Outsourcing Alternatives to a Politically and Economically Unstable India

Outsourcing: A love / hate relationship for U.S. I.T.Hong Kong ranked #1 on the list for 2008, with the
professionals.  Ask the average employee in any I.T.U.S.A. at #5.
organization, and hearing about fear of jobs going to 
India and China is almost unavoidable.  Although manyThe appraisal of economic freedom is based on 50
have started the move toward business serviceeconomic indicators within the following categories:
management (BSM) to address the chaotic laborcapital flow and foreign investment; financial systems;
trends, I.T. labor itself still consumes over one-third ofmonetary, budget, and trade policies; salaries and
I.T. budgets.  This figure is perfectly in line with aprices; government interference in the economy;
recently published Gartner report stating that 37% ofproperty rights and regulations; and black markets.
the typical I.T. budget goes directly to personnel costs. 
 What are you as the CIO going to do to manage thisMany outsourcing experts are finding a presence in
frenzied situation?  Is outsourcing, orArmenia quite successful for many of their clients and
“offshoring,” the answer?  partners.  The cooperation offered by the Armenian
 government to ease immigration and visa restrictions
How can you outsource your operations to a foreignfor executives and other technical employees traveling
country and still maintain compliance with best practicebetween Armenia and the United States has been a
frameworks such as ITIL or MOF?  How do youhuge advantage to many, and this is compounded by
maintain Sarbanes-Oxley, PCI, or HIPAA compliancegreat satisfaction with the talent pool offered by this
when utilizing 100% offshore resources with far lessEuropean country.
control?   
 Having a stable presence in Armenia is but one
Almost everyone in the I.T. sector has at least oneexample of alternatives to the current Indian instability.
story about various operational tasks being There are numerous other alternatives as well, and
“offshored” to India, and no call-center, networkdiversification is going to be the keystone to success
operations center (NOC), or infrastructure team hasover the next few years.  
been immune to rumors of jobs going offshore.  No 
longer are the cities of Mumbai and Delhi simpleAs pointed out by one CEO, “...the logical approach
manufacturing hubs and suppliers of raw materials.for today’s global economy is to diversify.  Many
 The country is home to some of the largestof my contacts who previously invested heavily in
corporate call centers and development centers in theIndian resources are already asking for new
world.  In late 2005, the Indian outsourcing workforcealternatives, and we believe the best approach is to
numbered 350,000 individuals.  That total is nowsimply avoid the old cliché of “putting all the eggs
estimated at well over 800,000, with many newin one basket.”
positions going unfilled due to the lack of qualified 
candidates.Singapore has emerged as another destination of
 choice, with an extremely stable economy and
Eleven years ago this month, USA Today published angovernment as well as strictly enforced laws on
article titled “Can political instability be eliminated inintellectual property rights.  Perfect English is widely
India?”  Looking solely at the news of the past sixspoken, and the country is considered one of the
months, the answer to that question is an obvious NO.top-five technical innovators in the world.
  
The trend toward a twenty-first century India has notOriginally founded as a British trading colony in 1818,
fostered the sort of sweeping political change oneSingapore joined the Malaysian federation for a short
might expect from the world’s most populoustwo years ending in 1965. Now completely independent,
democracy.  Moreover, the unwillingness of the IndianSingapore is undeniably one of the most prosperous,
government to more robustly combat intellectualdiverse, and cosmopolitan destinations in the world and
property theft is the stuff that causes your legal teamhas a per capita GDP greater than that of many
to lose MANY nights of sleep.“leaders” in Western Europe.  
  
Recession has made its way to India as well.  The 4In 2006, the World Bank rated Singapore as “the
December 2008 issue of The New York Times ran anmost business-friendly economy in the world.”
article discussing the wave of outsourcing firms scaling Immediately behind London, New York, and Tokyo,
back their daily operations in India due to the unhealthySingapore is the fourth largest foreign exchange
global financial climate.  As of this week, the Indiantrading hub in the world.  
rupee is at a record low. 
 The country is home to three major state universities:
India makes a strong case as the “global back The National University of Singapore, Nanyang
office,” yet it has failed to produce an environmentTechnological University and Singapore Management
supporting front-office operations such as productUniversity, resulting in a literacy rate over 93%.  The
innovation and corporate strategies.  The prevailingisland nation accomplishes it all with a geographic size
thought of the past 5 years has been that Indianonly three times that of Washington, DC.
outsourcing firms are masterful in the art of efficiency 
and product development measures.  What aboutThe Philippines and U.S.A. share not only a very similar
now?legal system but the English language as well.
 Companies in the legal sector consider this fact
On 7 January 2009, Indian stocks took a nosedive inespecially attractive. Once a U.S. colony, the Philippines
the wake of announcements by Satyam Computerhas a workforce that is already familiar with many
Services that corporate profit summaries had beenlegal factors not readily obvious to those in countries
inflated for several years.  The announcement bywith less of a seasoned relationship with the United
Satyam’s chairman and co-founder that he hadStates. 
directly falsified accounting documents on an ongoing 
basis has thrown the entire Indian outsourcing industryA few facts about the Philippines:
into dramatic turmoil.  As a provider of back-office-  Population of 91,000,000 as of 2008
services for many of the largest banks and healthcare-  550,000 college graduates per year on Average
institutions in the world, the result of the SATYAM-  Educated labor pool of Over 30,000,000
crisis is nothing short of devastating.-  Entry-level I.T. salaries average $2500—$8000
 USD P.A.
By Friday, January 9, 2009 news sources were-  Top-quality CBD real-estate costs average $17
reporting that interim CEO Ram Mynampati does notPSF
have faith that the firm can continue past the next-  95% literacy rate
few weeks.  Mynampati stated they were working to-  English as a primary language
find the liquidity to pay current employees, suppliers, 
and creditors. One of the top-three law firms in the world relocated
 their entire network operations center from Chicago to
In less than a week, the crisis has crossed the PacificFort Bonifacio, Manila, in 2003. That operation has since
Ocean and hit U.S. shores.  Auditing giantgrown much larger, also encompassing legal operations
PricewaterhouseCoopers is expected to pay a heftyand software development.
price for the emerging fraud.  The auditor has been 
responsible for Satyam financial oversight for overFrom 1997 to 2008, companies such as Citibank, Fluor,
eight years, and Satyam investors are expected to goIBM, Convergys, Telus, HSBC, Dell, JP Morgan,
to court in attempts to recoup losses. According toSiemens, and Deutsche Bank have all opened major
legal sources from within India, most are likely to attackoffshore facilities in the Metro Manila area of the
PricewaterhouseCoopers directly rather than Satyam.Philippines.
  
