Challenges Facing an Outsourcing Provider in India

In early 2000, when the dot-com boom was still going strong, I went to India to set up a software development center. At the time, I had started 3 dot-com companies and had verbal commitments totaling several tens of millions of dollars.

India was buzzing. The economy was good, the computer industry was booming, and everyone with a high school education was at least thinking about getting into the field. New Delhi, the country's capital, was not, by any stretch, a high technology center. But even there, computer training institutes were popping up all over. And everywhere I looked, people were starting their own software development companies.

A bit of perspective is needed so that the rest of this article makes sense.

India has a population of 1.2 billion. That means that if you combined the population of the US and Europe, then added the US population into the mix again, you would still be short 100 million (or roughly the population of Mexico). India's middle class is larger than the entire population of the US, and roughly 3 times the total adult work force there. So, the potential pool for talent is staggering. Producing more than 2.5 million engineering graduates every year, there is still a shortage of engineers in the country.

Companies all across the country were tapping into this potential pool. Money was being invested, resources were being re-deployed, and salaries were jumping by double digit percentages every year. A software developer earning Rs. 25,000 per month could jump to another company fairly easily --- and realistically expect a 25% pay increase.

People were hungry to do well in the outsourcing industry. Companies were hungry to cash in on different outsourced services. Communications and physical infrastructure was being built by both public and private organizations. People were learning languages, taking intensive accent training classes, and learning new skills that would be needed by foreign clients. It was really hard to sit still.

And this was just New Delhi. I had just arrived from New York City. By comparison, NYC was a sleepy walk in the park. Mumbai was much, much more dynamic than Delhi. And Bangalore, Hyderabad, and Chennai were reportedly more exciting than Mumbai in terms of outsourcing.


So, in this environment, with the stars all seemingly aligned to benefit outsourcing organizations, what kinds of issues would an outsourcing provider face?

Believe it or not, Recruiting is at the top of the list. Finding the right talent at the right time is difficult for any company in almost any environment. Employee Retention is also right up there. The top issues faced by outsourcing providers are:

1.Recruitment
2.Training
3.Performance Management
4.Consistent Service Delivery
5.Technology Management

Do these seem familiar?

People, especially outsourcing providers, like to mystify the outsourcing process. As long as outsourcing is a “difficult” thing, they can charge more money and take more liberties.

The fact, however, is that no matter where you go, you will run into these problems. How do you find and retain good talent? How do you measure and reward performance? How do you ensure that your team's output is consistent and good quality? How do you maximize the value of your technology investments?

When you outsource, however, you have two organizations with the same issues. The difference is that both have different resource constraints because they are physically in different locations. While you may have trouble finding a computer programmer, the outsourcing provider may be in a place that has an abundance of them. Similarly, you may have your pick of financial analysts, but the outsourcing provider may have to pull teeth to find even one.

Your success will be in defining what you lack and then look for an outsourcing provider that can fill this need.

Then, your focus needs to be on making the relationship work. Keep in mind that your outsourcing provider faces their own challenges. Instead of hiring a magical company that can solve all your problems, what you are looking for is a provider that can work with you, develop synergies, and partner with you to resolve your problems.

Outsourcing, more than anything else, is a partnership with an external organization that has resources that you lack. Working with this in mind will do a long way toward guaranteeing your success.