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RESEARCH AND PRACTICEIN HUMAN RESOURCE MANAGEMENT

Volume 13: Issue 2

Guest !itorial

Call "or Pa#ers

Regular Papers

Highlight, copy & paste to cite:

Chiamsiri, S., Bulusu, S. D. & Agarwal, M. (2005). Information T!hnolog"#ffshor #utsour!ing in In$ia% A uman 'sour!s Managmnt

rs!ti*, Research and Practice in Human Resource Management,

+(2), +05-++.

Infora!ion Technolog" Offshore

Ou!sourcing in In#ia$ A Huan ResourcesManageen! Perspec!ive

Singha Chiamsiri, Sri Devi Bulusu & Mithlesh Agarwal

A%STRACT

With the rapid and gloalising progress o! "n!ormation

#echnology $"#%, o!!shore outsourcing has een particularly

popular in the contet o! usiness process outsourcing to

"ndia' Starting with services li(e providing the talent pool,

and pro)ect eecution, now the trend o! o!!shore

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outsourcing is moving towards the higher value echelon o!

the "# industry value chain with activities li(e product

design and development, as well as consulting' #he paper

discusses the paradigm o! o!!shore outsourcing y

providing a ird*s eye view o! the ma)or "#+enaled servicesoutsourced in "ndia' "t eplores the possile changes o! the

nature o! the services outsourced in "ndia, and issues

related to a human resources management perspective'

INTRODUCTION

#utsour!ing !an / $s!ri/$ as th !ontra!ting out of th !oman"s ma1or

fun!tions an$ a!ti*itis to an trnal sr*i! or goo$s ro*i$r (Br"! &

3sm +44). In siml trms, outsour!ing !onsists in !on$u!ting on or

mor organisational a!ti*itis, using trnal agnts (6a!it" & irs!hhim+44). 7ull$ /" th n$ for /usinss fli/ilit" to rson$ 8ui!9l" to

!hanging mar9ts, outsour!ing /rings with itslf, intr alia, th a$*antags

of imro*ing th !oman":s fo!us on its !or !omtn!", gaining a!!ss to

th worl$ !lass so!it", r$u!ing in*stmnts in th non !or a!ti*itis of th

!oman", r$u!ing th ris9s /" sharing th in*stmnts, imro*ing th

ro$u!tion, a/stra!tion of $la"s, an$ th !ration of 1o/s $u to th

growing !onom". In th r!nt sur*" of 5,2+ !uti*s a!ross ;orth

Amri!a an$

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Ta&le '%enefi!s an# Challenges(Ris)s of Glo&al Offshore IT Ou!sourcing

%enefi!s Challenges(Ris)s

Re!uce! #ro)ect timelines*time to

com#lete*abstraction o" !elays

Increase! I+ !e#artment#ro!ucti,ity

Com#etiti,e a!,anta'e

Internal customer satis"action

Im#ro,e! -uality o" ser,ices

Access to technolo'ical e.#ertise

Gainin' access to the %orl! class

society

Re!ucin' in,estments in the non/

core acti,ities o" the com#any

Re!ucin' the ris(s by sharin' the

in,estments

%or(

$ac( o" internal customer mana'ement s(ills

A!!itional costs inclu!in' ,en!or selection0

transition cost0 le'al*contract costs amon'st

others

Ser,ice !ebasement

In th following s!tion, an o*rall *iw of offshor outsour!ing to In$ia is

rsnt$. This in!lu$s an intro$u!tion to IT outsour!ing to In$ia, th

*arious mo$ls of outsour!ing an$ th In$ia a$*antag. In th nt s!tion,

th *alu !hain of th IT outsour!ing in In$ia an$ its trn$s ar $s!ri/$.

This s!on$ s!tion throws light on th attra!ti*nss of In$ia *rsus its

!ontn$rs. Th final s!tion lains th uman 'sour!s Managmnt

('M) as!ts of th IT outsour!ing in In$ia. It nlists th ma1or fun!tions

of th 'M an$ th !urrnt /ottln!9s in th in$ustr". Th ar

!on!lu$s with a not on th ossi/l imro*mnts in th 'M arna,

infrr$ from an anal"sis of rimar" $ata.

