced. Every type of service shall have its own set of measures of effectiveness when it comes to outsourcing. Besides every outsourcing deal is contextual in nature and has to be therefore measured in relation to its objectives. While cost, scale & speed, quality would matter for every deal at all times – the mix and sensitivity could vary depending on the deal. Besides traditional models of outsourcing may not be the most relevant for business competitiveness related deals – say a transformation initiative. In regular nearly commoditized nature of services like IT maintenance (even here there can be a range of differences in the nature of the deal), most business feel comfortable about taking near standard deals – or deals structured with minimal variations. In general , for special deals the recommended action would be to test the waters through piloting before reaching the stable zone of outsourcing and scaling up further. The level of executive support and involvement of both sides and relationship management would become a key driver in ensuring continual success of outsourcing initiatives. Also if it relates to outsourcing from a high cost location, offshoring has got to be factored in for better costs and scaling up - substantial benefits and changes would be seldom felt without that. The continual revision /change in metrics in outsourcing is a given for enduring success. The effects of multisourcing also needs to be factored in the overall assessment.
Earlier TPI results confirmed that the offshore players are garnering more marketshare in the ADMS space. In the large deals space, offshore providers have cornered more than a quarter of new wins globally. Now comes the qualitative part. Recent Performance Monitor research reveals,that India-based firms outperform some or all of the multi-national firms in a number of areas of application development and maintenance (ADM) services and, as a group, the four Indian firms represented perform on a par with the seven multi-national firms in the study. This research looks more balanced as is based on input from 864 clients of eleven leading ADM providers, seven of which are multi-nationals and four of which are India-based.
My own feeling as to where the offshore players score are – their expertise, lead and mastery in terms of managing distributed development while ensuring good process and quality standards. It is indeed a phenomenon to see their methods and skills in terms of expanding opportunities, while beginning small inside accounts. It would be interesting to see how the global majors (who have been by far the leaders in most aspects of services outsourcing) blend their offshore workforce. So far the general sense based on party talks and discussions with executives are that – the integration of these facilities are not so seamless to the extent of providing best possible value to their customers –in terms of speed, quality and price. Independent analyses confirm that the the pricing models of indian headquartered firms are much more transparent, compared to most on-site players. Am sure the global majors would be focusing on improving on those aspects while the offshore leaders would be pushing the needle of effectiveness and enhance the levels of competition. I do beleive that it may well be time to begin talking about more productivity benefits within families of ADMS space(this encompasses a very wide ranging set of techniques, tools and technologies) and publicly come out with measures when service providers have been able to do more with less. The Indian headquartered offshore players have the challenge of maintaining and improving these impressive gains when they begin to compete and win the other 3/4th of the pie in the ADMS space. If past performance is an indicator, they will. The bigger challenge and opportunity for them would be in the much bigger IMS space – where the penetration potential is far higher.
The supposed talent shortage in India is again making the rounds. While talking about some difficulties in the sourcing front,the Tier 1 Indian headquartered offshore majors – TCS, Infosys, Wipro & Satyam all have exceeded guidance for the last quarter and have revised their guidance upward for the financial year. All the four Indian majors are working almost at near peak loading, as reported by them. The results of Cognizant, another significant player with substantial presence in India shows more strong trend confirming this. The Tier 1 Indian headquartered firms continue to make huge strides and despite some attendant difficulties in scaling up(which they are addressing quite well) they are seen to be executing very well, restrategising and as needed realigning their approach - seen from an operational, financial, competitive value add, efficiency perspectives. The middle tier enterprises are getting hurt and may eventually get squeezed out - the possibilities look higher on this front. The surging confidence is palpable. As I wrote recently, on all conventional financial metrics – Growth, margins, offshore firms have established new records. Average attrition levels at offshore firms are far less than that reported by the likes of Accenture – across quarters – an important trend to watch. Talk of some having mastered the global delivery model gets decimated by the fact the average billing rates for firms in the commercial firms stand approximately three- four times more than that of the offshore firms. The expanding opportunity for offshore services is indeed real for all to see. A model built to study this interplay and to evaluate various scenarios for different industries shows that approximately 35 percent of the work that could potentially be offshored, worth $110 billion and divided equally between IT services and business processes, actually will be offshored by 2010. Mckinsey believes that India's offshoring industry, which has captured two-thirds of the current global market for offshored IT services and almost half of the global market for offshored business processes is poised to grow faster, The spotty area is of course means to correlate productivity increase. Industry captains exude confidence about the Indian education system with some rejig can help in the supply situation and help maintain the leadership position. The sustainable advantage and favorable drivers are indeed proving to be real and gaining strength.
Its heady times for the last two years for the Indian headquartered service providers’ enterprise applications practices. Its now cleat that for the top 5-6 players, both Oracle apps & SAP practice head counts have on average more than doubled in the last two years alone. Some practices for some of these companies have trebled or quadrupled in the last two years. This is somewhat unexplainable – the enterprise apps space has become easier for big offshore players to muscle in – they did it when established methodologies for offshoring in development, integration, enhancement and production support were not put in place by product players themselves who boasted of having invested in millions and millions on their R&D. Its entirely to the credit of the offshore players that they were able to spot such opportunities, lay out good methodologies and frameworks for such developments & gaining customer confidence and goodwill to engage and grow this opportunity pie. There’s also a discernible shift from more technically focused engagements to a more balanced, function-led approach -Global rollouts, instance consolidations, integrations,upgrades are being executed in increasingly big numbers by offshore firms a lot more. From their perspective, such balanced portfolio of service offerings enables them to effectively compete against traditional global integrators and outsourcers. Some people do not recognize the strategy of offshore players while they scaled up. In reality - “Production support” and “staff augmentation” should not be considered pejorative terms. In fact while working on such opportunities in the early days of offshore enterprise application opportunities these players gained substantial visibility into the overall ERP opportunity within a client helping in mining and deepening opportunities and in the process help themselves to tap servicing new prospects across the value chain.
Bruce Richardson sums up the capabilities and the real stature that the offshore players have managed to win for themselves. He writes,
If you want to know what’s really happening with SAP or Oracle software, get a visa and book your flight to India. I would argue that many of the Indian firms have the best insights into what’s really happening at customer accounts. They may lag some of the insights into emerging technologies, but they catch on quickly. Looking back at my notes from the last two trips, I would estimate that the total number of SAP consultants and developers in India is likely to be around 50,000.As for Oracle applications skills, many firms told me that their “Oracle business is about 80% of the size of SAP.” That would yield somewhere around 35,000 to 40,000 consultants and developers. He adds, If you look at the “Contributor Recognition Program”, you’ll see that Indians continue to play the key role in the development of the ecosystem.
To be fair, he also notes that it has taken longer for the other “New Dimension” products to take off. Supplier relationship management is likely to be the next big category based on the amount of work currently underway. Few firms talked about any SAP projects in supply chain management or product lifecycle management, as of now.
My sense is Bruce will definitely get a different impression on this front when he visits the offshore firms next time around. Sure there's room for improvement in capabilities but the fact is the pace of change is indeed very real - they are climbing up the sphistication curve much faster than ever. The offshore players strength/global players with big offshore presence are set to grow faster and faster and they may take the dominant share in the enterprise apps place in the global market.
Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld "All views expressed are my personal views are not related in any way to my employer"
