Game-Changing Rules for Outsourcing

By guest author Kate Vitasek

In Search of a Better to Outsource
Peter Drucker challenged companies to “Do what you do best and outsource the rest!” Unfortunately, too many companies jumped into outsourcing using the same approaches and methods that they used for procuring commodities and materials to run their operations.   The result is that far too many outsourcing deals are less than optimal – leaving most in search of a better way to outsource. The University of Tennessee studied some of the world’s most successful outsourcing deals as part of a research project funded by the US Air Force.  Our work uncovered the fact that successful outsourcing deals had one thing in common:  they played by an unwritten set of rules that is fundamentally different from conventional approaches for procurement.  >>>

Outsourcing: LN Balaji, President of ITC Infotech (Part 6)

Sramana Motra: If you want to build an operation in Mississippi, you can do that. You can build something – you’re already doing something – in Arkansas. You can do it in Vermont. You can do it in all sorts of low-cost United States regions. We’re seeing that. We’re also seeing Latin America, big time.

LN Balaji: Yes, because of the time zone. We have two issues over there. One, we’re investing heavily in Spanish-language capability because that is needed if you have to work in most parts of Latin America, barring Brazil, but especially in Mexico. But talent is still an issue. That’s been our experience. What is your view of the economics of a low-cost U.S. location vis-à-vis an Indian or an Eastern European one? We don’t have any operations in Eastern Europe. >>>

Outsourcing: LN Balaji, President of ITC Infotech (Part 5)

Sramana Mitra: Because of the analytics talent?

LN Balaji: Yes, it’s a little bit high end. You don’t have to be high end all the time. When it was developed, we did it that way, and we did it out of Calcutta. This is maybe a five- or seven-year-old engagement. We still maintain it out of our development center in Calcutta.

SM: Are there any other hot buttons or core competencies in Calcutta, besides analytics? >>>

Outsourcing: LN Balaji, President of ITC Infotech (Part 4)

Sramana Mitra: I have a specific interest in understanding your Calcutta strategy. Why has Calcutta been so far behind the rest of India in terms of development in IT?

LN Balaji: I’m not so sure it is true. [But] it’s a combination of two or three things. The first thing is talent. Calcutta is terrific if you want to do very high-end analytics. It’s probably the best place in India to get that kind of talent. If you look at predictor analytics for anti-money laundering, for example, you won’t get a better set of people in India than in Calcutta. Having said that, the rest of it is more a perception. It’s difficult for people to put money in when they are not certain of how well they’ll be allowed to operate environmentally. Fresh investment I’m not so sure is going, but I can tell you one thing. We are looking to expand in Calcutta also, and when we were looking for real estate in that area, the nearest one that we bought was so far away I think you can peek into Bangladesh. Something must be happening over there. I do think that companies will set up maybe their second, maybe their third, maybe their fourth development centers somewhere in that area. Employable talent, as you know, in India is scarce. >>>

Outsourcing: LN Balaji, President of ITC Infotech (Part 3)

Sramana Mitra: Talk about what trends you’re seeing in your client base. Obviously, the outsourcing industry is going through lots of shifts: geographically, cost structure, competition for talent, geopolitical risk, currency risk, and so on. If you can synthesize the few dominant trends you’re seeing and that your clients are worrying about, what would those be?

LN Balaji: Honestly, cost doesn’t come at the top. Almost invariably, our clients are looking at value. I’ll expand on this in a bit. There are certain areas no client will compromise on irrespective of whether he’s in the midst of a recession. Some of those areas would be around the client. There are enough studies that will tell you if you segment it and brick-wall your existing customers carefully, they would yield far greater revenues than it would take for you to go out and get real customers. Typically, it takes anywhere from six to twelve times the cost to acquire a new customer as it does to mine an existing customer. What can companies do to add value to their customers? How can they set themselves up to serve that purpose? How can they segment their customers carefully? How can they add services but partnering with others who are looking to do the same thing. That’s the kind of stuff that companies would do because that is core to their very existence and core to their competitiveness. >>>

Outsourcing: LN Balaji, President of ITC Infotech (Part 2)

SM: What segment do you have that relationship in?

LNB: All of our development for the one software product company I mentioned is in the CRM space around Siebel.

SM: But CRM is horizontal. There is no vertical on top of the horizontal.

LNB: We don’t do it for all verticals. We do it for three of the verticals. One is retail and life sciences. The other one is airline. The third is consumer products. The thing we implemented at the soft drink company was actually a core innovation between ITC Infotech and another software product company for supply chain and performance management. It’s a module that sits on top of the APO module and that helps unravel complex supply chains in a manner that can be optimized. >>>

Outsourcing: LN Balaji, President of ITC Infotech (Part 1)

Bangalore-based ITC Infotech is one of the leading outsourcing companies in India. A fully owned subsidiary of ITC Limited, ITC Infotech has wholly owned subsidiaries of its own in the United States and the United Kingdom. This 11-year-old IT services business serves 140 countries and has delivery hubs in Bangalore and Calcutta.

Sramana Mitra: Hi, Balaji. Let’s start with some context about ITC Infotech. Of course, ITC has a wide-ranging portfolio. Tell us more specifically about ITC Infotech. >>>

Outsourcing: Ian Ippolito, Founder and CEO of vWorker (Part 4)

Sramana Mitra: On the service provider side, are these largely solo freelancers, or do you also have companies operating on your platform?

Ian Ippolito: They are both. Most of them in the United States are solo, although one of our largest ones is probably about 15 or 16 people. It’s called Gravity Jack. They’re about number two or number three in our ranking system. We rank all the different workers, and they’re two or three out of all 150,000. They are a larger company. But the majority of the people in the U.S. are solo people looking for extra work, or they’re in a situation where they don’t want to work a normal job, you know, go into the office, drive in and all that sort of thing. They want the flexibility and the freedom to choose their work. That’s usually what it is in the United States. >>>