[Kictanet] Why Outsourcing to India?

Tue Jan 24 17:05:45 EAT 2006

Dear All,

BOP being the thrust of the ICT strategy; I thought I should share the piece
below for all to reflect on the meeting. One very interesting statistic is
that Bangalore has 20,000 more IT Engineers than Silicon Valley!

Enjoy.

Harry
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ 

Outsourcing to India?
Special from the Pro Hawaii Newsletter and Flight Capital
By David Heenan, 1/22/2006 11:12:11 PM

The following is an excerpt from the book Flight Capital by David Heenan

Shifting U.S. jobs overseas remains an emotional hot button. In 2004,
Democratic presidential candidate John Kerry chastised "Benedict Arnold
CEOs," who favored foreign over American employees.

Then-secretary of state Colin Powell, dispatched by President Bush to New
Delhi, countered by saying that outsourcing was "a reality of the
twenty-first century" but that India should do more to offset the loss of
U.S. jobs by opening its market to American goods.

But don't dismiss the gains in productivity and competitiveness to U.S.
business and the jobs that are created as a result of outsourcing. The rule
of thumb is that each Indian employee represents an annual savings to
American employers of $20,000 to $30,000.

The cost of transmitting work offshore is expected to plummet by as much as
60 percent in 2005 thanks to new undersea cables. While such savings are a
big draw, quality of work is a close second -- and gaining in importance.
The skills of India's computer scientists, for example, are unsurpassed. The
Capability Maturity Model, or CMM, developed by the Software Engineering
Institute at Carnegie Mellon University, has been used to evaluate the
software development processes of hundreds of companies.

Software teams receive a rating of 1 to 5, with 5 being the highest. A
decade ago, only Motorola's unit in Bangalore achieved a 5 rating. Today,
387 Indian companies are so accredited. Therefore, multinational enterprises
are getting more complex work done on the subcontinent -- not just in IT but
in fields ranging from financial services to biotechnology.

Clearly, corporate America can no longer be lulled into thinking it is
immune to Indian competition. "The globalization of white-collar services
has become mainstream," says Nandan Nilekani, CEO of Infosys, India's IBM.
The country's unforeseen leap into the top ranks of global technology
refuted conventional development theory, which predicted that India and
other poor countries would follow the same long, slow path Western
industrial nations had followed -- from agriculture to manufacturing to high
technology. India's development shortcut made it the first Third World
nation to use its brain- power, not natural resources or low-wage labor, to
propel its entry into the economic big leagues. "Every company aspiring to
be global has to have an Indian strategy," says Nilekani.

This does not mean the United States will repeat the fall of the Roman
Empire. "Offshoring is not a zero-sum game," says Diana Farrell, director of
the think tank McKinsey Global Institute. "It creates value for individual
American companies and frees U.S. resources for activities with more value
added." Infosys's Nilekani agrees: By working together, both India and the
United States win.

"You have this whole ecosystem [that constitutes] a crucible for
innovation," he told the New York Times. "The whole process where people get
an idea and put together a team, raise capital, create a product, and
mainstream it -- that can only be done in the U.S. It can't be done sitting
in India.

The Indian part of the equation [is to help] these innovative [U.S.]
companies bring their products to market quicker, cheaper, and better, which
increases the innovative cycle there. It is a complementarity we need to
enhance."

While Americans fret over Third World competition, half a world away in
Bangalore engineers are hard at work writing software for the latest
telephones, designing next-generation microprocessors, and developing
wireless broadband technology that they hope will transform homes around the
world. By some estimates, there are more IT engineers in Bangalore
(150,000), India's self-proclaimed Silicon Valley, than in its California
counterpart (130,000). In this southern city once known as "pensioners'
paradise" for its mild weather and slow pace, you'll find the landscape
blazoned with famous corporate logos: GE, Intel, Cisco, IBM, Philips, AOL.
More than half the U.S. Fortune 500, as well as leading European, Japanese,
Chinese, even Pakistani companies, have a significant presence here -- all
using Indian brainpower.

David Heenan is a leading expert on globalization and author of Flight
Capital: The Alarming Exodus of America's Best and Brightest (Davies-Black,
$24.95). His career in business and academia has taken him from Citigroup
and Jardine Matheson to the B-schools at Wharton and Columbia. Today he
serves as a trustee for the Estate of James Campbell, one of the nation's
largest landowners with assets of more than $2 billion. Contact him at
http://www.flight-capital.com

The Pro Hawaii Newsletter is distributed monthly to over 1,000 Hawaii
businesses and their staffs as well as globally to empowered consumers and
professionals. See more at http://www.ProHawaii.com

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-----Original Message-----
From: kictanet-bounces+harry=aitecafrica.com at kictanet.or.ke
[mailto:kictanet-bounces+harry=aitecafrica.com at kictanet.or.ke] On Behalf Of
Brian Longwe
Sent: 24 January 2006 16:12
To: harry at aitecafrica.com
Subject: Re: [Kictanet] Workshop to discuss ICT Strategy Paper

Hi Wainaina,

Thanks for this input. I would urge you (and anyone else planning to  
come) to go through this document and come prepared to enhance,  
develop, adjust, beef it up so that it's better suited to the task at  
hand.

Regards,

Brian

On 24 Jan 2006, at 13:23, Wainaina Mungai wrote:

> Hi Brian,
>
> My input would be on the role of civil society organisations under  
> "Roles and Accountability". The main roles may be listed as;
>
> ->  Accountability & Transparency: Keep political and market forces  
> accountable to the needs of society and encourage social  
> responsibility & good governance.
> ->  Awareness raising & capacity building (especially to the  
> unreached)
> ->  Ensure a social justice & human/consumer centred approach
> -> Universal access/last mile solutions such as community-based and  
> community-run initiatives.
> ->  Implement and encourage non-market-led interventions (poor,  
> disability, gender etc)
>
> Put another way, CSOs must be the "conscience" that keeps both  
> market and political forces on the path of social justice and  
> intervenes where the two cannot adequately meet the needs of the  
> people.
>
> Regards,
>
> Wainaina Mungai
> http://www.madeinkenya.org
>
> SUSTAINABLE DEVELOPMENT is development that meets the needs of the  
> present without compromising the ability of future generations to  
> meet their own needs.
>
>
>>  -------Original Message-------
>>  From: John Walubengo <jwalubengo at kcct.ac.ke>
>>  Subject: Re: [Kictanet] Workshop to discuss ICT Strategy Paper
>>  Sent: 24 Jan '06 07:37
>>
>>  Hi Brian,
>>
>>  I just thought I would share my reactions in advanced given that  
>> I may  arrive later (or not) due some other meeting on the same day.
>>
>>  The paper seems to be hurriedly cobbled together, ideas are
>>  good and factual BUT they have NOT been contextualised
>>  within the Kenyan environment.
>>
>>  For example, the paper semms to emphasise a lot on outsourcing
>>  projects (call centers, BPOs, etc) and the proposal  to market
>>  Kenya as the hot destination for the same (BPOs, Call Center,etc)  
>> by March 2006.
>>
>>  My worry is that if we  market Kenya from this dimension,
>>  when our domestic infrastructure if far being ready to
>>  handle the resulting/impact of such a would be succesfull marketing
>>  campaign, then we create a disaster.  The first 3 or 5
>>  investors would get in, get burned and get out.  And then
>>  the rest would learn - from the bad experiences of the
>>  first few - and then probably never step in Kenya again. {might  
>> be good to hear the challenges of the 2 or 3  BPOs who've been in  
>> Kenya for the last 2years, and why the number has not grown}
>>
>>  In other words this ICT strategy looks at what Kenya should be
>>  in 5-10years time  but tries to set milestones for the same  
>> within a  1year bracket.  So, to me theres is need to be honest  
>> with what can be achieved in the next 1year as we look towards the  
>> next 5, 10 years.
>>
>>  The priorities for the next 1year are unfortunately the
>>  'boring' and difficult things that nobody seems to  want to do.
>>  This includes, but  is not limited to:
>>
>>  i) Regulatory issues: - there's need to ensure that the
>>  Regulator is effectively  independent to monitor and regulate the
>>  industry. Quality standards, Affordability, effective  
>> Competition, Consumer Protection,  remain but some of the  
>> challenges CCK seems to avoid.
>>
>>  ii) Government Issues: - there's need to ensure that the
>>  Government plays its role as far as enacting the
>>  appropriate legislations and regulation is concerned. Government  
>> should also ensure that the secondary but supporting  
>> infrastructure such
>>  as Electricity, Road networks exist to make it easier for Telecom  
>> Operators to expand their reach. Govt must concretely enhance or  
>> institutionalise  Public Private Partnerships (PPP), etc.
>>
>>  iii) Private Sector:- With a strong PPP, there will
>>  definately be opportunities for private sector to pump in
>>  sufficient funds to build and expand the Telecom Infrastructure
>>  (particularly the Fixed Line Network).
>>
>>  iv) Content Development:-We really do not have significant  
>> presence on the internet -as a country.  Most of the Internet  
>> Users in Kenya log in to access international content.  Even  
>> percieved local content like www.nationaudio.com seat on foreign  
>> sites.  eGovernment initiates must lead the way to provide locally  
>> relevant content along the lines K.R.A is doing. Strategies to  
>> encourage Universities and Colleges to do the same must be sought.
>>
>>  To me these are some of  the immediate things to put in place and
>>  they are the ones to be milestoned within a year.  The rest would  
>> then automatically fall in place.
>>
>>  walu.
>>
>>
>>
>>
>>
>>
>>  _______________________________________________
>>  kictanet mailing list
>>  kictanet at kictanet.or.ke
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>>
>>  Please unsubscribe or change your options at http:// 
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>>
>
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