Indian CIOs must consider Offshore Outsourcing

By SiliconIndia   |   Tuesday, 12 June 2007, 07:00 Hrs
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Bangalore:Indian organisations facing the daunting challenge of an IT skills shortage and "second-class" treatment from local service providers must consider offshore outsourcing to obtain high-end IT services, said Gartner, an information technology research and advisory company.

"India is witnessing a severe shortage of skilled IT resources at all levels of the IT personnel chain," said Linda Cohen, vice president and distinguished analyst for Gartner's IT sourcing group. Demand for skilled IT personnel by initiatives like the Indian government's recent national e-governance program (NEGP) and resource hungry Indian offshore service providers are outstripping local supply. Rapid economic growth in India is exacerbating the problem. Local chief information officers (CIOs) are finding it difficult to manage the shortage of skilled local IT resources as internal business units become even more demanding in the area of IT requirements and schedules.

"Local service providers lack adequate focus on the Indian domestic market, widening the demand-supply gap by not allocating enough quality resources for Indian customers," said Cohen. "Service providers typically allocate the best resources to their global flagship customers that pay in dollars and yield better margins. This is particularly true with Indian service providers".

India is undergoing massive economic growth. Gross domestic product (GDP) grew 9.2 percent in fiscal year 2006 (April 2006 through March 2007), which was second only to China among the major economies of the world. A recent Gartner survey conducted among more than 1,400 CIOs worldwide showed that IT budgets in India had the highest growth of 16.19 percent, compared with an average of 3.16 percent in the rest of the world.

These challenges and market conditions require Indian CIOs to look beyond the limits of their own geographical boundaries, much like their Western counterparts. Gartner predicts Indian companies will increasingly go offshore in their sourcing strategies, which will result in outsourcing deals offered by some Indian companies that include high end service (for example, design and architecture, and business consulting) delivered from other parts of the world.

"This global sourcing model will become business-as-usual for Indian organizations," said Arup Roy, senior research analyst for Gartner's IT services market group. "Indian companies will increasingly source IT skills from nearby Singapore and Hong Kong. The market has already seen the first signs of this trend. For example, the Indian embassy outsourced its visa collection and delivery services to a U.S. company. Many Indian IT firms with operations spread across the U.S. and Europe are now outsourcing a part of their administrative work locally".

Gartner recommends Indian CIOs to develop innovative programs for retaining the tale, considering the alternative sources of talent, such as recruiting from small and mid-tier cities. It also recommended the companies to invest heavily in training, even while knowing they will lose some of their training investment to competitors and evaluate offshore outsourcing or staff augmentation from other parts of the world in their sourcing strategy. This will create a sense of competition among the local vendors, potentially increasing their focus on local opportunities.

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