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Offshoring to India - top tips from CIOs
Inside India: What the IT chiefs really think...

By Steve Ranger

Published: Thursday 12 April 2007

Offshoring - love it or hate it, if you have anything to do with decisions about technology in a large organisation you won't be able to avoid having an opinion about it.

Outsourcing continues to grow and along with it the option of outsourcing to offshore locations, in particular India. Last year saw the largest number of outsourcing contracts signed ever, according to sourcing advisors TPI, and Indian companies are steadily growing their market share.

And as many of the biggest traditional outsourcing companies have set up operations in Bangalore, and other Indian tech hubs, in reality many outsourcing contracts these days feature an offshore component.

While for many businesses a couple of years ago the question might have been whether to look at offshore, these days they've already decided that they have to do it - and are looking at the details of what to offshore and how to get started.

So what is the reality for companies that have outsourced to India? silicon.com spoke to IT chiefs at two businesses that have offshored some of their IT to Indian companies to find out if the experience matches the hype.

The water company

Late last year Welsh Water signed a deal with Indian services giant TCS, which is working alongside Capgemini and Logica in an alliance to deliver service to the utility and its business partners.

In particular TCS is working on application development and supporting knowledge management and some of the utility's business functions.

There are around 25 TCS staff working on site and the idea is to move this gradually to an offshore delivery model.

Special Report: Inside India

In February silicon.com's Steve Ranger visited the Indian tech hotspots of Bangalore, Mumbai, Pune and Hyderabad. Click on the links below to see photo galleries of the cities and companies visited.

♦ Satyam's IT campus
♦ Hyderabad's tech parks
♦ Bringing tech to rural India
♦ High-tech on the streets of Pune
♦ Pune - the new Bangalore?
♦ Boom town Bangalore
♦ Bangalore's Electronics City
♦ SAP and Wipro in Bangalore
♦ The weekend in India's tech capital

Welsh Water is a big fan of outsourcing - 85 per cent of all its functions are outsourced with only 150 staff in-house.

"Most companies will outsource certain components - we've taken a brave step and outsourced a lot," says Fraser Nairn, head of IT at the water company.

This means it has to be savvy about the companies it chooses to work with and puts a lot of time and effort into making sure the relationships work. The TCS deal was the first time the utility had done business with an Indian outsourcer.

And the advantages of using offshore? "Ultimately you get a very high quality service at a vastly reduced price point. We do this for hard business reasons," Nairn explains.

But he acknowledges that dealing with an Indian company has its own particular challenges: Welsh Water spends time making sure the TCS employees feel a part of the business and hosts workshops for staff and business partners to get them used to Indian culture.

"There has to be effort on both sides to build up the relationship and there are cultural differences. We make sure [TCS staff] are recognised as equals and are invited to business and social events," he says.

"There's lots of things you need to understand to get the best out of them. You've got to recognise that there are differences there and you need to work through them."

And he's got a vital tip for CIOs thinking of outsourcing to India: go and see for yourself.

"If you are coming into this cold, it's essential that you do that and understand the fabric and the make-up of the society over there. It helps you to redress the cultural differences," says Nairn.

The news giant

In contrast to Welsh Water, which is just beginning to use India, news giant Reuters has been in the country for a long time.

"India isn't really offshore for us, it's part of Reuters. From a business point of view it's a hugely important economy for us," Reuters global head of solutions delivery IS&T, Dave Weller, explains.

The news agency's decision to offshore some technology resulted from a combination of pressures on its IT operation.

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