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Overexposed
By Michael Alan Hamlin
January 13, 2004
India's National Association of
Software and Service Companies (NASSCOM) has been extremely successful
in its strategic effort to brand India as the number one center
for outsourcing software development, call center services, and
other e-Services back office work. One call center executive told
me recently, "We have to be in India because our clients expect
us to be there."
But recent reports suggest that NASSCOM may have oversold the country
and its outsourcing service providers, or at least gotten ahead
of reality. To be sure, India's top outsourcing service providers,
such as the $1 billion software services and hardware company Wipro,
are world class. But if a medium-sized U.S. company is outsourcing
to a second- or third-tier firm, the reality can be sobering.
Or so the international business press had begun reporting. In December,
for instance, Fortune magazine reported that Internet hosting company
Web.com brought its customer service operation back to Brookfield,
Connecticut after being "plagued by cultural misunderstandings
and lost customers." The company found that it was costing
"more to send work to India than to do it in one of the highest-cost
states" in the Union.
A month earlier Dell made a similar decision about its own wholly
owned call center, "routing calls from some high-end business
customers back to Texas." Call centers operations aren't the
only services outsourced to India that suffer from cultural hurdles.
In its January 12 issue, BusinessWeek reported that Intentia International,
a $430 million business-software maker, had to redo all the work
it had outsourced to an Indian company.
An Intentia executive said that the Indian company that had been
contracted oversold itself by overstating its technical skills.
BusinessWeek columnist Spencer E. Ante concluded that, "shoddy
quality, security snafus, and poor customer service often wipe out
any benefits" from outsourcing. Some companies are finding
other landmines as well, such as security.
Ante said that software maker SolidWorks Corporation outsourced
work to India-based Geometric Software Solutions only to have a
Geometric employee steal SolidWorks' technology and attempt to sell
it to a competitor. It seems strange, but SolidWorks decided to
stick it out with Geometric nevertheless, because "the efficiencies
are so compelling that we're not willing to give up."
That's a large measure of forgiveness in most executives' view.
Fortunately for the Philippines so far, outsourcers aren't having
to make those kinds of decisions. By every measure, business is
booming and confidence is building. While Dell may have pulled a
substantial portion of its business from India, it's increasing
the number of customer representative seats outsourced to Philippine
call centers. According to industry sources, Dell keeps three different
call centers with thousands of seats hiring as fast as they can.
Other e-Services also appear to be booming, although the Philippines
boasts just a fraction of the capacity India does. And for some
pretty good reasons. Consider the quality of software development,
for instance. The Center for eBusiness at Massachusetts Institute
of Technology found in a recent study that India software projects
have 10 percent more bugs than buggy U.S. projects.
Anecdotal evidence in the Philippines suggests that the record is
far better. A regional executive for Canon - which has software
development centers in China, the U.S., and other countries aside
from the Philippines - told me a while back that whenever possible
he assigns his software development projects to the Philippine center,
"because they come back perfect and on time."
Local "mentor capitalist" and software project guru Joey
Gurango says his new firm, Webworks OS which develops .net programming,
is developing even faster than he originally envisioned. The reason,
he believes, is the company's emerging reputation for its .net expertise,
professional project management, and willingness to work closely
with partners and clients.
But unlike India, much of the progress the Philippines is making
goes unnoticed because no NASSCOM-like group has emerged with the
resources and the depth to project the Philippines consistently,
and meaningfully. As a result, many opportunities go to India by
default, because as the call center executive implied, it's expected.
In some ways, mostly forgivable, NASSCOM may have oversold itself.
But it's a bigger crime, in my book, that the Philippines doesn't
do the same.
(Michael Alan Hamlin is the managing
director of consultancy TeamAsia and the author of three books on
Asian economies and companies. His latest book is Marketing Asian
Places, of which he is a co-author (Wiley, 2001), and he is currently
at work on High Visibility: The Making and Marketing of Asian Professionals
into Celebrities. Write him at mahamlin@teamasia.com.).
Copyright © 2003 Michael Alan
Hamlin. All Rights Reserved.
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