Indian IT Firms: Is the Future Theirs?

January 10, 2007
By

James Maguire

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Another trend that’s increasing the influence of Indian IT providers: outsourced contracts now tend to be shorter, and more divided between multiple providers.

“In the past, companies used to award IT outsourcing contracts that were longer, 7-10 years. They would hire one firm to do it, and that firm would have subcontractors,” Ford-Taggart says. Now, big clients split up major projects and request bids on individual components. “Then they’ll say, “Look, we can have this portion done in India for 30% less.’”

This might cause more managerial headaches for the client company, but in fact it’s less risk: clients have fewer eggs in a basket with any one IT firm, so if a projects goes bad or creates cost overruns, the entire project won’t take such a big hit.

Cultural Stigma

A certain cultural stigma continues to cloud the perception of Indian IT companies. “As we often do in America, we equate low price with low quality,” Ford-Taggart says. Throughout the ‘90s (and still somewhat today) outsourcing to India was like buying a product from Japan in the 1950s – a cheap price for shoddy goods.

Some of this stigma comes from the experience of American consumers who get routed to Indian call centers. Frustration is a constant. These phone operators are at the bottom of the training rung and are equipped to solve only minimal problems.

“People take their personal experience with the call center and extrapolate that to anything else coming out of India,” he says. But in fact, the Indian call center workers and the Indian IT workers are two very different groups of people.

The Secret Sauce

Indian IT firms are more likely than U.S. firms to benefit from centralized process control, Ford-Taggart says.

From their origins in the ‘80s, Indian companies have developed standardized processes that they use for all clients, honing these processes over many, many projects. In contrast, U.S. companies often work on a partnership model. “In the partnership culture, in New York it could be very different from the way [the office] operates out in San Francisco, which could be very different from the way a partnership of the same firm operates out of Miami,” he says.

This model creates a challenge for U.S. IT providers. “You have all the U.S.-based firms claiming they have a global delivery system because they’ve set up facilities in India, and maybe in Eastern Europe, [but] it’s much harder to create a global delivery model when you don’t have the centralized processes in hand.”

“That’s why I think the Indian firms can be so disruptive, because as the U.S. firms turn around and try to create a global delivery model by opening up facilities in lower cost areas, they’re still looking at those lower cost areas as a cost center move. And they have to kind of recreate the processes to put them on a global platform to deliver them from around the world.”