The tragic events of November 2008 in MumbaiMore than just a country filled with call centers, the
clearly show that the concerns go much deeper. OverPhilippines is home to dozens of offshore operations
200 people were killed in the attacks, and the entireinvolving network operations, wireless services, energy,
central business district in Mumbai ground to a halt forshipping and logistics, legal and medical transcription,
several days, resulting in billions of dollars in lost labor.  finance and accounting, and software development.
Within one week of the attacks, five high-profile Indian 
cabinet members were forced to resign.  On 1The country is now recognized by some as the top
December, TIME magazine posed the question “Willdestination of choice in Southeast Asia. In 2006, the
India’s Government Survive the Mumbaicountry generated in excess of $3.0 billion in
Massacre?”outsourced operations, and that figure is expected to
 more than double by the end of 2009. The Philippine
Many companies are selecting alternate destinations,government has targeted a global market share of 8
and some trends show an actual migration OUT ofto 10% in the O&O market by 2011.
India to other knowledge-rich environments such as 
Singapore, The Philippines, Armenia, Pakistan, andRegardless of where you go, there is no “single
various Latin American countries.  Companiesbest answer” to every situation.  When looking for
requiring less interaction with the public (for example, athat “trusted advisor” to help you make your
software development center) may select destinationsnext outsourcing, offshoring, development, or
where English is not the primary language, or in someinfrastructure decision, you need a firm with the
cases, is not a language spoken at all.  Companiesknowledge, process, devotion, and proven direction to
building public-facing operations such as helpdesks ormake it a success.
call centers are being forced to reconsider earlier 
decisions, and many are moving to moreOnly by in-depth knowledge of your core business can
English-centric countries like Taiwan and the Philippines.any firm help in an effective O&O engagement.
 You need a firm that endeavors to understand and
Key players are making a strong case for themselvesoptimize how the process will enhance not only the I.T.
as these trends develop.  In the Western Hemisphere,department, but all other business units as well.
Costa Rica and Peru have marvelous records of 
rock-solid software development and high customer O&O will continue to gain momentum over the
satisfaction ratings.  In Europe, Armenia is emergingnext few years, regardless of what happens in the
as a major powerhouse and model of efficiency.  InIndian subcontinent.   The recent events in India and
Asia, many are discovering that the almost-perfectthe surrounding territories are but a small
English spoken in Taiwan and the Philippines combinedstumbling-block to an ever-evolving global business
with some labor costs equal to or less than those inmodel.  
India make each a destination of choice.  In fact, the 
November 30 edition of The New York TimesBusinesses today realize that three very important
Magazine featured a four-page article touting thefactors have emerged in the outsourcing and
viability of the Philippines as a premier outsourcingoffshoring industry: 
destination.- O&O cannot and should not be based on the
 “one size fits all” methodology anymore.  
While China, Russia, and Korea have fantastic talentDiversification is the key.
pools, the labor cost and in some cases difficulty- Every situation is different.
dealing with local and national governments make them- Unless you are prepared to invest in learning foreign
less attractive to some U.S. based companies.tax and H/R systems, unfamiliar holidays, unique
 infrastructure, governmental regulations, and possibly a
While being one of the lesser-mentioned yet morefew foreign languages, you NEED a trusted advisor on
historically colorful European countries, Armenia is ayour side.
virtual strongbox of extraordinary talent.  As 
mentioned by the CIA World Factbook, 18% ofCompanies and their investors who spent the billions of
Armenia’s current population is under the age of 15,dollars (and thousands of man-hours) building
meaning the talent pool is poised for huge growth.outsourced operations based solely in India have found
 that trying to separate the technology from the actual
Armenia declared independence from the formerbusiness process is not only foolish—it is futile.  
Soviet Union on 21 September, 1991 and is now aOutsourcing and offshoring can provide limitless
bastion of political stability (a particularly attractivepossibilities, but they must be done with precision , care,
factor for the O&O industry).  A healthy GDPand proper distribution.  Rather than outright
real-growth rate of 13.7% makes Armenia one of thewithdrawal from offshoring operations, now is the time
top producers in the EU.for diversification.
  
Additionally, Armenia is rapidly becoming a major“There is timing in the whole life of the warrior, in his
challenger in the index of relative economic freedom.thriving and declining, in his harmony and discord.
As reported by the Heritage Foundation, the changeSimilarly, there is timing in the Way of the merchant, in
has been nothing short of amazing. In 2000, Armeniathe rise and fall of capital. All things entail rising and
ranked 84th in relative economic freedom. As of latefalling timing. You must be able to discern this..” 
2008, Armenia ranked 28th – ahead of EuropeanMiyamoto Musashi , 1645
powerhouses Spain (31st) and France (48th) and just 
behind Sweden at 27th.DOWNLOAD the full PDF version of this article.