The changing landscape of outsourcing

Andy Sullivan

WASHINGTON: Technology investors in India, Russia and other emerging markets must be willing to roll up their sleeves when they open their pocketbooks, participants in a World Bank conference said.

"What companies need at this stage is more than capital. They need hands-on support and management expertise," said Moshen Khalil, director of information and communications technologies at the World Bank.

The success of high-tech manufacturing in China and tech services in India has created opportunities across the Third World that will increase as markets develop, investors said.

Countries like Brazil and Russia boast rapidly growing economies and large, educated populations willing to work for cheap, providing an irresistible lure for U.S. companies looking to keep costs down and venture capitalists hoping to find the next Google.

But investors must negotiate a thicket of unstable government policies, underdeveloped financial markets and shaky infrastructure in much of the world, participants at the International Finance Corporation Global Technology Conference said.

"You have to be willing to be intrusive in these places in ways you don't have to be in Arizona," said David Bonderman, a founding partner of the investment firm Texas Pacific Group.

While citizens may have ample technical knowledge, marketing expertise is rare in countries governed by Communist or authoritarian regimes, experts said.

Delta Capital Management CEO Patricia Cloherty said her company was looking to invest in telecommunications and pharmaceuticals in Russia, despite weak intellectual-property protections and a population that has little management experience.

"The Russian population clearly has resident brainpower. The enablers are not in place for it to be capitalized on," she said.

Khalil said in an interview that domestic markets were beginning to develop, ensuring that goods and services do not flow entirely to the United States and other developing economies.

Rising costs in India are also driving development in places like Vietnam and the Phillipines, he said.

"We're beginning to witness the flow of goods and services from south to south," he said.

But countries like Nigeria will not be able to handle outsourced work from India until their underlying infrastructure improves, said Valentine Obi, CEO of eTtranzact International, a Nigerian electronic payment system.

"I think it's a long shot," he said. "It's going to be quite difficult to have an Indian company coming into Africa."

©Reuters