PDF: 2962 pages, 5.2 MB - Bay Area Council Economic Institute

Software/IT Services/Business Process Outsourcing
• Menlo Park customer service software developer Kana Software Inc. eliminated 100
development jobs in India in 2005 and began hiring again in the U.S.
• Teneros Inc., a Mountain View company whose “appliances” ensure continuous operation
of unified email communications and other Microsoft infrastructure functions in
the event of power failures, network outages, server failures, or data corruption, closed a
30-person office in India and brought 12 developers to California.
• GlobalLogic, a Virginia-based outsourced software product development company,
funded in part by Silicon Valley VC firms Sequoia Capital and New Enterprise
Associates, has committed $50 million to India expansion, much of it through acquisitions
of distressed captive product development centers started by mid-sized firms.
GlobalLogic believes it can operate these facilities more efficiently or consolidate them;
it has facilities in Noida, Pune and Nagpur and expects to add two more locations, increasing
its India workforce to 4,000 over time.
Don’t Blame the Model
A common Indian response has been, “If you don’t know how to make the model work, don’t
blame the model.” Major Indian and multinational firms are gradually abandoning the low-end,
relatively low-revenue back office center, in favor of large-scale, specialized product development
centers catering to specific industries, often housed in a single mega-complex.
The objective is to merge India’s IT, software, and semiconductor advantages with industryspecific
“domain” expertise, expanding India’s role as a global R&D outsourcing platform. And
in addition to simply providing contract services, Indian third-party vendors are looking at new
kinds of revenue models (revenue sharing, build-operate-transfer, joint licensing of new technologies
and products, etc.) in mobile telephony, medicine, materials research, energy management,
and other fields.
Major Indian IT firms may each employ 40,000+ people in India alone; the top 20 together employ
nearly 500,000. By moving up the value chain in their R&D and service offerings, global vendors
like Tata, Infosys, Wipro, Satyam, HCL, IBM, and Accenture can offer top Indian graduates higher
pay, cutting-edge work, and a range of career options. Local recruitment, management autonomy,
and an understanding of India’s complex language and cultural differences and sensitivities provide
a further advantage. The most successful foreign firms are quick to point out the value of giving
workers greater responsibility and autonomy, allowing their operations to develop as uniquely
Indian enterprises.
India’s indigenous IT-BPO sector has, to an extent, undergone consolidation in recent years.
Tata, Infosys and Wipro accounted for a combined 26% of Indian outsourcing export revenue in
2004; by 2007, their share had risen to 41%. Small and mid-sized firms have carved out niches in
certain industry, technology or business process areas, have settled into the lower end job shop
or call center segments, or have closed.
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