Cost, scale still drive outsourcing globally

Birlasoft Inc., US COO Avinash Singh has over two decades of experience in the areas of software consulting, offshore outsourcing and professional services. He is responsible for global operations across USA, Europe, APAC, Japan and Middle East markets. In an interview with Pragati Simlote of CyberMedia News, he throws light on the mindsets prevalent across the world with respect to outsourcing and how Birlasoft has worked towards overcoming the barriers. Excerpts:

What kind of different mindsets towards outsourcing do you see in the different regions you operate in?

European customers for example will take a lot of time in first trying you, in understanding who you are, in understanding your culture, and you as a person. It could be a 12-month cycle before they engage with you. But once they have engaged you and assuming that you are doing a reasonably good job, they will not change.

In Japan, they have very protracted decision making, even more than the Europeans. A multiple decision making processes exists there which also means that the whole sales cycle tends to be fairly large, the size of deals tend to be smaller.

Politically, outsourcing in the US is not openly accepted. The bureaucracy out there is very positive, the corporations out there are very capitalistic— clear that they need to embrace any type of strategy which helps them continue to be competitive, drive value with their stockholders and analysts, etc.

What about the acceptance level of outsourcing globally?

From an appetite for our business, i.e. offshore outsourcing in Europe and UK — UK in particular, is very very open to them. Even politicians in UK understand that this is something that they need to embrace, it is something that would help not only the organization who are present in the country, but even their own country. So large projects in Britain that are happening today have large outsourcing components. Out there the whole acceptance of offshore outsourcing is pretty high in today's world.

If you go to Europe, again various countries can be very different - there are language/linguistic issues. Like for instance, in France and some eastern European countries, acceptance of outsourcing and offshore outsourcing is much higher by a multiple factor as compared with what it was three years ago.

In the US, outsourcing is the biggest tool that they have found in terms of managing cost and deliver services that they need to do. The CIO behavior is devoid of emotions. Companies have to prove from project to project, as opposed to Europe where you have to prove yourself just once. Appetite for offshore outsourcing in the US market is very strong. Political rhetoric is there, but its just rhetoric.

In the Middle East, we don't serve too well. The way to penetrate that market is through leveraging local partnerships, local business and local people.

Is cost still the driving factor?

Value is a pre-requisite. You need to be able to demonstrate value, that is there, but yes, cost is the main driver. Most customers are still looking at cost, time to market — bandwidth and scale that you get over here in a much more rapid time. There are some companies who have embraced that model back and are now thinking how they can leverage additional value like GE, Intel, Microsoft - going up the value chain, but that to my mind is still a small percentage. It will increase much more rapidly and organizations like us are evolving strategies to address that demand and appetite of finding more people value from a domain perspective, from a research perspective, from a knowledge worker perspective vs. just a programmer perspective. But I still think as high as 80 per cent is a combination of cost and scale.

What is the current footprint of Birlasoft?

Globally, we employ 2,800 people, out of which 2,100-2,200 are in India. We recently announced the setting up of three centers. One is already operational in Bangalore with a seating capacity of 520. We have set up a Siebel Center of Excellence (CoE) there. The other center we are opening is in Hyderabad, which again is to service the needs of some of our customers including GE. This 600-seater center would be operational by February 2006. The other one is in Noida, where we are setting up a 1,000-men facility to meet the demand and expansion plans we have. This center would become operational in May 2006. We are already running a 500-seat facility in Chennai, apart from facilities in Melbourne and Sydney.