Global Sourcing Goes West

The demands on CIO budgets within the finance sector were supposed to ease this year, however demands of 'the same for less' are as strong as ever. There are several ways to meet this request including rationalisation of the technology portfolio, ensuring architecture is stuck to ( and the right supplier contracts negotiated ), using development at speed methods ONshore ...... and of course OFFShoring

So everyone went to India. The results were fabulous in some instances, budget reductions in excess of 40%, improved quality to CMM level 5 standard, greater predictability and of course the opportunity for Industrial Tourism ( well why not ! ). The problem is that the rush to Offshore has caused mayhem in the Indian Offshoring market. Growth rates of over 30% per annum for the last 4 years and in some cases major companies growing over 50% ( one example is from c.20,000 to c.45,000 employees in just one year ). The infrastructure has suffered too with roads chocked at key times of the day. Of course salary increases are a natural consequence as is staff attrition ( usually linked to higher wage offerings ).

All of this is managable, say the experts, because there are more than 1mm people in University in India studying technology. This is true and bodes well for the future, however for the present this immaturity does affect standards. And even the best processes in the world cannot replace experience.

So off to China ! Further away, greater time zone difference, some excellent quality, patchy English and challenges in finding quaility management. Nevertheless the Chinese have also established a quality education programme and in the future there is no doubt that this country will be a major sourcing location for Asia in particular as well as Europe.

For long distance destinations, Brazil must now be considered. Although more expensive in the South of the country ( and the high salary taxes add to this ), the Northeast region has excellent potential. Good quality staff, excellent management, fine infrastructure and more than 30% of the staff speak suitable English. The problem lies in future capacity rather than current capability. Unlike China and India there have not been major government education programmes in technology and the bouyant in-country market soaks up much of the existing capacity. However there is some depth to the resource pool already and the government is now waking up to the need for a major education program. The move West also supports the American timezone.

With reasonable capacity today, good growth prospects in the medium term and the added bonus of new government initiatives to support technology, Brazil must now be taken seriously. The key question is: Who will take the first mover advantage !