O**SHOREIT OUTSOURCINGININDIA

In th last $!a$, a trmn$ous growth an$ !hang in -/usinss has /n

$ri*ing th softwar in$ustr" to mo* to !ountris li9 In$ia an$ Irlan$

(6an 200+). In$ia has /n th fa*ourit $stination for man" !omanis

aroun$ th glo/ for offshor outsour!ing /!aus it !uts ali!ation

$*lomnt an$ maintnan! !osts whil $li*ring th highst 8ualit"wor9 an$ imro*ing ro$u!ti*it". Aroa!hs ha* rang$ from

su/!ontra!ting ortions of softwar $*lomnt ro1!ts to thir$ art"

!omanis or su/si$iaris, to sta/lishing trul" *irtual $*lomnt tams

(=rnr, Ditr & 'aimun$ 200+). =ith th rai$ growth of outsour!ing,

s*ral mi an$ mat!h mo$ls of outsour!ing ar mrging. Comanis !an

!hoos an on sit arrangmnt, off sit ro!ssing in th outsour!rs

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fa!ilit", nar shor ro!ssing in a !ontiguous !ountr", or an offshor mo$l

in whi!h th ro!ssing is $on in a !ountr" with a *r" low !ost stru!tur.

Th !lassifi!ation is lu!i$at$ in Ta/l 2. #ffshor outsour!ing has /n

arti!ularl" a mor suita/l mo$l for In$ia. Th litratur suggsts that

offshor outsour!ing in In$ia is not onl" th most oular managmnt

ra!ti!, /ut also !o*rs aroun$ 0 r !nt of th offshor outsour!ing

mar9t (=rnr, t al. 200+, a/th 200).

Ta&le +T"pes of Ou!sourcing

On

si!eOff si!e Near shore Offshore

Cost sa,in's $o% Mo!erately lo% Mo!erately hi'h Hi'h

$ocation o" outsourcin' CloseMo!eratelyclose

Mo!eratelyremote

Remote

utsourcer hirin' the customers#ersonnel

es 4o 4o 4o

utsourcer hirin' the customers

e-ui#ment es 4o 4o 4o$e,el o" control on the outsourcer $o% Hi'h Hi'h $o%

$e,el o" cost sa,in' "or the customer Hi'h $o% Mo!erate Hi'h

5ocus on the relationshi# %ith theoutsourcer

Hi'h $o% Hi'h Hi'h

#ffshor IT outsour!ing is an imortant an$ mrging fil$ in th ara of

information s"stms (;aurn, Curri, =ra99o$" & Dsai 200). IT

outsour!ing is $fin$ /" 6oh an$ ?n9atraman (+442) as th signifi!ant

!ontri/ution of trnal sulirs in th h"si!al an$@or human rsour!s

asso!iat$ with th ntir or s!ifi! !omonnt of th IT infrastru!tur in

th usr organisation. =hil 'a19umar an$ Mani (200+) $fin offshoroutsour!ing as th sulir of softwar, $*lomnt is from anothr

!ountr" than th firm that $!i$s to outsour! information s"stms. Smith,

Mitra an$ ;arasimhan (+44) $fin offshor outsour!ing as softwar

$*lomnt that is $on in othr !ountris than thos that ha*

tra$itionall" $ominat$ th softwar $*lomnt in$ustr". 7irms ntring

into offshor outsour!ing aim rimaril" to gain a!!ss to highl" s9ill$

rofssionals at a r$u!$ !ost (At, So/ol, anao9a, Shima$a, Saarinn,

Salmla & ?salainn +44).

Bill ats r$i!tion in +444 that In$ia is li9l" to / th nt softwar

surowr has largl" /n ralis$ (hmawat 2000). Tr$iman an$

aramou>is (2002) !laim that to$a", In$ia $ominats 0E40 r !nt of th

total of offshor $*lomnt r*nu worl$wi$ an$ is !t$ to / th

9" la$r in offshor outsour!ing in th nt fi* "ars. In$ias outsour!ing

ort r*nu now !$s F /illion, ma9ing it th !ountr"s largst

ort, an$ th !ountr" is hom to som half a million IT rofssionals

(;ass!om 200a). In th light of th rsnt !onomi! $ownturn, th

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rimar" moti*ation /hin$ offshor outsour!ing is !ost r$u!tion, s!iall"

lowr r !aita la/our !osts ('a*i!han$ran & Ahm$ +44, oal &

rishnan 2002). Softwar $*lomnt !osts in In$ia ar stimat$ to /

0E0 r !nt lowr than thos in $*lo$ mar9ts (6a!it" &

irs!hhim +445).

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Collaboration

Cultural issues

Continuin' 'eo/#olitical uncertainties

Sometimes intensi,e trainin' nee!e!

