Posted on 02/04/2002 6:29:04 PM PST by JoeMomma
How to Tap India’s Cheap IT Labor Three things you need to know before you travel this route.
Craig Schneider, CFO.com
October 17, 2000
If Columbus found the elusive spice route to India today, he’d still discover a little piece of America.
This is because U.S. companies are increasingly colonizing in southern cities such as Bangalore and Hyderabad, seeking salvation from a tight IT labor market and developing the next Silicon Valley in the process. It’s certainly no secret that India is teeming with highly skilled, cheap labor for IT development. The trouble is getting your hands on it.
And as CFO.com reported last week, President Clinton is expected to sign an H-1B visa bill into law by Tuesday, which is expected to help ease the IT labor shortage in the U.S. by raising the limit on foreign professionals. And nearly half of the visas go to workers from India.
But how do you gain access? Some companies go the direct route of setting up an offshore subsidiary, while others opt for an outsourcing strategy. Either way, India is worth exploring. It’s the Indian labor costs – about one-fifth of those in the U.S. – that really have CFOs salivating.
“An equivalent $100,000 a year person here (in the U.S.) is maybe making $18,000 to $20,000 a year over there," says Nicholas Visio, CFO of Intelligroup Inc., an Edison, N.J. global vertical application service provider. “When you look at the incredible cost leverage you get out of it, it’s essentially a no- brainer.”
“There’s nothing that comes close to India,” adds Gordon Coburn, CFO at Cognizant Technology Solutions, a Teaneck, N.J.-based IT consulting firm that does about 70% of its work from its Indian facility. “They speak English, the university system is superb with 80,000 tech graduates produced each year versus 25,000 in the U.S., and the cost of communication has declined significantly.”
Offshore IT facilities also allow for a virtual 24/7 work environment, in which programmers email you projects before the sun rises on the East Coast. However, as enticing as having the home court advantage sounds, doing business in India is no curry walk.
Here are three lessons you should learn quickly before you even consider making the plunge to hire Indian-based IT help.
Lesson 1: Don’t go it alone.
For many U.S. companies without the advantage of having a founder native to India, launching the offshore subsidiary is a slow, arduous task that often begins with local vendor partnerships.
“You need to have local management and local ownership,” says Andrew Efstathiou, program manager at The Yankee Group, a Boston-based market research firm. “You can’t go in and impose U.S. business structure. You have to be sensitive to the local culture and methods of local business.”
And that sensitivity can often take years to build. Cisco Systems, for example, said in August that it would invest $150 million to expand its technology development center in India over the next two years, double the $75 million it has spent in India since 1996. It already has partnerships with Indian software services firms Infosys Technologies, Wipro Ltd., HCL Technologies Ltd., and some technical education institutions.
Cisco now plans to increase its workforce to 1,500 tech professionals from the current 500 with its new Bangalore facility -- a much more daunting and costly task if done from within the States or if it were just starting in India alone. Little-known companies without a reputation in the marketplace may have an even harder time recruiting and retaining abroad.
Partnerships offer insight into not only the local culture, but also the business process itself and the pitfalls of doing business offshore. After years of building local relationships and that comfort, then companies can start worrying about getting government approvals or hiring people for a 100% owned subsidiary.
“It’s not an overnight thing,” adds Intelligroup’s CEO Arjun Valluri, a native of Hyderabad, India. “Setting up the infrastructure can become a nightmare unless you are native to the country.”
Lesson 2: Use intracompany transferee visas (L-1).
Getting India’s IT workers into the U.S. has been even more of a nightmare with the shortage of H-1B visas. And while new legislation to raise the cap will help mitigate the problem, companies have other immigration options.
If your company has the wherewithal to set up a subsidiary in India, L-1 visas are an easier bet. And there is no quota.
“Once a foreign employed worker has been with the related company for a year, you have the option to bring them over on intracompany visas (L- 1) that have no cap. You can use them for up to five years,” says Laura Foote Reiff, the Washington D.C.-based attorney in charge of business immigration law for national firm Greenberg Traurig.
But certainly not all IT problems warrant setting up your own offshore subsidiary to recruit in India.
As a result, outsourcing has become the answer to many companies that don’t want the business risk and set- up requirements.
Lesson 3: Outsource through B2B Web marketplaces.
Getting the right consultant for the job at the best price can be an exhausting search, but B2B Web marketplaces including those of Hotdispatch Inc. and Vivant Inc. are speeding the process. IT managers can post specific questions/projects for free and get answers from a global pool of IT contractors.
