“We view technology as a key competitive advantage,” JP Morgan-Chase vice chairman Thomas B. Ketchum announced and cancelled the $5 billion outsourcing deal with IBM. It has only been a few months since publication of much talked about “Does IT Matter?” book by Nicholas Carr and a widely distributed article by same title in the renowned Harvard Business Review. Has the world changed in few months? When the second largest U.S. bank, with $1.12 trillion in assets, announced that not only does IT matter, it’s so important NOT to be outsourced, we all need to take notice. Experts have preached to us that organizations need to outsource all their non-core processes to be successful. In that light, IT cannot be a core process of a bank. Not only for a bank, Linda Dillman, CIO of Wal-Mart, the biggest retailer and employer in the U.S. also announced, “We’d be nuts to outsource.” They have all their technology development in-house and claim that they can implement things faster then anyone could with a third party. Even Michael Dell is on record to say that he does not believe in outsourcing the IT functions of Dell Inc.

Does it mean that the good times for the Indian IT industry, where outsourcing makes up 80% of revenue, are not going to last too long? We need to keep in mind that outsourcing and offshoring are not the same thing. A company may not like to outsource its core process but that does not stop it from starting a subsidiary in India and take advantage of the abundant talent pool and favorable cost structure. While outsourcing to India is pretty mature, captive offshoring by big organizations is still in the nascent stages. For our upcoming BPO directory, we did a survey of all BPO companies in India. Out of about 300 decent sized BPO organizations, less then 50 are fully owned subsidiaries of foreign corporations. The percentage is about the same in IT services too. Let’s compare this to our favorite nation China that is the favored manufacturing destination of the world. According to the Wall Street Journal, foreign owned corporations opened 60,000 factories in China between 1992 and 1995. That is 60,000 as opposed to 50 foreign owned BPO companies in India. This is the market size that India stands to lose, whether outsourcing remains popular or not. The IT industry can grow in multiples just by foreign owned corporations opening their own subsidiaries for offshoring their own IT and business processes—if the right infrastructure and facilities are provided in India.

In the test of fire, our cover man, Rohit Kapoor and our past cover feature, Vikram Talwar, have come out in flying colors. As founders of EXL, they went through acquisitions, buy-backs, and recently, much coveted profitability. Finally, the word is out loud and clear. Open Source is here. And will stay. It is the best thing that could happen to our tribe. It is an opportunity for the famed Indian IT cohorts to take another stab in developing products that the world can use. Are we ready?