Outsourcing for cheap vs Outsourcing for talent

Let’s take a step back and dive into the origins of IT outsourcing in India. The reality is that it is almost impossible to know when exactly the Indian outsourcing industry was born. However, according to Mr. Karnik’s, who served as the president of NASSCOM, a meeting at a New Delhi hotel in 1989 was a significant moment. NASSCOM is a trade association of Indian Information Technology and Business Process Outsourcing industry. Established in 1988, NASSCOM is a non-profit organisation.

An excerpt from the article: How India Became an Outsourcing Magnet

Jack Welch, who was then chief executive of General Electric, was in India to persuade the country to place an order for G.E. aircraft engines. Present at the meeting was Sam Pitroda, a technology adviser to the Indian prime minister, Rajiv Gandhi.

As recounted in “The Coalition of Competitors,” after Mr. Welch said what he wanted from India, Mr. Pitroda said, “Fine, but first we want you to outsource $10 million of I.T. software work to India.”

Mr. Karnik writes that G.E.’s famous boss was surprised, but he finally said, “Fine. Done.” And G.E. became the first U.S. company to outsource software work to India.

From a small house in Pune, with the help of 7 engineers, the company called Infosys was born in 1981. Infosys played an important role in commercializing the concept of the IT outsourcing in India.

Ultimately with the help of the following companies, India went on to become the capital of IT outsourcing of the world.

Infosys

Wipro

TCS

HCL Technologies

Tech Mahindra

Fast forward to today, currently, there are over half a million open software engineer jobs in the US alone. That number is predicted to be over 1.4 million by 2020.

The US has no option other than outsourcing software engineer talent to other countries. And it holds true for other regions of the world as well. Whether it is countries in Asia or Europe. They will look to outsource talent to India going forward.

Whereas, on the other side there are 5 million software engineers in India. India is churning 1 million new engineers every year. Meaning, India can fulfill the demand side of the marketplace.

One of my core thesis is — that the next big innovations and next big companies will come from all over the world and not just from Silicon Valley.

Almost all industries will run on software at some level at least. The followings are what would be required to build the next big tech companies:

Deep domain expertise

Skills — Software + Data Analytics

Up until a few years ago, for the most part, offshore companies were turning to India for outsourcing low skilled and cheap labor services.

Things are starting to change now. Companies have started to turn to India for outsourcing top-notch software engineers and data scientists talent.

Technological tools like Slack — internal company communication, Trello — Project management, Zoom — for video conferencing and many more are empowering distributed team/remote work.

The bottom line is that in today’s day and age, as long as you have a decent computer and good internet service – one could be located somewhere in Asia and could be working for someone on the other side of the globe.

Go-Jek is a great example. Take a look at the following tweets by Sidu Ponnappa, head of Software Engineering at Go-Jek.

Go-Jek was founded by Nadiem Makarim, a native Indonesian, Nadiem started Go-Jek in 2014 in Indonesia. He had the deep domain expertise to build Go-Jek but lacked access to good Software engineers + Data scientists in Indonesia. As mentioned above, in order to build a large tech company the following two elements are required:

Deep domain expertise

Skills — Software + Data Analytics

Nadiem Makarim turned to India to outsource talent. Sources say — the company was valued at $4.8B for its last funding round, which makes Go-Jek the largest private tech company in Indonesia.

From the following tweet by Shailendra J Singh, managing director of Sequoia Capital South East Asia, also an investor in Go-Jek, we can sense that outsourcing for talent is an emerging trend now.

Conclusion

⚫ Technical talent has replaced oil as the most valuable resource of the world.

⚫ Large companies, startups, and even countries will fight for good technical talent going forward.

⚫ Outsourcing for talent is and will be the new norm.