Indian Exec on Offshoring: Mistakes, Politics and Money

The vice president of a major IT services company in India talks one-on-one with Datamation about offshoring -- from a different perspective. How can U.S. companies ensure their outsourced projects succeed? How much competition is China? And will American political pressure affect their business?
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Offshoring high-tech jobs has created a political and industry-wide stir here in the U.S., but what is happening in India where many of these American jobs are headed?

While the labor market there isn't suffering the IT job losses that it is here, Indian high-tech workers have to deal with American customers who aren't yet savvy about outsourcing's demands, says Sunil Chitale, vice president of Patni Computer Systems Ltd., the sixth-largest IT services company in India.

And there's a lot to learn -- for both sides -- since more and more work is going nearly half-way around the world to India's borders. Just last month, industry analyst firm Gartner, Inc. released a study showing that one quarter of traditional U.S. IT jobs will be done offshore, in countries like India and China. That's compared to an estimated 5 percent or fewer jobs that are offshored now.

At Patni alone, the company has shown a consistent growth of 41 percent every year since 1999. Ten years ago, Patni had about 20 customers -- all of them from the United States. Today, the company, which has a revenue of $251 million and has 7,000 employees, has about 150 active customers, and about 85 percent of them are from the U.S. That other 15 percent comes from companies in Australia, Europe and Japan.

In a one-on-one interview with Datamation, Chitale talks about the mistakes companies make when they're offshoring IT work, concerns that American companies will move their offshored work to China, and how the U.S. political climate affects their bottom line.

Q:How do you feel about the public outcry here in the United States about offshoring American jobs?
Certainly there is value people see in outsourcing and getting bottom line results, so most customers we talk to have assured us they want to continue working with us. They want to continue to build the relationship. As far as the jobs being outsourced, I feel that India is doing work that would be similar to manufacturing work but in a software context. Taking a business idea and transferring it to an IT idea continues to remain in the home business space. But someone needs to write the code and someone needs to test it. That work is what is being outsourced to companies like ours.

Q: So far, you've been getting more of the low-end work, but are you seeing an increase in higher-level work being sent your way, as well?
As for the idea or creation part of the business, companies with a mature relationship with us -- say seven or eight years with us -- are looking to us for that. We are participating in both spaces with them. It's less than 10 percent, though. Our mature customers want us to participate at that level because they believe that is where the value is... But we still feel that most customers want to keep the 'secret sauce' or the critical IT in-house and we understand why. It's a very enticing area to enter, but really that is not where our mission lies. That requires significant presence in the U.S. and much better understanding of the business processes and practices. We do want to understand our customers' businesses. But for us to play into that domain, we are a few years away.

Q: Following the public backlash against offshoring in the U.S., there has been some political backlash, as well. Has that affected your business?
Certainly. As you may have guessed, we need our team to visit the U.S. and understand that domain. So there is the need for Visas and work permits. If there is any government support or the lack of there, it affects that part of our business. In the dot-com era, there was a huge demand for programmers and most U.S. companies wanted to increase the number of Visas for people to travel to the U.S. and do that work. That Visa limit has been brought way down in the past year. Because of that if we need to do onsite work, we cannot rely on sending India people to the U.S. We have to hire U.S. people to do that.

Continue on for Chitale's take on outsourcing's high failure rate, advice for U.S. companies and how much competition China is becoming.

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