End of India as an outsourcing destination
Munjal Shah of Riya recently wrote about how the company is moving its base back to the valley, citing wage inflation as the primary reason why they are moving out. If the responses are anything to go by, it has not been a popular move. I think it is a bit unfair to judge companies regarding where they want to operate from on the basis of toeing the line as far as the latest *sourcing/*shoring trend and whatever bits of nationalism you might want to apply to it.
We operate in a profit-driven scenario, where your operating costs can eat into whatever revenue you might have at any point in time. Unless you have the luxury of being a situation where there is going to be a considerable volume of cash flow to meet your additional expenses, which is not coming from your revenues, you have to always keep the opex/capex variable under control. From that point of view, I think it is totally a company’s prerogative to decide where they want to operate from.
India, that way, stands at a very strange juncture. In every sector, from BPOs to garments, we don’t occupy the excellent value for money pedestal in the lower end of the value chain anymore. That, in a way is good, because it would force us to move upwards in the chain, offering something better than ‘cheapness’ as compelling value proposition. The companies who can see that and adapt accordingly now itself are going to do well in the long run, the others will fade away with time.
I still remember my first job, with a web software development firm during the heights of the first bubble. They had a solid client base and decent products, but the owner steadfastly refused to move up the value chain, preferring to go for the easier bang for the buck approach. The end result was that, once the bubble burst, they were on their knees, being unable to retain any of their top talent because they were not doing the kind of work the good guys wanted to do and they also had a hard time keeping the mouths fed because spending disappeared across the board everywhere and what was left was a couple of AMCs for the lower-end work, which did not bring in much money anyway.
In terms of development, we badly need to move out of the mindset that most companies have here. It is insanely hard to find professionally run firms here, other than 10% of any sector. On the web front most are still busy copying what’s already been done-to-death in the west, leading to developers thinking only in terms of copying or being ‘inspired,’ which leads to decrements in value the add to the business.
Eventually, the wages, at least in technology, will go up to a level where in pure cost terms we won’t have any advantage over any market you can think of, necessitating other reasons why people should stick with us and from what I’ve seen, we are still a long way from being able to come up with some pretty compelling reasons.