Indian Offshore IT Projects – Boom or Bust
I have just come back from a trip to Bangalore India having been asked to set-up for a well known consultancy an offshore software development centre.
Bangalore was selected because there is already a significant offshore IT development presence by companies such as Accenture, Honeywell Bull, Intel, IBM. It was decided that here I would pull together resource in order to set-up a 200 to 300 man software development factory.
When I got to Bangalore on a scoping and discovery trip to estimate the time /cost and contacts that would be needed for such an undertaking I was shocked by what I found:-
- A city which had grown 7-fold in population size over the past 5 years to 7.3 million people.
- No train /metro network to support the labour force.
- No international size airport (only one terminal)
- No regulated taxis system, so the streets have become clogged 24/7 with Auto Rickshaws to the point that everything is grid-locked.
- Smog & Pollution everywhere, mostly generated by 2 stroke Auto Rickshaws. I would describe this level of green /yellow haze as a health hazard to anyone.
- Poor water quality. Even local people suffered at least 5 working days off work per annum due to what they call “Hygiene Sickness”.
- Frequent Power Cuts each day. The locals call this “load shedding”. I call it not enough power generation to support the growing economy.
- 2300 motor bike registrations a month in Bangalore. NO CONTROLS adding to the gridlock and pollution.
- No proper network of buses for people to get to work on.
- Inflation set to hit 7%
- Cultural issues with staff and management unused to raising issues or saying NO.
- Hotel Rates rising exponentially. Very difficult to get a hotel up to Western Standards for less that £200 per night!.
So what does all this negativity add up to? Well if we take £11 per hour as the cost of a low level Indian software engineer & £35 per hour as the equivalent in the UK it means that these resource costs (unloaded) have a smaller differential than might first appear.
Having done the numbers on the effect of all these “Gotcha’s’” on delivery margins along with the need for larger than expected onshore presence to give delivery assurance, it is clear that the cost differential is negligible. In-fact when taking into account Indian IT wage inflation of say 10% PA it will soon be cheaper to run development onshore.
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