Another great article by Penny MacRae. This one was of particular interest to me since the interviewee was Kiran Karnik, the President of India’s National Association of Software and Services Companies (NASSCOM).

I have highlighted below a few points from this interview:

• Commenting on a warning by a top industry analyst that China might overtake India, Mr. Karnik stated that “China was unlikely to surpass India in any significant manner over the next three to five years”. I found his response extremely smart, since most analysts believe it would take China another five to seven years to overtake India!

• Karnik admits that retaining leadership does require India to develop a vastly better country infrastructure. This point is well-known: India’s poor country infrastructure has already become its major bottleneck; the Indian government should urgently act on this.

• The pool of English-speaking people has undoubtedly been a forte of India over most other destinations, including China. But here again, Karnik admits that China is moving ahead very rapidly, thanks to its “systematic and planned approach to rapidly developing key sectors of its economy, its substantial domestic market and sizable educated workforce.” He even adds “they are learning English at breakneck speed.”

• Karnik states in the interview that the two Asian giants could learn from the experiences of the other, with infrastructure development strong in China and standardization of quality a key asset in India. It seems to me (and to a growing number of people!) that the CMM model is a marketing hype created by the major suppliers of the IT outsourcing industry, whose true added value to customers still remains to be clearly demonstrated. Fore instance, the use of CMM induces many constraints / rules that are in most cases hardly compatible with modern programming techniques and project management methods. Standardization of quality as a “key asset” of the Indian industry looks like a questionable affirmation.

• The article concludes on a quote from Mr. Karnik: “Even if China catches up significantly, it would not hurt India in a major way.” I fully relate to that statement. Competition is always good, and India desperately needed some. India can only benefit from a strong China, as China is currently benefiting from a strong India. Let’s hope that India’s infrastructure won’t be too big an impediment for the country to follow China’s pace, which would not be good for the industry either.

I cannot resist closing this post with a remark on Karnik’s comment: “When I look in the rear view mirror, I don’t see anyone there yet but I know they are out there and that they can move very fast… China must not be ignored”.

Beware! Objects in the mirror are closer than they appear! In competing with China, one should never forget this piece of advice from the Art of War by Sun Tzu: the stronger you are, the weaker you want to appear to your enemy.

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BBC News published on Aug. 17, 2007 another interesting article on IT offshoring by Mark Hillary [Read here]. Mark reviewed for the BBC the various destinations that are emerging as potential outsourcing destinations, principally from a European perspective.

His article reminds me of a recent post by Stephanie Overby on CIO Magazine Online and called “Would You Actually Outsource to These Countries?”

I can understand why so many countries are willing to take their chance; even a small fraction of India’s $ 47.8 B outsourcing market would be enough to delight most of them.

But I am struggling to understand why a Western company should select destinations like Pakistan for instance.

I am sure that countries like Pakistan produce very talented engineers, with excellent English skills. However Iran does too, and almost no western company would consider outsourcing there, for obvious reasons.

Let’s face it. How many American or European companies would send their employees to any of these destinations on a regular basis, or would send some confidential information there? I am sure some do, but I bet it is a very marginal number.

The reasons why more and more companies are questioning India as a destination today are well known (prices, attrition rate, country infrastructure, overall quality, etc.).

But any alternative to India has to offer at least:

• Some acceptable political stability
• Better infrastructure than India
• An appealing domestic market
• Lower prices than India
• Lower attrition rate (much lower!)
• Better or similar government support to the outsourcing industry
• And foremost and in addition of all of the above, be already a recognized destination for outsourcing. In other words, provide with a pool of talents large enough to limit the risks inherent to outsourcing to their bare minimum.

And I can think of only one destination today that fulfills all of these criteria, and that is China.

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