"or !e,elo#ers

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igure -

"ndia*s Attractiveness .ersus "ts Contenders

Sour!% M!ins" Anal"sis (;AASC#M 200/)

?alu a!ti*itis ar th h"si!all" an$ t!hnologi!all" $istin!t a!ti*itis that

a firm rforms an$ ar th /uil$ing /lo!9s /" whi!h firms !rat ro$u!ts

*alua/l to its /u"rs (ortr +45). To$a", larg !omanis ar outsour!ing

a gratr rang an$ $th of sr*i!s than *r thought ossi/l. '!nt

inno*ations (.g., offring /" Ali!ation Sr*i! ro*i$rs) ar ro*i$ing

a$$itional oortunitis for th outsour!ing of fun!tions that r*iousl"th" woul$ n*r ha* !ontmlat$ (rn, =ill!o!9s & 6a!it" 2002, Curri

200). At rsnt, ali!ation $*lomnt is th most fr8untl"

outsour!$ a!ti*it". #thr fun!tions !ommonl" snt offshor in!lu$ !all

!ntrs, s"stm a$ministration@suort an$ hl $s9. Man" In$ian

*n$ors also offr managmnt !onsulting sr*i!s, infrastru!tur

outsour!ing sr*i!s, hl $s9 an$ $s9to outsour!ing sr*i!s. Th

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In$ian IT-na/l$ sr*i!s in$ustr" is st to mo* wll /"on$ !onta!t

!ntr, low s9ill$ wor9 $ri*n /" th arl" su!!ss of th first mo*rs

(;ass!om 200/). In this ar, th anal"sis of th *alu !hain $os not

in!lu$ all th lin9s in th *alu !hain, /ut ro*i$s an o*r*iw of th t"

of outsour!ing !ontra!ts, an$ th sr*i!s offr$.

Tren#s of Offshore IT Ou!sourcing in In#ia

Th offshor IT outsour!ing in In$ia mainl" !onsists of ro$u!t Comonnt

#utsour!ing, ro!ss Comonnt #utsour!ing an$ Total #utsour!ing.

ro$u!t Comonnt #utsour!ing $als with offshoring a art of th ro1!t

to th !lint. This !oul$ / arti!ularl" suita/l whn th !lint ma" not

ossss th t!hnolog" or s9ills n$$ for th !omlt assignmnt@

ro1!t. ro!ss Comonnt #utsour!ing mans outsour!ing a art of th

fun!tion of on or mor of thir ro!sss. Comlt #utsour!ing $als with

outsour!ing all th hass of th ro1!t in!lu$ing th a!ti*itis li9 $sign,!o$ing, an$ imlmntation. Th nt $ir!tion for th In$ian *n$ors is to

!ontinu to mo* u th *alu !hain /" offring sr*i!s rlat$ to ro!ss

Comonnt outsour!ing E ar!hit!tur, $sign, an$ $*lomnt an$

t!hnolog" stratg" sr*i!s. =hras in th ast, In$ian sulirs fo!us$

rimaril" on $li*ring ali!ation rlat$ sr*i!s, th" now offr

*r"thing from ali!ations suort to infrastru!tur managmnt

(in!lu$ing $ata !ntr outsour!ing, ntwor9 managmnt, $ata !ntr

!onsoli$ation, stratgi! !onsulting, an$ hl $s9 outsour!ing) to *arious

fla*ours of /usinss ro!ss outsour!ing (B#) E or IT- na/l$ sr*i!s, as

th" ar t"i!all" trm$. This shift imlis that in a$$ition to its o*rallgrowth, th mar9t is also $i*rsif"ing an$ an$ing to n!omass non

ali!ation rlat$ sr*i!s. Th to tir In$ian *n$ors hi/it flair to

mo* u th *alu !hain an$ offr high *alu !onsulting an$ ro1!t

managmnt s9ills in or$r to !omt with 3S /as$ IT sr*i!s firms. In

a$$ition, th !urrnt trn$ of mo*ing to th highr n$ of *alu !hain

in*ol*s a!ti*itis li9 ro$u!t $sign, a$$ing *alu thorough rsar!h an$

$*lomnt ('&D), r$i!ting th futur $ir!tions of t!hnolog". It ma9s

/usinss sns for In$ian firms to mo* fastr on th *alu !hain la$$r an$

gt mor in*ol*$ in ' an$ D, an$ ro$u!t !ration, /ran$ managmnt an$

stratgi! !onsulting, an$ ro*i$ing mor nt !ntri! an$ -!ommr! t"

intra!ti* sr*i!s to !ustomrs (;aurn, t al. 200). Th othr aras

into whi!h IT offshoring is li9l" to an$ ar lga!", an$ -/usinss

ali!ation intgration.

HUMANRESOURCESMANAGEMENTISSUES

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ol ar our gratst asst is a mantra that !omanis ha* /n

!hanting for "ars. But onl" a fw !omanis ha* start$ utting uman

'sour!s Managmnt ('M) s"stms in la! that suort this

hilosoh". Thr ar a num/r of !hallngs in th In$ian IT in$ustr"

whi!h r8uir th srious attntion of ' managrs to fin$ th right

!an$i$at an$ /uil$ a !on$u!i* wor9 n*ironmnt whi!h will /

/nfi!ial for th mlo"s, as wll as th organisation. Th IT in$ustr" is

alra$" un$r strss on a!!ount of rsistnt ro/lms su!h as attrition,

!onfi$ntialit", an$ lo"alt". #thr ro/lms ar managing ol,

moti*ation to a$ot nw t!hnolog" !hangs, r!ruitmnt an$ training,

rforman! managmnt, $*lomnt, an$ !omnsation managmnt.

=ith ths !hallngs, it is timl" for organisations to rthin9 th wa"s th"

manag thir ol. Managing ' in th 9nowl$g /as$ in$ustr" is a

signifi!ant !hallng for ' managrs as it in*ol*s a multi tas9

rsonsi/ilit". In th rsnt s!nario, ' managrs rform a *arit" ofrsonsi/ilitis.

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$artmnt has a !lar rol in this ro!ss an$ $trmins th su!!ss

tmo of an" organisation. An urgnt riorit" for most of th organisations

is to ha* an inno*ati* an$ !omtnt ' oolJ soun$ in ' managmnt

ra!ti!s with strong /usinss 9nowl$g.

Recrui!en! an# Training

'!ruitmnt has /!om a ma1or fun!tion from an imrati* su/ s"stm in

', arti!ularl" in th IT in$ustr". ' managrs la" a *ital rol in !rating

assts for th organisation in th form of 8ualit" manowr. Attra!ting nw

talnt also is a to riorit" for softwar !omanis, /ut lss so for smallr

!omanis. Anothr !hallng for ' managrs is to ut s"stms in la! to

ma9 th ol a rf!t fit for th 1o/. S9ill r$un$an!" is fast in th IT

in$ustr". To o*r!om this ro/lm, organisations gi* th utmost riorit"

to training an$ s9ill nhan!mnt rograms on a !ontinuous /asis. Man" IT

!omanis ar ro*i$ing t!hni!al training to th mlo"s on a 8uartrl"/asis. Ths trainings ar 8uit usful also in trms of ro*i$ing s!urit" to

th mlo"s.

The Trus! *ac!or

6ow l*ls of trust inhi/it ta!it 9nowl$g sharing in th 9nowl$g /as$

in$ustr". It is ssntial that th IT in$ustr" ta9s mor initiati*s to imro*

th s!urit" l*ls of th mlo"s.

-or) life %alance *ac!or

Anothr $imnsion to th !hallngs fa!$ /" IT In$ustr" is th growing

a! of talnt a!8uisition. This as!t !rats with it th !hallng of a

smoothr assimilation an$ th !ultural /in$ing of th nw !omrs into th

organisation fol$. Th rssur of $li*ring th /st of 8ualit" sr*i!s in a

r$u!$ tim fram !alls for nsuring that mlo"s maintain a wor9 lif

/alan!.

A!!ri!ion(Re!en!ion of !he Talen! Pool

#n of th toughst !hallngs for th ' managrs in th IT in$ustr" is to

$al with th r*alnt high attrition l*ls. Though thr is an a$8uat

sul" of 8ualifi$ staff at ntr" l*l, thr ar hug gas in th mi$$l an$

snior l*l managmnt in th in$ustr". 7urthr, th salar" growth lan for

a!h mlo" is not wll $fin$. This situation has rsult$ in in!ras$

l*ls of oa!hing an$ attrition /twn organisations. Th in$ustr" a*rag

attrition rat is 0E5 r !nt an$ !oul$ rang u to 0 r !nt.

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%ri#ging !he Dean# Suppl" Gap

' managrs ha* to /ri$g th ga /twn th $man$ an$ sul" of

rofssionals. Th" ha* to maintain !onsistn!" in rforman! an$ ha*

to 9 th moti*ation l*ls of mlo"s high, $sit th monotonous

natur of wor9. Th sam also la$s to r!urring training !osts. In!onsistntrforman! $ir!tl" aff!ts r*nus. Dwin$ling moti*ation l*ls la$ to a

loss of intrst in th 1o/ an$ a highr num/r of rrors.

