Musings from Mumbai: India Provider’s Revenue Focus

With the experience of 10 days in Bangalore and Mumbai fresh on my mind, I want to share an observation from the recently held NASSCOM 2007 conference.  NASSCOM is the Information Technology, Engineering Services and Business Process Outsourcing trade association in India.  Its annual conference attracts virtually every significant corporate, educational and governmental participant in the industries in India.

My colleague Paul Schmidt and I presented at the
conference, carrying a message we have been hearing from our clients. The topic:
maturing an offshore operation. Our message, in a nutshell: Bigger is not
necessarily better when it comes to offshoring.

Many of our clients are concerned that India-based
offshore providers place so much emphasis on revenue growth (or "headcount
growth," in the language of the prevailing business model.) It’s as if
their worthiness was measured by no other metric. Ask any of the leading
outsourcing providers that operate in India, and they’ll provide some astounding figures related to their hiring record and plans.  If probed, they’ll share similarly striking figures relating to attrition rates.

To deal with this immense inflow and outflow of
human capital, most of the service providers are investing in extensive
educational programs. This is another point of immense pride.

So we felt that our message of “find ways to
measure your contribution to your clients other than through incremental
headcount” was appropriately framed. We offered some examples and suggestions,
largely aimed at deepening the caliber of services with the same vigor that
they are broadening their headcount. Put another way: Do more for your clients
with less effort.

Again, because we advocated the concerns we hear
from clients, we were happy to hear a parallel issue mentioned prominently by
leading government and industry officials, who urged the service-provider
community to divert its focus away from the top-tier cities that serve as the
foundation for the industry today. Indeed, there was almost a plea for the
providers to expand their workforces into “tier 2” cities, those of smaller
size. The reasons? There are many, it
turns out.

The most commonly heard motive is to relax the
burden on the already stressed infrastructure of India’s
popular destinations – Dehli, Mumbai and Bangalore, among them.  Airports, roadways, utilities, public services – they’re all stressed by the huge number of people participating in the offshoring boom.  And there’s a desire to allow the rising tide of relatively well-paying jobs to flow across the expanse of India’s population of educated young workers.

I’m not sure that the move to smaller metropolises
will actually address the concern that Paul and I raised – greater focus on productivity
– but it helps to shine a light on the fact that bigger isn’t necessarily
better, no matter what slice you take.