Guest Contributor: Anil Budha, Managing Principal, GBP Financial Solutions
A growing number of U.S. companies are saying goodbye to Bangalore, India and hello to America’s boondocks. Some IT organizations solicit domestic partners to supplement their offshore outsourcing projects, while others look to domestic providers to clean up messes created by offshore vendors or to avoid the complexities and rising costs of offshoring altogether.
We are only seeing the tip of the ice berg when it comes to identifying issues with offshore outsourcing. Recently the CEO of a major IT firm complained that a resource in India cost more than a resource in St. Louis. When I asked why this was, the answer shocked me. He blames the turnover rate for a good Indian developer. Currently if you have an offshore Indian employee on staff for more than 9 months you are considered lucky. Young Indian IT professionals have learned how truly valuable they have become and are constantly looking for change that will bring higher salaries.
So what does this mean for customers? Higher cost!
Now if we turn our focus to outsourcing to the United States, you can find that in certain areas with low cost of living plus an ample amount of young talent, that the rates are comparable to that of India. For example, a typical head count in India performing a highly skilled implementation will cost about $250 USD a day; in rural America, you will pay about $300.00 a day. The trade off with for the extra $50.00 a day is a resource that will stay on your project for more than 6 months, current domestic outsourcing is seeing a turnover rate of 4.5 years.
The qualification for Indian resources and rural American resources are about the same. Both would have majored in Computer Science, both would have a Bachelor’s or Master’s degree, both would know C++, Java or .NET and both would speak English. The only difference would be the understanding of the English language.
So in the end what do you really pay for when you outsource to India?
With companies like Citigroup, JP Morgan and Barclays capital already exploring this model, is the rest of Wall Street far behind?