Indian CIOs Look Offshore

It may now be India's turn to offshore its IT services requirements. Research firm Gartner on Monday issued a recommendation to India-based CIOs that crystallizes the severity of the technology talent shortage in that country. Gartner recommends CIOs in India consider outsourcing IT offshore to nearby locales, including Hong Kong and Singapore. The IT talent shortage is a particular problem in India, which is working hard to build up its infrastructure to support a growing economy--one that's largely been fueled by providing offshore outsourcing to businesses based in the U.S. and elsewhere. India CIOs are competing against Tata, Wipro, and other local service providers for IT talent. These service providers are not allocating enough quality resources for Indian customers, according to Linda Cohen, vice president and distinguished analyst for Gartner's IT sourcing group. "Service providers typically allocate the best resources to their global flagship customers that pay in dollars and yield better margins," Cohen said in a written statement. India has a "severe shortage of skilled IT resources at all staffing levels." Rapid economic growth in India is only exacerbating the problem. In a report in February, Gartner warned that the problem for user organizations in India may only get worse as outsourcing companies start hiring business line managers from user organizations to build their vertical industry expertise. As the large Indian outsourcers grow in revenue by 30 to 40 percent each year, they will hire business managers from the banking, manufacturing, and retail industries, who bring business knowledge that can be integrated into their services offerings, the report added. With large Indian outsourcing consultants focusing primarily on markets in the U.S. and Europe, multinational services companies have targeted outsourcing deals by large Indian companies but the focus so far has been on very large deals, Gartner said in February. If Indian CIOs outsource work offshore to parts of Southeast Asia, that may get Indian companies to try and reverse the trend, Cohen says. In addition, an alternative to offshore outsourcing is for Indian CIOs to work with second- and third-tier providers in India who are interested in local business. The right provider may be able to provide domestic resources and perhaps a higher level of attention to issues and demands, she says. Gartner recommends that India-based CIOs develop innovative programs for retaining talent; recruit from small and midtier cities; evaluate offshoring; consider second-tier and third-tier IT service providers in their own country; and invest heavily in training "even while knowing they will lose some of their training investment to competitors," Cohen says. Related articles: Gartner Names the Top Service Providers IT Prediction 2007: A Rebuilding Year