There is no "failed" South Asia Outsourcing.
January 26, 2012
South Asia since the late 80ies has been targeted by western companies as a hub for outsourcing. Since then, the vast majority of western ICT companies has been outsourcing the electronics they’ve considered as either “cash cows” according to the BCG portfolio matrix or non-core-competence elements. Times changed rapidly and high end software products nowadays often evolve from South Asia. Nevertheless the main motivation for going east still is getting rid of legacy work which has a massive structural impact on the industry.
Trend to low-tech.
Nevertheless, due to the low-end requirements of the outsourced work the level of know-how has remained years behind what has been considered “current” amongst western IT academics. Furthermore there hasn’t really been a general need for lean working models as wage levels at the beginning were that low that labor-force wastage could never outweigh labor shortage.
Success stories made more and more western companies attempting to outsource to South Asia without caring much about what kind of problem they’ve outsourced and to whom they gave it. Indian equals Indian was and still is the undifferentiated opinion shared among many western IT managers. As a result, the well established low price legacy companies have been absorbing highly complex projects and have been failing in one project after the other. Thus European and US companies have been winding down their activities in off-shoring and pulling back their resources. Culture, communication, attrition and distance are on the top list of the flawed causes raised by the managers of those failed off-shoring missions.
Mismatch of Complexity and Skill Levels.
The true reason for why those companies are failing, however, has not much to do with these symptoms. Lets just derive two simplified statements for common issues here.
(1) Mental overload: It is obvious that any engineer who has worked in his whole career with outdated systems will unwittingly fail in new technologies or mission critical web applications that demand more than just writing dumb code-blocks. (2) Mental underload: Similarly it is apparent that a top-notch developer will wait for the next best opportunity to switch employer if he is not fed with real challenges.
There are basically two things companies do wrong by employing software engineers. (1) Do core applications with Programmers and (2) treat Rockstars like servants.
For many years so-called rockstars (highly skilled software engineers with unique combinations of skills such as high analytical and mathematical skills paired with a large domain knowledge and a killer instinct to get things on the ground) did not exist in South Asia due to no true demand. However, since already several years smart companies identified the huge potential of getting the crazy professors from within the massive market of engineers.
Nowadays almost all the big Silicon Valley corporations are running development centers in India which do not per se produce cost savings but digg for, develop and run core innovations. Many Indian companies are already hiring developers at US salaries. There is a group of completely globalized South-Asian “Silicon Valley Guys” who coin the world of software development from the headquarters of the largest US and Indian IT companies at Bangalore, Mumbai, Dheli, Chennai, Calcutta, Pune and Dhaka. So what we end up is having different tiers of Software people. In the first tier we meet guys with huge salaries who are working in A-Teams for stock market trading platforms and in the last tier we find guys fixing outdated 3rd party programs running on Windows 98.
Development of great software is not linearly scalable. Knowing that ten 200 dollar guys will tremendously fail by giving them a 2000 dollar guy’s task already solves most of the managerial problems. Similar to sports teams the composition of a team unlocks an unlimited upside that decides if a team plays in the Premier or in the Amateur League.
Obviously, to become Champion of the Premier League you need a good trainer, good roles and good team work. How developers of great software are organized we hear from SELISE CTO Shah Ali Newaj Topu in our TELETOPU video blog series.