THE BLOG
09/10/2013 05:51 pm ET Updated Nov 10, 2013

IT Outsourcing Lucky Chance: Who's Ready for It?

Nowadays IT outsourcing seems to be the most natural service both from the point of view of those companies which do have such tasks and from the side of those who are eager to provide the service and necessary solutions. However, few would think a minute to answer a most simple question: how happened that companies of the developed West are eager to share knowledge and skills with representatives of the third-world states -- things which have always been kept as the highest secret. One needs just to recall a famous historical example of Venetian secret of mirror making and what happened to those who betrayed it. Now the time and attitude turned out to have changed drastically and the West eagerly shares precious information, skills and ensures that third-world developers gain experience in the process. So what were the reasons for all that? Or maybe that precious knowledge is not a top secret in the least?

Mass IT outsourcing started, in fact, when developed countries had to solve the notorious Y2K problem. Six digit time input pattern cost much for the developed world but gave a chance to Indian developers who engaged into that monotonous, and tedious, and consumptive work. It seemed that American and European countries needed anyone who would do that job at a lowest cost, and Indian developers turned to be at the right time at the right place. The task did not provide lots of knowledge or experience but set a communication channel as well as Western business processes understanding which turned for India to be a solid bridge into the new millennium. According to NASSCOM, Indian software export in software for the years of 1997 totaled to $125 million USD while in 2001 it reached 2 billion USD. Of course, some outsourcing companies did exist in India before year 2000 such as the big five Indian IT providers (TCS, Cognizant, Infosys, Wipro and HCL Technologies) but the country was more like a back yard for big international companies which outsourced here their business processes. The Y2K issue quickened the whole thing and distinguished the trend.

Then the dot com bubble came and as Indians were old acquaintances they managed to deliver services when again they were needed most. The bubble burst and the crisis broke and the Westerners needed the same level IT coverage at a much lower cost and India was again at hand. Comparing the level of life and salary rates American and European companies saved huge sums of money hiring Indian developers. Those were the key factors why now despite all forecasts India is the leading provider of IT outsourcing services: a challenge of cheap and resource-consuming task and again a sufficient ratio of salary and work quality.

Today many researches guess whether new powerful centers of outsourcing development will rise and replace India. As it was mentioned above, two things are necessary for that. Something extremely simple and time consuming and a huge number of developers ready to fulfill that task at a really low price.

That's why Eastern Europe is highly unlike to become that future monster, as the level of developers will not allow them to engage in such an unsavory and unrewarding activity. The same stands true for Latin and South America which developers are quite spoiled by the near shoring contracts from the US. China might be an alternative, big IT providers have appeared in China lately, like Pactera, GDS, and many others. What is a really huge benefit similarly to that which contributed to the rise of India as the world IT outsourcing leader is Chinese economy of scale allowing to engage a huge number of developers at a time.

However, there is a range of factors which can harden the successful path to the Western market. Currently about a half of the software developers available in China works for Japan. More and more human resources are necessary to satisfy the IT needs of the booming internal market. Of course, some companies are focusing on only foreign markets but they can be hard hit by the coming alterations to the US immigration law.

Some surveys view Africa as a promising candidate. Some African countries like Ghana, for example, do have a certain pool of skilled IT development professionals, however, taken into consideration, those skilled experts are scarce about a huge continent regularly torn by war actions of some less lucky and less developed African states, with no common guidance or strategy, we wouldn't bet for Africa.

Besides, availability of cheap workforce there is a need in an issue similar to Y2K, which would power a new outsourcing community to a level of Big Guys. Mobile development, though a very trendy thing of late, is definitely not such an issue. Developing applications for portables is really popular and brings profit to millions of developers around the world but at the same time does not provide the necessary scale. New technologies such as cloud computing, big data management or already popular things such as web application development are highly improbable as well. They demand skills and experience and as we agreed those are not strong sides of a potential power, at least at the starting point. At the same time now, when literally everybody is eager to work with Java and .Net technologies, quite few keep an eye on mainframe programming languages which are absolutely indispensable to keep the ball of existing operations rolling. However, similar to Y2K issue, the problem which thousands of some yet to-be-developers are looking forward to may arise quite unexpectedly and demand treatment at any cost and in no time. We definitely will not anticipate it but it would be interesting to see how it could affect the global IT outsourcing market and global cash flows.