RESU/TS

Th authors sur*"$ l*n softwar la$rs in In$ia a/out th !urrnt

!hallngs in th in$ustr" an$ th rtntion initiati*s in thir !omanis.

7or this sur*", snior managrs in ' an$ othr fun!tionalitis, an$

softwar nginrs wr intr*iw$ for thir oinions. Mor than half of

th !uti*s sur*"$ rss$ that th ma1or !hallngs for th '

managrs ar r!ruiting th right ol an$ rtaining thm for longr

tims. Th nt most imortant ' !on!rns list$ wr mting th

$man$, sul" r8uirmnts in th in$ustr", !tations managmnt of

th rsour!s an$ othr sta9hol$rs, ffi!in!" in ro!sss an$ '

oli!is. =hn as9$ to ran9 th /st moti*ating fa!tors, th most

fr8untl" rss$ riorit" was th natur of th 1o/ an$ 1o/ satisfa!tion.

Th nt most imortant as!ts wr salar" an$ montar" /nfits, goo$

r grou, ositi*, moti*ating an$ intra!ti* n*ironmnt an$ !oman"

ro!sss. Mor intrstingl", wor9ing for th right /oss an$ !oman" was

*r" aaling to th authors.

Th moti*ating fa!tors an$ rtntion initiati*s ta9n /" $iffrnt

!omanis wr *r" thought ro*o9ing. Th most fr8untl" mntion$

initiati*s wr thos rlat$ to salar" an$ montar" /nfits. oo$ salaris,

in!rmnts, rforman! /as$ a", an$

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anothr rason for staff mo/ilit". Som of th othr rasons mntion$ wr

la!9 of !tations managmnt, !ounslling an$ mntoring, la!9 of

rofssionalism in imm$iat sur*isor as wll as a$ of th rl*ant

$artmnt or grou, an$ la!9 of $iffrntiation /twn rformrs an$

non rformrs. #n of th snior managrs in ' oin$ that th !urrnt

sul" of ra$" to us manowr is lowr than th $man$, an$ th la$

tim in gtting ro$u!ti* ol is a ma1or limitation in r!ruitmnt, whi!h

inturn la$s to mor attrition. Anothr rason mntion$ was /a$ ' @

organisational *alus an$ la!9 of thi!s.

CONC/USION

Th In$ian IT in$ustr" is fa!ing !onsi$ra/l !hallngs. In or$r to

maintain In$ias !omtiti* a$*antag of t!hni!all" s9ill$ 9nowl$g

wor9rs with th right mi of t!hni!al, /usinss an$ fun!tional s9ills, th

wor9for! n$s to in!ras /" at last +0 fol$ to 2.2 million 9nowl$gwor9rs in IT softwar an$ sr*i!s rlat$ aras /" 200 (;ass!om

200a). To !o with su!h !omlitis, 'M stratg" must ha* at its

!ntr a fo!us on ol n$s an$ r8uirmnts. Th IT in$ustr", li9 an"

othr sr*i! in$ustr", is ol $ri*n. At rsnt, th mhasis shoul$ /

mor on imro*ing th rsonalitis an$ ro!sss an$ hl a!h in$i*i$ual

!om out as a winnr. ' managrs ha* to !ontinuousl" *ol* !arr

aths, moti*at thir mlo"s an$ !rat a !ultur of onnss, whi!h will

also a!t as rtntion tools. Sin! th r!urring r!ruitmnt !osts ar

$trimntal, it is r8uisit that grat mhasis is to / l*i$ on starting

s!ialis$ training instituts to gui$ mlo"s to i$ntif" th right ol

at th right tim who !an 9 a! with th uni8u wor9 attrns in this

in$ustr". Th managrs of IT !omanis shoul$ ta9 mor initiati*s to

imro* mlo" rtntion /" ta9ing suita/l initiati*s. ow*r, it is also

to / un$rstoo$ that staff turno*r is as unr$i!ta/l as t!hnologi!al

un!rtaint". ow*r, with suita/l ' stratgis th masurs of th

attrition r!ntag !oul$ / 9t low gi*ing a$$ition organisational /nfit

an$ inturn, to th In$ian IT outsour!ing a$*antag.

AUTHORS

Singha Chiamsiri is !urrntl" Coor$inator of Cororat 'lations &

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