From the NY Times:
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Companies Finding Some Computer Jobs Best Done in U.S.


April 28, 2004
  By EDUARDO PORTER


Even as the prospect of high-skilled American jobs moving
to low-wage countries like India ignites hot political
debate, some entrepreneurs are finding that India's vaunted
high-technology work force is not always as effective as
advertised.


"For three years we tried all kinds of models, but nothing
has worked so far," said the co-founder and chief
technology officer of Storability Software in Southborough,
Mass. After trying to reduce costs by contracting out
software programming tasks to India, Storability brought
back most of the work to the United States, where it costs
four times as much, and hired more programmers here. The
"depth of knowledge in the area we want to build software
is not good enough" among Indian programmers, the executive
said.


If it sounds like "Made in the U.S.A." jingoism, consider
this: The entrepreneur, Hemant Kurande, is Indian. He was
born and raised near Bombay and received his master's
degree from the Indian Institute of Technology in that
city, now known as Mumbai. Mr. Kurande is not alone in his
views on "outsourcing" technology work to India. As more
companies in the United States rush to take advantage of
India's ample supply of cheap yet highly trained workers,
even some of the most motivated American companies - ones
set up or run by executives born and trained in India - are
concluding that the cost advantage does not always justify
the effort.


For many of the most crucial technology tasks, they find
that a work force operating within the American business
environment better suits their needs.


"Only certain kinds of tasks can be outsourced - what can
be set down as a set of rules," said Nariman Behravesh,
chief economist of Global Insight, a forecasting and
consulting firm based in Waltham, Mass. "That which
requires more creativity is more difficult to manage at a
distance."


Another Indian executive in the United States who has
soured on outsourcing is Dev Ittycheria, the chief
executive of Bladelogic, a designer of network management
software with 70 workers, also in Waltham. Bladelogic,
whose client list includes General Electric and Sprint,
outsourced work to India within months of going into
business in 2001. But it concluded that projects it farmed
out - one to install an operating system across a network,
another to keep tabs on changes done to the system - could
be done faster and at a lower cost in the United States.


That was true even though programmers in India cost
Bladelogic $3,500 a month versus a monthly cost of $10,000
for programmers in the United States. "The cost savings in
India were three to one," Mr. Ittycheria said . "But the
difference in productivity was six to one."


Bladelogic's chief technology officer, Vijay Manwani, born
and educated in India, predicts that once the "hype cycle"
about Indian outsourcing runs its course, projects will
come back to the United States "when people find that their
productivity goals have not been met."


The upshot is that high-technology corporations are likely
to ship more and more business functions to India to take
advantage of its well-trained work force. However, even as
they do so they will keep many essential tasks here.


For instance, Storability Software, which designs systems
to manage data storage and has 25 employees in the United
States, first tried to outsource some core programming
tasks to a big software contractor in India. When that did
not work, it tried a more specialized boutique. When this
company did not deliver up to Storability's specifications
either, the company hired four programmers in the United
States to help rewrite the code.


But Storability also stuck to India, setting up its own
small shop in Pune late last year, where its 25 programmers
perform noncore tasks. "We essentially realigned our
motivations," Mr. Kurande said. "We were able to figure out
areas of our engineering that suited them."


The Indian entrepreneurs in this country - business
executives with the cultural affinity and local connections
that might be most conducive to making offshore
partnerships work - do not fault the work ethic of the
programmers in India. But they say the geographic distance
and the differences in business contexts can be difficult
to bridge.


A typical challenge is the difficulty of finding
programmers overseas who can go beyond following well-known
procedures to the next steps of identifying problems and
creating new solutions.


For instance, ConnecTerra, a Cambridge, Mass., company that
designs software to manage data from electronic devices
like new radar-based ID tags that companies can use to
track inventory, tried programmers in India last year. But
ConnecTerra, which has 30 employees in the United States,
ultimately gave up on outsourcing because the Indian
company that it worked with could not deal with the
fast-changing requirements.


Murali Menon, an Indian-born executive who was
ConnecTerra's vice president for engineering at the time,
dealt with the recruitment of the Indian company. He said
the Indian programmers required more detailed instructions
to write the software code than would a programmer here,
who would be more familiar with the customer's needs. This
slowed the process, which was a major drawback because this
technology is new and changing very fast. Ultimately, the
product that the Indian programmers delivered was unwieldy,
with software code written in one big chunk rather than
more flexible modules that top programmers use now.


No one questions the dedication of Indian programmers.
"They worked hard," Mr. Menon said of the programmers in
India, "but couldn't keep up."


(Executives at Bladelogic, Storability and ConnecTerra
declined to divulge the names of the companies they have
worked with in India, saying that it might damage potential
business relationships for other work in the future.)


In the end, many say the advantages of keeping some of the
most sophisticated work in the United States are related to
the factors that draw technology entrepreneurs from India
and elsewhere to this country in the first place: Indian
engineers and software designers in this country know that
the businesses whose needs are driving technological
innovation are mostly in the United States. It comes down
to being where the customers are.


A defense of the programming industry in India comes from
Bassab Pradhan, the senior vice president for worldwide
sales for Infosys Technologies. Infosys, based in
Bangalore, is India's largest software services company. Of
its revenue of $1.06 billion last year, about two-thirds
came from American corporate clients including Visa
International, Boeing and Cisco Systems; it provides them
with services like data entry, programming and customer
technical support.


Mr. Pradhan, who is Indian-educated, disagrees with critics
who say that Indian-trained workers lack creative ability.
When outsourcing fails, he said, it is typically because
"less disciplined" businesses try to farm out projects that
are not properly defined.


But Mr. Pradhan agreed that the need for proximity to the
final user of the technology does place limits on what
types of tasks can be outsourced. "Whenever the pace of
innovation is very rapid," he said, "is when the work
should be done closer to the client."


In the future international division of labor, Mr. Pradhan
said, the production of the technology will be done in
places like India, which can deliver it reliably at a low
cost. What cannot be sent to India, he said, is the
invention of new business processes and technologies.


Conceiving inventory-management software that helps a
retailer make the best use of electronic product tags, for
example, might be something best done by system designers
in the United States working closely with the retailer.
Once such a system and its tasks have been mapped out,
though, the software code could be written by programmers
in India.


Such distinctions are why even the champions of India's
programmers-for-hire industry are trying to do more work
within the United States. This month, for instance, Infosys
announced that it would spend $20 million to set up a
consulting company in the United States. It has already
hired some top consultants from companies including
Deloitte Consulting, Cap Gemini, Ernst & Young and E.D.S.,
and plans to recruit others.


Innovative business processes result from "an understanding
of the business that happens when people get into a room
and talk to each other," Mr. Pradhan said. "That is very
difficult to outsource."


http://www.nytimes.com/2004/04/28/technology/28SOUR.html?ex=1084158387&ei=1&en=bef5874c452a9538


Copyright 2004 The New York Times Company

--
Tom Brandt
Northtech Systems, Inc.
130 S. 1st Street, Suite 220
Ann Arbor, MI 48104-1343
http://www.northtech.com/

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