India Offshoring story – are we in the best portion?
Recently eWeek carried an article Offshoring 2.0: The Post-India World – “Experts agree that India will soon no longer be the biggest offshoring center“. I found the article to be baseless, shallow and far from truth. With the world economy (and Indian economy) growing for last 3 years at a stretch, many people want to stand away from the crowd and become instant doom sayers. It is sad eWeek wants to join the bandwagon of Prophets of Doom.
The article doesn’t name the experts who say it is doomed or the studies other than the one by its sister organization IDC on a study of cities worldwide. Let me substantiate my views with our experience in Vishwak.
The article talks about increase in salaries as a primary (and only) reason for this, so let me take that up first:
- Faster career growth – No doubt the Salary in India is increasing day by day. We have seen our salary outflow doubling in the last 24-36 months (this is apart from our Team Strength Increase). Just this raw data can be very misleading here and you can easily portray doom from this. Dig deeper and you will find this. We have found our people to be more ambitious than in the past, taken up more responsibility and grown up in their career. So we have been able to get better billing rates for the same person, obviously you don’t want Person “A” to keep earning the same money for the company year on year. You want it to increase. This is more than productivity increase I am talking here, I am talking about a Software Engineer, becoming a Module Lead, Project Lead, Project Manager and so on. Here Indian IT companies have mastered the balance between career growth to technology training and hands on experience. It has taken Indian IT companies more than 2 decades to reach here. I doubt whether China or Vietnam or East Europe can come to this level instantly. No doubt one day they will come here, but it will take them atleast 5 to 10 years and by then Indian IT companies would have leap-frogged to the next level.
- About a decade back when offshoring started from western countries to India it was primarily cost arbitrage of 1:10. Today it is not 1:10, but still significant and at many cases still at 1:3 or 1:4 levels. Senior level people salaries have certainly narrowed with US levels, but still there is a 1:3 or at least 1:2 advantage to India. Entry level salaries in India have grown but even now they are not even closer to US figures. Taking the minimum wage in many US states at $10 per hour, still there exists a cost advantage at a minimum of 1:2 levels to India’s advantage and obviously software engineers in US get many times more than $10 per hour. Only graduates from IIT & IIM you will find higher salaries and clearly they are exceptions as they are premium across the world.
Next comes the productivity, process advantages:
- Don’t forget the complexity and scale of projects Indian companies are handling. Most of the CMM Level 5 and CMMI companies are based in India and compare that with East Europe and China, it will speak for itself. Just like China having the worlds largest manufacturing units, India has some of the largest Software Engineering campuses. Imagine where else in the world you can get thousands of software engineers in a day, get them organized into teams and start working – all the infrastructure, process, learnings for doing this is available only in India. In the last decade probably Silicon Valley had this, but now undoubtedly it is India. And again this has taken Indian companies a minimum of 2 decades to achieve this far.
- Software writing is not all about English language, though it is a huge requirement. It is about Creativity and Lateral thinking. I am not saying that all Engineers who graduate in India or who join IT work force in India have it. But India has the highest percentage of these people, again this has been the result of 2 decades of work to come here.
- I am sure Indian IT companies are already investing big monies more than their counterparts across the world on developing Automation and Code Generators, which will give them the advantage of solving problems using lesser human labour. I am only saying lesser and not about eliminating manual work altogether which may not happen in distant future.
- Last comes the political stability that Democracy brings in (India is the world’s largest Democracy that is proven to work for last 60 years) and the Law of Land (Intellectual Property protection) that Indian Judiciary brings in (though it is very slow compared to western countries).
- Business week has covered the same IDC story here
- Check out the full presentation (and video) I made last year on why I believe Indian IT Exports will only grow?
Good points. Moreover India and Indian companies are lot more predictable and protects Client’s IP.
In China, there is no such guarantee.
It looks like a paid study for Chinese government.