Systems In Motion

It’s easy to get consensus within IT about whether we should invest in American workforce: of course we should. Almost everyone agrees we will need to have an educated and experienced domestic workforce in order to sustain the trend of productivity gains that technology has brought us. But this consensus falls apart when it comes to whether individual companies should hire domestically. After all, while it would be good in general to invest in American jobs, each individual company needs to do what is best for itself and its shareholders, and offshore IT outsourcing is viewed as the right decision to help a company remain competitive.

That’s why this recent interview with Harvard Business School professors David Pisano and Willy Shih caught my eye. In it, they lay out the reasons why offshore outsourcing hurts the ability for companies to innovate, thus damanging their ability to compete in the future. Maybe there is an alignment between what’s good for individual companies and what’s good for our country.

Read the full article at http://www.cio.com/article/686597/IT_Outsourcing_How_Offshoring_Can_Kill_Innovation

Article: TCS, Infosys, MindTree, HCL and other Indian IT companies to suffer as angry America wants its jobs back

BANGALORE: Some American corporations are retaining a small, but highly-prized slice of software jobs at home, mindful of the record unemployment levels and the anger among locals who see work being shipped overseas.

For Indian software providers such as TCS, Infosys and HCL, such a development – it is not expected to become a mainstream trend – could chip away a fraction of new jobs that could have been offshored to them. In an interview with Bloomberg on Monday, Charlene Begley, chief information technology officer of GE, said his company was rethinking the strategy of outsourcing more than half of its IT work.

Already, GE has announced plans to add 15,000 jobs in the US over three years, 1,100 of which will be at the Detroit IT centre. Walmart has also decided to drive the development and design of its ecommerce platform from a new centre in Brisbane, California.

WALMART PUTS OFF BANGALORE CENTRE

Walmart will not open its own captive technology centre in Bangalore, a person familiar with the retailer’s decision said last week. In the latest job posting on its website, Walmart has advertised nearly 150 new technology jobs in Bentonville, Arkansas. “Some of this, let’s say at least a quarter of these, could have easily been managed out of a captive centre Walmart was evaluating to open in India,” the person said.

At least a dozen executives at US-based firms and local American authorities said more companies would shift highend technology jobs as they are under pressure from their local constituencies to create jobs. “Companies like GE are under social pressure to demonstrate they care by creating local jobs. They have been practising economic sense for years and reaped enough profits,” said a senior executive at one of the top US tech firms. He requested anonymity because his company counts GE among its top customers.

In January, GE Chairman & CEO Jeffrey R Immelt was named the head of US President Barack Obama’s panel on jobs and competitiveness, which also includes the leaders of America’s biggest firms, including Xerox and Intel.

“There is pressure to create jobs in the marketplace, as well as demands on technology to create revenue impact in the front office. Both these trends actually play to create jobs in onsite locations – the former as a good corporate citizen, and the latter in recognition of the new levels and roles that IT has to play in these days of mobility, social networks and advanced analytics,” said Vineet Nayar, CEO of HCL Technologies.

He declined comment on GE’s outsourcing strategy but said customers are increasingly asking vendors to play a role. “For instance, if you were to look at what has been happening in HCL, the cosourcing deals we do with customers have already brought 9,000 employees who were with customers into HCL ranks,” Nayar added.

Co-sourcing involves the transfer of a client’s workforce to the payroll of the vendor, a switch which ensures job security to local workers who would then become part of multi-year outsourcing contracts. Experts say creation of more local jobs in the US is not likely to have any material impact on India’s $60-billion outsourcing sector.

“The costs of switching out of outsourcing relationships are too high for most, but I think you can expect to see more companies finding ways to create jobs in the US,” said Esteban Herrera, COO of US-based HfS Research, which advises customers on outsourcing.

“But it is likely GE will be sending less high-end work to India based on this strategy; meaning growth, and especially growth in complex processes and services, will likely decrease or stop altogether.” While GE has been outsourcing to India for over three decades, Walmart started its offshoring pilot with Infosys only last year.

GE currently outsources nearly $1 billion of software development and backoffice projects to Indian companies such as TCS, Wipro, Genpact, Patni Computer and MindTree. TCS is GE’s largest Indian IT vendor, accounting for about $200 million of business a year. Genpact, originally a GE back-office captive, currently gets almost 40%, or around $450 million, of its revenues from the company.

“As a percentage, the jobs moving back are very small. For example, if 500 out of 60,000 jobs move back it is a drop in the ocean. The kinds of jobs that are moving back are select, niche jobs such as design. Politics is a factor, but it is not the only factor why this is happening,” said Phaneesh Murthy, CEO of iGate, which counts GE among its top customers.

The 1M/1M Deal Radar: Systems In Motion, Fremont, California/Ann Arbor, Michigan.

From Sramana Mitra’s 1M/1M Deal Radar Blog:

Joining the blog’s ongoing conversation about outsourcing, nearshoring, and IT services is Systems In Motion, a U.S.-based technology services company that was founded to create a competitive and complementary alternative to the trend of offshore outsourcing of IT work.

Systems In Motion’s CEO, Neeraj Gupta, along with CMO Debashish Sinha and delivery head Mike Parks, launched the company because, from their decades of experience in offshore outsourcing, they believed there was a large and underserved part of U.S. enterprises’ technology services needs not being adequately fulfilled by any current sourcing option, whether that was offshore outsourcing, domestic staffing, or boutique consulting firms. Gupta was previously the chief commercial officer at Patni, Sinha previously VP of marketing atHCL, and Parks previously CIO at Virgin Mobile.

“You’re thinking, ‘Does the world really need another IT services company?’ says Sinha. “Unfortunately, it does. None of the existing technology service providers will make a significant investment in developing a local U.S. workforce because, ostensibly, it’s cheaper and more profitable to be in India, the Philippines, China, and Egypt.”

Systems In Motion’s approach is to use the best practices of remote delivery management in combination with investments in centralized service delivery infrastructure in the Midwest (specifically, Ann Arbor, Michigan) in order to create an IT service model that out-competes those of players such as Cognizant, Wipro, Syntel, and Intelligroup at large and fast-growing U.S. enterprises. “In the inshore model, dedicated delivery centers can be created with resource pyramids of as few as 20 full-time equivalents (FTE) since the cost of infrastructure, security, knowledge transfer and governance are substantially lower than is typical for offshore operations,” says the company. “Once established, the delivery center can grow rapidly, without any further significan