The Economic Times in India published a terrific article about Systems In Motion and the Inshore Services operating model that provides US enterprises with a cost-competitive alternative to their global sourcing strategy. The main points of the article appear to be the following:
1. Systems In Motion has built a cost-efficient domestic IT services model that competes with offshore services on price, scale, quality, flexibility and business alignment
2. In some US locations like Michigan, the level of unemployment, coupled with the size of the current student population is creating the potential for significant talent development and acquisition by US enterprises and outsourcers
3. Stan Lepeak disagrees that this is going to be anything more than a niche market
4. Senior official from Indian tech firm believes that when the economy rebounds, everyone in the US will go back to those high-paying jobs.
You can read the whole Economic TImes article here.
Without delving into the opinions published in the article (which, ultimately, will only be proved or disproved over time) we’d like just get a couple of facts clarified.
In the article The Economic Times states:
In 2004, at the height of the American presidential campaign dominated among other things by offshoring and a jobless recovery, HCL’s
Vineet Nayar set off a firestorm with a comment that American graduates were not employable.
As trade unions seethed and politicians fumed, two men looked at the reaction the comments had caused and wondered if there was a business opportunity.
Since offshoring was considered a purely Indian phenomenon and sensing a backlash to the process in the years ahead, Debashish Sinha and Neeraj Gupta two IT industry executives in the US began quietly working on an alternative that would appeal to many companies and the political establishment.
It took them five years to come up with a concrete plan and get investor funding. System In Motion (SIM), a Michigan-based start up, launched few months ago plans to challenge the traditional offshore outsourcing market leaders by delivering low cost services from locations such as Ann Arbor.
Actually, Vineet’s comment was made to an NYC audience and reported in BusinessWeek last year (not in 2004), and had very little to do with triggering Systems In Motion. Though some of the ideas for the Inshore operating model did come from a whitepaper written by Conscient Partners on behalf of the IT Association of America (now TechAmerica) in 2006.
Also, the Economic Times article says:
“There are 7-8 Fortune companies including Ford, GM and Chrysler, almost 3,12,000 students are available within 75 miles and the unemployment rate is nearly 30%. If you add the local incentives and Michigan becomes a globally competitive location,” says Gupta, an IIM-Calcutta and BITS Pilani graduate. Gupta, who headed Patni Computers’ global sales and marketing until last year, is the chief executive of SIM.
Yes, there are 312,000 students within a 75-mile radius of Ann Arbor, MI and there are several large enterprises headquartered there, making Ann Arbor, MI a very powerful destination from an IT services sourcing perspective. The above statement would be entirely accurate if the Economic Times had just got Neeraj’s Alma Mater correctly as the University of Alabama (home to Mark Ingram, 2009 Heisman Trophy winner) instead of BITS, Pilani (home to many peacocks and Girdhari’s).
Finally, there’s a minor clarification on Systems In Motion’s view of wage and cost escalations in India. The Economic Times article suggests:
“We were seeing wage inflation in India, and around 20% wage inflation in the US,” says Gupta. For some of the top Indian tech firms, hiring local workers in the US had indeed picked momentum. “What these companies are doing is developing the top end of the pyramid, they will never spend time on developing the bottom, they cannot have their entire pyramid in the US,” says Sinha.
In reality, Systems In Motion believes research from several sources that suggest that wages in India will continue to escalate by double-digits over the next 3-5 years, while wage inflation in the US remains flat. As such, over time, the US workforce is likely to become more competitive against the Indian labor pool, not less.
Otherwise, this is a great article and well worth a read.
Please do visit www.systemsinmotion.com for more information, leave us a comment here, or join our conversation on twitter at www.twitter.com/systemsinmotion.
Tags: Debashish Sinha, Domestic Services, Inshoring, Mike Parks, Neeraj Gupta, Outsourcing, Systems In Motion