 Global Economy > The Changing Geography of Cheap Labor
For a global software company,
outsourcing began at inception
Massachusetts-based Lionbridge Technologies is a global leader in "application management outsourcing" with expertise in global multilingual application development, localization, testing and maintenance. To provide its clients with cost-optimized, high-quality IT services, Lionbridge has established 21 outsourcing solution centers in 10 countries, including India, Ireland, Brazil, China and France. Sachin Gupta, Business Development Director, sells and manages outsourcing relationships for Lionbridge that leverage these outsourcing centers.
Q. Outsourcing is integral to Lionbridge, and it’s been right there from the beginning.
A. Yes. We evolved as a global corporation from our very inception, so being offshore was not new. As a global company, we’ll get the work done for our clients at the most appropriate geographic location. Since we have this global footprint, we can seamlessly send work overseas and manage it here in the US.
Q. Describe your routine as an outsourcing manager. Presumably you’ve had some sleepless nights.
A. Oh yes! It is undoubtedly a challenge, but smart outsourcers have leveraged the difference in time zones to their advantage. Because Lionbridge has always been a global company, we excel at global program management. To meet our clients' needs, we generally have an onsite team and an offsite/offshore team. Especially in application-maintenance scenarios, the time difference can be an advantage wherein level 1 maintenance requests are handled primarily onsite and the level 2 and 3 requests are sent nearshore in Ireland or offshore along with an analysis report prepared by the onsite team during their working hours in the US. Oftentimes the work has been completed by the time the onsite team comes back to work the next morning because the offshore team is working those requests during their daytime, which is nighttime here in the US.
Having said that, while a lot of people have overcome the time-zone difference, it is still something that requires some level of adjustment in work routines for the onsite teams. For example, there is some phone communication required between the teams as work is handed off from one team to another. This is why it is so important to have a proven global program management process in place.
Smart outsourcers also ensure that the onsite team has the skill set to bridge the cultural gaps between the offshore and client teams such that the clients don’t feel the effect of the cultural gaps or time zones.
Q. India is one of your premier solutions locations. How would describe its rise as the major outsourcing destination?
A. The rise of India outsourcing began in the late 1980s. But at that time, India's value-add was the ability to provide skilled contract workers for the US. Then, in the late 1990s, there was an effort to outsource some projects to India. Little by little these small offshore development projects ensued. There wasn’t a focus on process maturity back then, and offshore outsourcing led to several failures as a result. Of course, today process maturity is one of India's strongest assets.
Q. But at some point on the way, there seems to have been an explosion.
A. Yes, the real thrust came with Y2K. Work needed to get done fast, and that’s when Indian companies really burst onto the scene because of their ability to scale rapidly. But it raised questions about whether outsourcing overseas is repeatable and manageable. The benefits of outsourcing can't be tied to low wages alone. If requirements aren't understood and processes aren't defined, the project can overrun your time schedule, with several hidden losses.
Y2K conversion wasn’t necessarily a high in the value-chain job but gave the Indian companies a view of what was possible if the model matured into something more process driven and repeatable. Then came process maturity and standardization through processes like SEICMM Level 5 and Indian companies started evolving their Y2K outsourcing relationships into projects for software development and maintenance and ultimately to the dedicated offshore center model. That’s how the model evolved from the late 1980s to the 1990s to the early 21st century. It is all about cost, scale, skill and excellence.
Q. You make four to six trips a year to India. Do you have any Americans following you over there to work?
A. While Americans will travel to India for short periods, I’m not so sure Americans are in a situation where they can work through some of the infrastructural and cultural challenges of working in India full time. You have the basic infrastructure, but just getting around the cultural differences, or the lack of a mature healthcare system, can be somewhat difficult.
Q. What’s your reaction here in the United States to the rising perception of India and the outsourcing phenomenon?
A. I’ve watched it evolve. For example, I have a client in Arkansas that we are working with to help them leverage the outsourcing model in an optimal manner. When I visited them for the first time in 2001, when they had just started outsourcing, there weren’t a lot of people there who had even heard of India. Now, after embracing offshore outsourcing over the past two years, they’ve accepted Indians as a part of their community, and it’s just a completely different environment. So I see a great evolution in that America is now recognizing and appreciating the capabilities and skills of other parts of the world and looking to leverage those capabilities to provide business advantage above and beyond low cost. I am talking with several corporations that are planning on outsourcing, and just like the Big 5 consulting companies, my company also sells into the government market where offshore outsourcing is a complete no-no. Having a very flexible model with solution centers in the US, Europe and Asia gives Lionbridge a significant advantage because we can address each client's budgetary, technical and geographic requirements.
Q. Where do you see this trend, and the backlash, in a decade?
A. Today software development is going through a maturity cycle. It’s only evident that more and more parts of software will be outsourced. The core is going to stay in the United States, but more and more outsourcing of the ancillary software activities is an inevitable capitalistic phenomena.
I relate to the backlash, especially because I have had a software job in this country in the past, but, really, today the US needs to innovate itself, the workforce needs to retool itself, just as it has done through several business cycles in the past. We need to continue climbing higher in the value chain, as we outsource work that is lower in the value chain. As industries mature, they need to focus on core parts of the business. Everyone knows about the wage inflation levels in India. Over a 7-to-10-year period, the cost arbitrage in outsourcing software to India will be lost, although the skills and expertise in India will still be attractive. Over time outsourcing destinations might change, but offshore outsourcing is at the fulcrum of globalization and free trade.
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