The sites are particularly useful for finding solutions to complex IT problems that could, for example, involve Java coding, Bluestone servers and an Oracle database. "Some companies in that situation may go hire an Oracle or Java consultant. That's pretty inefficient," says Hotdispatch CEO Mike Kaul. "(With the site) you really are leveraging the market to find someone who's been there, done that several times before."
Also, it's often possible for IT managers to test software solutions to their dilemma before committing to payment.
Coburn, whose company typically focuses on Fortune 1000 companies, believes the largest companies aren't necessarily focused on finding a vendor through the marketplaces as much as locating one through reputation, word-of-mouth, and brand awareness. "I believe it would be more the mid-market using those types of services," he says.
Whichever route you take, remember: Timeliness is key. Waste time recruiting an IT staff and you risk losing your product lead to a competitor; burn out your limited IT staff with too many menial projects and risk turnover, an even more expensive risk.
What's the fastest way to create one job for one of those downsized native-born American IT professionals? Just deport one H-1(b) back to India!
IMMIGRATION resource library: public-health facts, court decisions, local INS numbers!
None of the above.
My opposition to H-1B rests on two principles -- my opposition to corporate welfare and my desire to put Americans' interests before the interests of corporate America's quest for cheap labor.
It has to do with putting Americans first and cheap labor second. It has to do with ending corporate welfare programs designed to keep Americans (native and naturalized) unemployed -- one of which is called the H-1B program.
Do you favor corporate welfare in the form of the H-1B? You do? You're on the side of Bill Clinton and Robert Reiccccchhhhhhhhhh ...
You've borrowed a page from the Clinton handbook -- when you disagree, call the other persona racist, bigot, just anything but discuss the issue at hand. Ho hum ... at least be creative in your debate methods. But I guess lobbyists and cheap labor enthusiasts like yourself can't come up with a sound argument for putting Americans last -- so you come up with sound bites.
You see, I'm for Americans first, whether they are naturalized or homegrown. That's not bigoted, just like the Japanese aren't bigoted for their stance against non-Japaense labor in their country.
Putting Americans first and standing in opposition to H-1B isn't racist.
You are just one who believes that corporate America is flawless, and you love the free job market only when employers have the leverage over employees. When employees have leverage over the employers due to market constraints, you think that's unjust. You and your fat cat buddies run to liberal big government to get your taste of some corporate welfare.
Allman_Brothers_Are_Gay is really Bill Clinton (an H-1B supporter) lurking around the FR forums! I've figured it out!!!
He obviously can't argue FOR corporate welfare, so he starts calling names! A page from the Clinton/Lockhart/Begala/Carville playbook to say the least.
Actually, Pat Buchanan and Ralph Nader were against the H-1B. Winning candidates against the H-1B were Tim Hutchinson, Bob Barr, and Tom Tancredo.
That is pure BS. The requirements, guidelines, and restrictions are extremely stringent, and to overcome the hurdles set in place by them (educational level, English speaking ability, technical knowledge, and other merit-based factors), make it a daunting task for anyone to get one.
Not true. The DoL H-1B process is a rubber-stamp process where they check for the application's completeness (all the blanks are filled in) and not the veracity of the claims by the applicant business. As for the "prevailing wage" requirement, the prevailing wage is a number supplied by the employer (pulled out of the Adam-Clymer of the CEO is my guess) that merely reflects the wage that the employer would LIKE to pay an American in a similar position -- not actually what it would take to hire an American for that position.
The truth that you do not want to admit is that an American who is qualified for the job merit-wise may still be treated as an unqualified applicant by merely the salary requirements of that applicant. The business may legally turn away merit-wise qualified applicants whose only crime was asking for a market-based higher salary, and then run to liberal big-government for an H-1B by claiming a labor shortage.
The loopholes to prevent H-1B abuse are big enough to drive a Mack truck through.
Your very left-wing stance FOR the H-1B visa gets blown away by this conservative patriot frrom Colorado.
You're just in hysterics because you do want corporate welfare, and you're trying your best to defend it. Americans last -- corporate campaign contributions first. Straight from Clintonesque schools of thinking.
I'll align myself with conservative patriots like Tom Tancredo. Putting Americans first is the patriotic thing to do. Odd -- you've been an American citizen longer than I, and yet I'm more "America First" than you by a long shot. I guess it's just because I value employing Americans more than savings on the payroll account.
I'm against corporate welfare and all conservatives are. You, MR ABAG, are not a conservative -- just an apologist for corporate welfare.
What lobbying firm do you work for? I don't think there's an ITAA branch in Atlanta, but there may be a sister organization that promoted corporate welfare there.
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