Friday, November 17, 2006


Outsourcing to China and why it makes more sense than India...

In previous blog entries, I mentioned my significant other is working on a startup idea in the IT security space. She realized that the task of development was more than she could accomplish alone and I simply don't have enough spare time to jump in, so she did her own homework on getting assistance in terms of development and realized that outsourcing to India is a bad idea...

For offshored research, China can't be beat, and this equally holds true for software, hardware and even business. Choose a metric, any metric: When it comes to research capabilities, China beats India. She did figure out that in terms of R&D that she should outsource the R (as in research) but not the D (as in development) to minimize nasty things such as disputes regarding intellectual property.

When comparing IIT to Tsinghua University, IIT is more branded but Tsinghua has more capability to make meaningful differences. She came to the conclusion that everything in India is simply too risky. China has not yet consumed all of its high-end talent unlike India where all the senior folks are spread thin and you are pretty much forced to work with junior folks who index themselves against other junior folks and rationalize themselves into seniority. We all know that rationalization is a trap.

The real benefit to outsourcing to China is not only in terms of the services they provide to you, but the opportunities it will bring for you to sell within the country itself. While both China's and India's economies are booming, the real question is which economy affords the best opportunity for American's to sell their goods and services in them and China clearly stands above India in this regard.

I wonder if I were to ask several of the CTOs who blog to point out software sales of their products within India and China, which country buys more? I think the answer is intuitive. Anyway, China also has lower billing rates and more importantly, the process of software development feels more agile than the India counterparts.

In observing other large enterprises, they always seem to be caught offguard when they say outsource 1,000 American IT jobs and it happens to turn into 2,000 plus jobs in India. There are many reasons for this ranging from the ability (or lack of) of top talent, the ratio of freshers to those with real experience, and the simple fact that most folks in corporate America actually play multiple roles (they just don't know it) while a developer in India has no incentive to play any role other than the one they are assigned.

My significant other thought deeply on the later and found that she couldn't simply hand off a task and expect folks to run with it and would otherwise be forced to pretty much define every thing in intricate detail with the resulting time taken to define things in writing being more time consuming than actually doing it herself. Her discovery said that the vast majority of folks in India simply haven't been permitted to understand the entire picture of any project but only encouraged to focus in on their part. She wants end-to-end solution design experience not just a butt in a seat.

In my own analysis of my significant other's conclusions, I asked myself, why haven't industry analysts who focus on outsourcing done research on this particular aspect?

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