Monday, May 31, 2004

India: Coming to a Country Near You

China Sourcing Alert    
Monday, May 31, 2004
Dateline: Qingdao, Shandong, China
 
India:  Coming to a Country Near You!
 
With all the rage about offshoring, let's take a look at nearshoring (see http://tinyurl.com/2d8mm ).
 
As part of their global delivery model (GDM), India's tier one systems integrators (SIs) are extending their offshoring options to include nearshoring in Canada and Mexico (really, Mexico?).  Nearshoring "provides a viable alternative for companies hesitant to move their entire work offshore or for those who are unwilling to bear the high cost of onsite work."  According to an EVP with Cognizant, this seems to hold true especially for large or mission-critical projects requiring 24x7 responsiveness.  (Hmmm ... maybe better suited to BPO than ITO.)  According to an Infosys exec, "a nearshore strategy provides clients the confidence that the software services company's site is just a few hours on a plane trip as compared to nearly a day for visiting an offshore site."  (Hah, I wish it was only "a day."  Perhaps in the weird since of time zone differences.)  Every project Infosys undertakes has a business continuity plan (BCP), which includes a contingency plan that aids in seamless transfer to one or more of their locations.  (Comment:  I wonder how well this REALLY works?  But it sounds good.) 
 
The marketing head of Blue Star Infotech (another Indian SI) noted that companies who do not have "formal systems" for document transfer and management face difficulties in moving projects offshore since project details may not be fully conveyed to offshore development teams.  Nearshore sites bridge this gap.  (My comment:  I'd be leery about taking on projects which aren't adequately speced.  It sounds like a strategy for moving a pending disaster from India to Mexico.)  But a point is well made:  Projects requiring frequent human interaction might be best served with a nearshoring (or onshoring) strategy.  However, it should be noted that the fully-burdened costs for nearshoring may be three times as much as offshoring (using India as the base, so figure six-to-ten times as much as offshoring in China).  This article cites the following billables (figuring India for the offshore component):  Onshore, $100 (per hour, I'll assume); nearshore, $70; offshore, $30 -- and in China, $10-15.  These are numbers to take to heart.  Bottom line:  Frankly, this is more for G2 than something that is actionable by China's SIs.  However, Canada may represent a viable nearshoring destination, especially for clients easily served by Canadian firms (e.g., U.S. clients, either end users or SIs, in the northern U.S. or easily served by a nonstop flight from a major Canadian airport, such as LAX or SFO).  For now, China's SIs should be aware of nearshoring billables and be prepared for either a nearshore or onshore presence if required.
 
Cheers,
 
David Scott Lewis
President & Principal Analyst
IT E-Strategies, Inc.
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posted by David Scott Lewis at 9:46 AM