Outsourcing to India: why it doesn't work?

Jan. 19, 2018

Management

Many companies are running to India for their IT solutions. To them, India provides a way to cut cost while still enjoying the desired value. Even though this could be true in some cases, there are numerous reasons why this is overrated. Yes, outsourcing to India is a waste of time, resources, and money.
Shocked? Well, let’s break it down for you. Here are six reasons why outsourcing to India doesn’t work.

The talent sought for may not be as good

The assumption is that outsourcing to India means excellent skills available for the cheap. While we don’t dispute this fact, there are many cases of failed projects done by Indian experts. Natives in India are joining the software development career because this is where the money is, and yet they lack the technical expertise required for the job.

Take for instance the incident that happened to the British Airways in May this year. The IT system crushed causing massive queues and cancellation of several flights. Sources in the company attributed this to the inadequacy of outsourced Indian staff when it came to restoring the data backup on time.

Another example as featured in livemint.com was the loss of $2.3 billion in the EU. The UBS trader indicated that this incident was due to the failure to develop adequate controls that would flag out suspicious activity during transactions by the Indian outsourced firms.

Varied Interests

To the outsourcing party, what matters is a working project with minimum costs. However, to the Indian developer, you are as good as you pay. Companies here put minimal emphasis on how the project is running and if you are getting value for your money.
To them, a good customer is one offering the higher pay. A poor quality code will mean extended maintenance which means more money. You are a mere cash cow to the outsourcing company!

Two different time zones

The time difference between India and USA is about 12 hours. It means that as the sun is setting in India, probably it’s the time you are getting into office. For smooth delivery of a project, proper communication is vital, yet the time difference possesses a significant challenge on when to hook up and share information about the project.
You don’t want to talk to a person ranting about how they have foregone their time with family just to put in a few more hours to work and share progress on the project. Managing a project between two different time zones may turn out to be too risky.

Cultural Differences may harm your business when outsourcing to India

Imagine discussing something with the project team or a developer who ends the conversation with a ‘Yes.’ To your understanding, you assume they meant they would do whatever you have discussed. But wait, in India ‘yes’ means ‘I have heard what you have said.’
A ‘yes’ to most of the natives in India is an acknowledgment and not an agreement. This would possibly lead to frustration when trying to understand why milestones and agreed timelines weren’t met due to this possible cultural difference.

Differences in national holidays may often lead to project delays and cost overruns. Similarly, developers in India stick to working hours, unlike USA developers who would work past the office hours for the sake of the project. This means, a project would take a few days or weeks to complete in the USA, while in India, it could take up to two months.
And another thing about culture, many Indians don’t like writing stuff down. They believe in verbal comprehension. You would have to repeat something over and over again to get it done. Instruct them in the evening (which is morning to you if you are in the USA), and by the time they wake up, it has already escaped their minds.

More than one way to lose money in the process

First, the tax rate in India is crazy high! As we all know, the tax levied on a business is passed on to the customers. According to The Business Insider, India’s tax rate is at 60.6% putting it in the bracket of top 20 countries with highest tax rates worldwide. According to The Commerce Times, India started levying a 35% tax on US outsourcing firms.
Secondly, scammers have found means to get the money from unsuspecting international clients. According to marketwatch.com, Americans lost $47 million in Indian tax scams, involving fake call centers with call agents who call people with phony claims like defaulted payment and possible jail terms.

Intellectual Property protection

The code in programming is considered to be intellectual property. After all, it is your source of profits and it is imperative to protect it. When outsourcing your IT department, one of the most important things to do, is to overlook the contract you’re about to sign and make sure, the intellectual property is protected. In other words, make sure that after ending the contract with the outsourcing company in India, you will get back your full code and other features of your project. There have been many cases of intellectual property theft in India and it’s been repeatedly put on a list of countries to be aware of.

So, for those who are in the process of acquiring IT solution or getting maintenance contracts, before you engage with that Indian outsourcing company, kindly evaluate all options around, and you might just have better value for your money elsewhere!

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