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Building A Nearshore Outsourcing Company In Ann Arbor, Michigan: Systems In Motion CEO Neeraj Gupta (Part 4)

Posted on Monday, Apr 4th 2011

Sramana: Latin America, Eastern Europe, and the nearshore U.S. are all options that are coming up a lot now. What is the risk to India?

Neeraj Gupta: India is the only place where software development works at scale. There has been a lot of investment in India, and I think it is here to stay. The biggest challenge companies face today is determining how much more money to put in India. If you have 50% of your operation in India, what is the risk of putting even more work there?

India is also going through challenges. Attrition and growth are high, and because of that mid-tier shops are struggling. The bigger companies that have a well-oiled machine are now interested in working only with companies that are willing to stay with them. If companies have a captive center in India, they run a huge risk of not being able to retain people or to continue to afford them. This may lead them to look at other parts of the world.

Sramana: What about other parts of India?

Neeraj Gupta: It comes to high concentrations of available talent. That leads to cities like New Delhi and Bangalore. There is clearly a trend of [establishing operations in] other cities, and yes, you can reduce your risk that way. However, you still have an overall country risk. Companies must decide if they need another country aside from India to mitigate their risk. There are good reasons why companies are looking at Eastern Europe and Latin America right now.

We come to companies with a complementary strategy. Talent pools in other countries are somewhat limited, but nobody argues with the talent pool in the U.S. Michigan can deliver a price point that is productivity rated similar to what you can get from Argentina or Ukraine. The difference is that Argentina and Ukraine have 12% inflation. The U.S. workforce has greater leverage [than it has] in two years.

Sramana: What about the time zone problem? I think there are 50 cities in India that could develop into the next tier of outsourcing companies, just as you have done with Michigan. India will move beyond its seven-major-city mode, but it can’t change time zones.

Neeraj Gupta: India will definitely be part of the global strategy for most companies. The time zone discussion does come up when we start talking nearshore, including Canada and Argentina. We highlight time zone and cultural advantages with our model. A lot of that is coming into play today. The pace of innovation, R&D, and technology is so fast that for IT departments to keep up, they have to use agile [models]. Those are difficult delivery models if you have time zones that are very different. The time zone advantage is very big for us.

Sramana: If you are competing with Argentina, there is clearly a larger supply of talent in the U.S.

Neeraj Gupta: We do have more resources in the U.S. There are a group of people graduating with associate’s degrees who can do good work. They may not be core computer science students with algorithm development, but if you give them a PHP framework that is MVC [model–view–controller], they will do well.

This segment is part 4 in the series : Building A Nearshore Outsourcing Company In Ann Arbor, Michigan: Systems In Motion CEO Neeraj Gupta
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