[patio11]

A lot has changed, and very little has changed. The whole framing for the story -- that one would expect an Indian graduate to be fluent in conversational English and capable of being net-productive in the global economy -- is one way in which a lot has changed. Historically, that has been true for only the tiniest sliver of folks in India.

The outsourcing boom exploited one persistent mispricing of labor: below that tiny sliver of folks at the top of the educational pyramid in India, there was a slice of folks who had a minimal level of competency and prevailing wages which were absurdly low compared to wages in e.g. the US. I've done telephone support before. You don't have to be a genius to do it. Given that you're not looking for geniuses, you could either find a modestly educated American homemaker (or somebody trying to pay his way through college) at $10 an hour plus costs, or you could employ someone near the top of India's educational distribution for less than $2 an hour, fully-loaded.

Then apply the same economics to folks in the top of that below-the-sliver slice who are able to do back-office line-of-business CRUD apps, which are the outsourcing sweet spot.

Even though India is ginormous, though, there is a finite amount of labor in that slice, and when the global economy became aware of that mispricing, that labor got bid up very rapidly. Prior to the Lehman shock, engineering salaries in India were going up at 50% per year. My company had difficulty keeping any engineer on a project for six months -- they were unwilling to match the new market rates so the market did to them what the market does to everyone: allocates scarce resources efficiently. "You pay peanuts, you get monkeys", to quote one of our Indian engineers. (He now works for a Japanese company at a multiple of his former salary, last I heard.)

Anyhow, the overwrought reporting about the labor mispricing for that one little slice of the market apparently convinced at least some people of something which is manifestly untrue, which is that Indian education is world-class. It's not. India in 2011 is the same as India in 2001 is the same as India in 1951: it is gigantic and filled with lots of desperately poor people who do not have even minimal levels of competency for global work. (It is entirely possible than India in 2051 will not be, but they've got quite a ways to go yet.)

[mbesto]

I was speaking with a potential client concerning their current outsourcing in India. Not happy with their outsourcing in India, that potential client said "I need people who can think".

I've been working in enterprise IT (and small business) for about 5 years now. I've never had a good experience in India. There are the few who do come over to the US (on visas) that are exceptional (and possibly in a relative sense) but again don't represent the whole, and nor does my bad experience represent the whole for that matter. The fact is that in more than one occasion (it's actually countless) I've had to hand-hold Indian colleagues on how to fix an issue. It astounds me that this price difference can ever achieve it's value and more importantly do it sustainably over time (re: difficulty keeping an engineer for six months).

Our company has outsourcing in Romania and it's by far better than any other outsourcing I've worked with. I think we've found that "tiniest sliver of folk" in Romania, but it doesn't mean the streets are filled with these type of people, nor do I think we can expand to create a managed service hub of thousands of Romania techies.

At the end of the day I always have to fall back on "you pay for what you get".

[statictype]

you pay for what you get

Yes, when you outsourced to India, you probably did so on the basis of getting cheap labour, so it seems utterly unsurprising that you were disappointed with the results.

There are a lot of competent outsourcing firms in India - you probably don't use them because they are expensive.

[mbesto]

First, I was working as a consultant to work with organizations who off-shored there sys admin work. As a consultant I found myself having to document something step by step to the India counterparts. Why on earth does this make any sense to hire such people when I could simply do it myself? I've looked at the costs and they could hire one good on-site consultant for the price of 3 bad Indian ones. This is the age old consulting/outsourcing paradigm of "let's just throw more bodies at the problem"

Second, the expensive Indian outsourcing firms are not advantageous to do business with. (1) What's to stop the employee turnover when these people are sent to the US under H-1B visas? Large corporations (in the US for example) often exploit this ability. (2) What then becomes the cost advantage as opposed to near-shoring it?

I think that's why countries such as a Romania, Hungary, Bulgaria, Ukraine, Czech Republic, Argentina, and Brazil are up next as the areas to blossom for outsourcing. These areas foster strong technical skills (and strong educational systems to back them) and are still at a fraction of the price of their "1st world" counterparts.

I can't claim to be an expert on outsourcing economics but I see and breathe the issues and benefits of it everyday.

[statictype]

Well, I think we're looking at it from different angles.

You see good outsourcing companies as those that have technically competent engineers. That's not how I see it.

I think part of the reason big companies are still outsourcing to India is not because of the low cost of technical competence, but rather, the low cost of process management in developing IT-related software.

For example, when you outsource a module to be built by the offshore team, you may end up with code which is not world-class quality in terms of maintainability or performance, but you will end up with something that matches the requirements you gave. And if something seems out of place, they will be able to trace it from the bullet point in the requirements.doc file down to the module stored in VSS (yes, sadly, probably VSS, not subversion or git), to the unit test cases that cover it in unit-tests.xls.

This is because all the companies that are outsourcing their IT are not doing it in the hopes of getting good code, or because they're not technically competent enough to write the required code (most outsourced code is of the CRUD variety as people have mentioned here) they are doing it because its cheaper than having a whole team to track requirements, and make sure they map to UI elements in the right places and that the code is documented in a way that someone down the line won't be able to complain about it not being understandable, and that the unit tests are in place and all of them are checked-off.

I guess if you're outsourcing work that requires technical competence, maybe you're right about other countries working out better (I have my doubts but don't have any reason to disbelieve you) but I think a majority of the outsourcing success stories (involving India) work because their outsourcing needs have less to do with the actual code quality and more to do with the process involved in writing boring enterprise CRUD apps.

[mbesto]

Absolutely agreed -> low cost of process management in developing IT-related software.

The issue I have with this is that success (if you could call it that?) in enterprise IT is driven by both competence in both process management and engineering talent. The paradigm (and the fallacy) of today's IT is that the enterprise sees IT as largely commoditized. What would happen if, for example, a CRUD application was built by developers who understood the benefits of UI/usability and this increase performance/productivity of a salesforce? Naturally I'm inclined to think the 'Enterprise' would simply write off IT's existence ("let's cut costs and send it to India!") and praise the salesforce ("another great quarter of double digit growth")

I think it's wishful thinking, but whatever happened to using to technology to solving strategic problems?

[hga]

I have an even more reductionist angle: if you look at the success rates of these sorts of IT projects, total failures are somewhat less than 50% but general failures, the latter plus systems that lack significant functions that were part of the requirements are well over 50%.

So you might say that doing this sort of IT is akin to cargo cults: these organizations aren't really doing it, they're just pretending to themselves that they are.

So, if you're going to fail, why not fail as cheaply as possible?

[raghava]

> "you pay for what you get"

And, you get what you pay for. ;)

[statictype]

It's not. India in 2011 is the same as India in 2001 is the same as India in 1951

As someone who as experienced India in the late 80s, the 90s, and the 2000s, this statement seems so spectacularly far from being true, I have to openly question what sort of evidence you've used to draw your conclusions.

[raghava]

Very good points, put concisely & effectively. Outsourcing and it's impact on technical education in India is a topic that requires a post on it's own.