Small Business

Misadventures in Indian Outsourcing


By David E. Gumpert

DUD CODE. Not one to give up, Arun decided to assume the role of lead architect when the second outsourcer couldn't immediately find a replacement. During that first month, "We were spending lots of time on the phone and with e-mail" to get the team in India up to speed.

As with the first contractor, warning signs began appearing once the work was due to be cranked out in earnest. Two or three teleconferences were scheduled each week, but only one of the four developers in India ever bothered to attend. Nor was the project manager ever present. More significant, the all-essential code wasn't being produced.

By the middle of January, a bit of code did appear, but Arun says it didn't work according to specifications -- an impression confirmed when he brought in a local consultant to examine the Indian outfit's handiwork. The verdict wasn't good. The U.S. consultant, recalls Arun, "said it wasn't even close." By this time, neither phone calls nor e-mail queries were being answered. Good-bye to company No. 2. "These two firms put us behind between three and four months," says Arun, not to mention costing about $40,000.

A REAL TEAM. The story does have a happy ending, though. After those two outsourcing failures, the couple decided to try going American. They posted online ads seeking contract programmers, and received dozens of responses. Eventually, they wound up hiring five developers at rates ranging from $2,500 to $4,000 per month -- not much more than what they had been paying in India. In return for such modest compensation, Arun and Sangita have agreed that the U.S. programmers will share in their company's growth via stock and other benefits.

"Over the last three months, we've made more progress than in the previous six months," says Arun. "This team works like a team. We give them a vision. We let them be very creative. That has helped us a lot."

Now, as the couple tries to raise venture capital backing, Arun and Sangita look back on their experience and see two main problems. First, they feel that India's outsourcing shops are stretched too thin. Observes Arun: "Bangalore is like Silicon Valley in the late 1990s. People take jobs, and they leave when someone offers them $5,000 more."

NOT THE SAME. Second, the outsourcing boom has placed smaller U.S. businesses a low priority with the Indian companies, since it's large corporations with big budgets that receive the primary attention. Notes Sangita: "The big corporation will hire 50 people or 60 people, while we were hiring 5."

Arun is saddened that the India he remembers from the early 1990s has changed so dramatically. "When I left, there was employment for life. I liked that about the country," he says. Sangita shares his misgivings. "Most of these [outsourcing] companies," she says, "are now spoiled rotten."

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