Venky Adivi seems relaxed – almost too relaxed, given the pressures facing him. After all, as co-founder of VideosDotCom Inc., a recent Internet start-up specializing in a very young market – the delivery of movies and videos to household television sets via an Internet portal – Adivi has a lot at stake.
But that’s not all; VideosDotCom is located in McKinney, Tex., smack dab in the heart of one of that state’s booming high-tech districts. In a continent reeling from an IT skills shortage, McKinney and the surrounding region is an urban island particularly barren of IS talent. For companies like VideosDotCom, which desperately needs people well-versed in Internet and application development-related skills like Java, C++ and Oracle, finding developers is a matter of life or death.
Still, Adivi figures he has the problem solved. In fact, he says he found the solution long before the existence of VideosDotCom, while he worked at another telecom company based in the same region, and facing the same problems.
“[Then] we spent a lot of time looking for engineers with the background I needed,” Adivi recalled. “They needed to have several skills; they had to be proficient in C++, real-time embedded programming, have real-time OS knowledge, and typically have five to eight years of experience. That’s what I was looking for, but such skills are hard to come by [here] in the telecom corridor – or maybe because it is the telecom corridor.” To make his search that much more complicated, Adivi also needed highly-specialized developers able to build software on boards that would later be plugged into sonic multiplexers.
Those few who did fit the bill commanded huge salaries. And none of them stuck around long enough to make much difference anyway. “We had schedule pressures, so I was forced to look elsewhere,” he said.
In this case, “elsewhere” happened to be 12,000 miles away, in the city of Bangalore, India, home of Wipro Technologies, the software services arm of one of India’s largest corporations, Wipro Corp.
Adivi eventually agreed to contract all of his software and most of his hardware projects to Wipro, and thus entered the world of offshore outsourcing. Wipro is among a growing number of foreign companies, many of them Indian, courting clients across North America, where the intense competition for skills and the rapid pace of technology adoption has left some companies with no choice but to outsource.
“We build software, that’s our main focus,” said Makarand Teje, marketing manager of Wipro Technologies’ U.S. operations in Santa Clara, Calif. “Our focus is on two sets of customers: the CIOs, or IS people, who need help building IT applications and legacy client/server custom development, and second are the CTOs or directors…for product realization.”
Adivi was so impressed with Wipro’s work at his former job that he brought them on board after he founded VideosDotCom. Today, Wipro consultants have control over “pretty much all” the software and most of the hardware elements required by the company. That covers three primary elements: the construction of a secure software suite to handle movie rentals, the construction of Java-based Web portal software tied to an Oracle database, and embedded software that runs on Linux-based set top boxes that each VideosDotCom customer must have in order to download movies.
Adivi said Wipro offered him several clear advantages over local outsourcing firms. First and foremost was price.
“I had two contracts that were local at the time. They were very expensive. Their hourly rates were, if you compared them to someone in-house, at least twice the hourly rate of the engineers, and if you compare them to someone based in India, they were three or four times more expensive. From a cost perspective it just didn’t’ make sense to hire. If anything, consultants are more expensive to hire locally than hiring full-time people,” he said. He also likes the fact that he can adjust the number of workers he needs from Wipro as his demand changes.
Jonathan Chang, one-time vice-president of group systems at Aetna Canada and now a consultant at Toronto-based insurance provider The Maritime Life Assurance Company (which has absorbed Aetna), also went the offshore route when he was in his former role. At that time, he secured Cognizant Technology Solutions (CTS), an outsourcer based in Chennai, India, to handle his Y2K remediation.
“We were able to use additional resources on demand, and the rates were much better than what we would have paid [local firms],” Chang said. CTS offered him anywhere from a 30 to 50 per cent savings on staff costs, Chang said. “I paid a full time person [in India]. That individual was dedicated, worked only on our assignment. That has kept the costs manageable.”
Typically, an offshore project works like this: the outsourcer assigns clients at least one on-site liaison contact who’s charged with overseeing the project, ensuring that the client and the staff in India are aware of each other’s requirements. In short, he or she builds the architecture.
But the bulk of the work is sent back to India, where all the hard coding is done. Final testing and integration is performed back at the customer site. In order to keep the client informed, outsourcers follow project management practices that differ little from any other IT project. CTS clients, for instance, obtain their updates via an intranet. In Adivi’s case, Wipro used Microsoft Project, and sent regular e-mail to each party. Many of the larger outsourcers maintain giant bandwidth pipes back to their head offices. And because India is literally halfway across the world, outsourcers there can take full advantage of client site resources while the North American staff are at home sleeping.
Raj Balasundaram, regional manager of Cognizant Technology Solutions Canada in Toronto, said any wariness on the part of North American companies to ship their work to India has diminished over the past several years, as the Internet forces organizations to maintain a global perspective. “It used to be true, five to seven years ago, [there was] a reluctance. But today that myth has been dispelled.”
In fact, the U.S. market is big business for CTS: Balasundaram said that over 80 per cent of CTS’ global revenue is generated in North America. And In terms of staff distribution, about 75 per cent of total staff are located in India, with the remainder in North America and Europe. And by their accounts, business couldn’t be better. Companies are racing to get Web-ready, and that means there’s a huge demand for workers who can quickly build Web retail-related software, as well as link legacy and client/sever systems with Web storefronts.
some caution required
But that doesn’t mean there aren’t challenges for companies that go the offshore route. Chang said at first his full-time staff viewed the outsourcers with some suspicion. That didn’t surprise him.
“Initially, it was for us a new way of deploying resources; in our organization there were some doubts by some of the staff,” he admitted. “But that’s just part of management, making sure your senior people understand the reasons, understand what they’re doing.” In Chang’s case he explained to them that CTS was taking on much of the grunt work that was of little interest to up-and-coming IS staff.
And Adivi – who originally hails from India – said cultural issues and language misunderstandings could arise, though he says Indians are well suited to the North American market. Virtually all schooling in India is done in English, he said, and many of India’s top IT students complete degrees or graduate work in Western Europe or North America.
Still, he’s happy with the way things have turned out for VideosDotCom. “We spent a lot of time up front writing up our requirements…but once we had that in place, it worked out really well. We don’t intend to hire anyone here.”
Though offshore outsourcing can be found everywhere from Ireland to Singapore, the market has really taken off in India. With its large English-speaking population, advanced education system, an advantageous time-zone vis-