May 24, 2007

Things don’t just hop here in India, they leap

..or so says Lin Chase, Director, Accenture Technology Labs India in this blog post at the Accenture site. Here are some quotes:

A year ago, I landed in Bangalore, India – not just for a visit, but to live. I had eight suitcases with me, mostly full of what turned out to be the wrong clothes and shoes, and the name and phone number of a woman who supposedly had an apartment I could live in for a while.

A few weeks earlier my boss had asked me if I would be willing to move to India to be Director of a new R&D Lab – Accenture’s fourth. I jumped at the opportunity. Accenture Technology Labs, our technology research and development organization, has been turning technology innovation into business results for 20 years. Plus, things were seeming a little sleepy in California and I’d heard how things were hopping in Bangalore.

Fast forward one year, and I can attest that things don’t just hop here in India, they leap. Bangalore is an inspirational place to work and makes me feel alive 24/7.

This week I’m back in the U.S., visiting a client in New Jersey to arrange a pioneering installation of one of the new inventions of our India team. Prior to building the India Lab, it would have seemed odd to present a Bangalore invention to a U.S. client. But now, I’m convinced that India is the wave of the future – with the talent, the brains, the creativity and the dedicated will to make the future happen.

It’s by far the most exciting and rewarding job I’ve ever had. Our team is developing an R&D spirit together and building a world-class research facility in India. Now we can really start to 'play cricket,' as they say here.

However, Accenture and IBM are the rare IT consulting firms that have really leveraged the India advantage. Their other MNC contemporaries like CapGemini, EDS and the like are still figuring out how to really combat Indian IT firms.

A recent Forrester Group study says that captive outsourcing units are likely to be economically unviable in the long run.
Instead of saving money, the cost of operating captive center costs is typically higher than using third-party providers. The cost per person, per month of a captive center is $4,944, compared to $4,231 for a "third-party supplier." And over three years, the costs of a 150-person captive center are $29,453,799, compared to $21,723,299 for using a third-party supplier.

And while companies say they want to save money, protect intellectual property or more tightly control processes, in reality....

...the majority of the reasons firms cite for building their own facility versus outsourcing to a third party are flawed. Our research shows that in the majority of cases, it is driven by personal reasons such as an expatriate employee's urge to go back to India for family reasons.

According to the report, many American and European companies that have set up captive centers have closed them down, brought in partners or sold their centers to local companies - and many more will do so in the next three years.