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IT services outsourcing: Do you have an ‘India-plus-one’ strategy?

For quite awhile, many U.S. companies have focused their IT services outsourcing strategies on India due to its market share, low cost of labor and robust vendor market. But now, some companies are seeking the best of both worlds: Traditional IT services offshoring coupled with a nearshore location.

My piece this week on IT services outsourcing in Latin and South America focused in on three of the larger countries in those regions in this industry: Mexico, Brazil and Argentina. For those who might have missed it, part 1 in this series dealt with IT services outsourcing in Asia.

As I investigate these locations, what I’m hearing is that many U.S.-based companies are seeking an “India-plus-one” strategy, whereby they supplement offshore operations in India (or perhaps China, another IT services outsourcing leader) with a vendor in a nearshore location, allowing them to derive the advantages of time zone alignment, geographic proximity, and any other perks that the particular offshore locations offers. To ensure that they don’t get left behind, some Indian IT services outsourcing companies have opened their own facilities in nearshore locations to complement their Indian operations.

For instance, I had a conversation this week with Paul Madarasz, general manager of the eastern region business unit at Aliso Viejo, Calif.-based IT services firm UST Global. Although the company has a lot of IT services operations based in India, Madarasz said the company is opening an IT services delivery center in Chile, outside of the capital of Santiago, that will focus on UST’s “bread and butter”: Application development, support and maintenance.

“We chose Chile for a lot of different reasons,” Madarasz said. “A lot of our clients would love to see an ‘India-plus-one’ strategy. They feel they’re fairly well saturated in India and would like another location.”

Other pluses include the Chilean government’s commitment to the IT sector and an educational system to support it, favorable immigration laws for bringing workers in and out of the country, and a communications infrastructure that would be robust enough to handle a high-intensity operation.
“We felt the business climate there was probably the best for us to be in,” Madarasz said.

So what are your thoughts on an “India-plus-one” strategy? Are you considering IT services outsourcing in different locations than in past years? And what parts of the world are you interested in reading about to guide your IT services outsourcing strategy?

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Rachel, This is an interesting strategy. I have discussed it with some other senior IT colleagues. We were discussing the Offshoring failures that have occurred recently. We were debating options and one option that has worked for some companies is to actually reduce their Offshoring and change their IT staffing model. Instead of trying to reduce IT resource budget by hiring Offshored, cheaper labor, they reduced their U.S.-based IT staff and kept only the most advanced, experienced, software/system agile engineers. Then they only hired those type of engineers. They stopped worrying on the "it won't scale" mantra about having a smaller group of IT staff who can wear multiple hats. They pay these smaller crews very well, and work them very hard, and require them to handle multiple IT software/systems. They are covered on resources quitting or being off, by having enough of the versatile engineers (my colleagues referred to them as IT heroes) to buffer when someone quits or is absence. They reduced their middle management resource cost and lower-end technologists and just kept the cream of the crop, but pay them well enough to keep them and keep them motivated. I am now professing this strategy and recommend it be considered. It was a hard mind change. It is a radical concept and seems illogical based on all we have been taught and read from Forrester, Gardner, etc. However, those channels have much to gain from recommending consulting firms and offshoring firms. Summary: Save money on IT - Lay-off or early-retire any non-advanced IT staff (this includes reducing middle management - a large burden on IT budgets), and hire only the best IT engineers (have a trusted, respected IT engineer review prospects technical prowise and adaptability), pay them well. Your budget will be reduced and it does scale.
Oh. Also, I have been reading up on the grassroot movements of anti-offshoring. You should make sure your readers realize the long term negative impact offshoring can have on their business and their credibility. Checkout: