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Small-scale outsourcing
to India
[If
you are interested in offshoring, you may also be interested
in Mohan's new book on Offshoring
Management]
Despite
all the furore about outsourcing in the US, several companies
ranging from Fortune 500 giants to smaller organisations are
successfully outsourcing work to India. MOHAN BABU answers
the queries of a small company which wants to engage a one-man
workforce in India
Globalisation
and outsourcing are turning out to be among the most commonly
used words in technology management and executives and managers
of all kinds of companies in the US are starting to consider
outsourcing. Following is an interesting e-mail from one such
executive I received a while ago.
Mr
Mohan Babu,
My
name is Bob (name masked for this discussion) and I am the
CTO of a US-based software company, ABX Corporation. I read
your article on the Express IT People website and found it
interesting... hence I have determined that you might be an
expert or at least know where I might be able to go to get
information on my questions.
For
the past two years, we have employed an intern engineer working
on his Masters in Computer Science at a US University near
our facility. His university visa is expiring at the end of
December (after graduating) and he intends to move back to
Mumbai. He would gladly accept a job offer from us, but at
this point we are not in a position to offer him a full-time
position and H1-B status.
We
are interested, however, in continuing to work with him from
India as an independent contractor with future hopes of starting
a software R&D centre in Mumbai. I have a few questions
about this:
1)
Are there any governmental issues that we (the company) would
have to work through, or is he the primary person responsible
for setting up his personal status as an independent contractor?
2)
I am looking for a report on IT compensation in India. Any
ideas on where to go for this?
Please
Advise,
Bob
[CTO, ABX Corporation]
This
mail was definitely intriguing and set me thinking. Outsourcing,
or at least a flavor of outsourcing, is the kind of remote-work-management
being proposed by Bob whose company does not want to throw
the baby away with the bathwater, so to say. They want to
continue to avail the services of the Indian engineer, who
has proved to be good, but cannot remain in the US because
of visa hurdles.
After
thinking for a bit, I decided to offer my two cents to Bob,
with the disclaimer that this was not a legal advice. My reply
to Bob went something like this:
Bob,
Thanks
for writing to me.
The
topic of “outsourcing” (although what you are attempting is
not exactly outsourcing) is especially close to my heart.
I have researched a number of successful cases of outsourcing
for my articles. Several companies ranging from large Fortune
500 giants to smaller organisations are successfully outsourcing
work to India. I will attempt to answer your queries the best
I can:
Regarding
your first question, the candidate could work as an independent
contractor bill-ing your company at a mutually agreed-upon
rate.
The
legal work system in India—although I am no expert, but have
a general knowledge of it—is similar to that in the US. The
candidate can choose to work for you from his garage (literally).
Of course, I am assuming that you will be going through the
motions of signing a contract, non-disclosure, non-compete
agreement with the candidate before he embarks on the project.
You
should also take steps to ensure the protection of your intellectual
property rights. In the future, if/when you decide to expand
your operations, you will need to form a subsidiary or incorporate
a
branch
in India. (History of EDS’s expansion into India makes for
interesting reading: http://www.eds.com/india/india_profile_history.shtml).
The
answer to your second question: Most IT outsourcing companies
charge clients rates ranging between $12 to $15 per hour for
work done offshore.
Although
I have not been able to get hold of “official data”, the following
article should give you some idea: http://www.expresscomputeronline.com/20020415/cover1.shtml.
Another article on “Current trends in compensation practices
in the software industry” might give you some more input on
the trends: http://www.mafoi.com/compensation/content/trend7.asp.
It
should be noted that your contractor may incur additional
expenditure in the form of access to the Internet/intranet,
networking, phone calls to/from the US and other logistics
that need to be factored in. Hope this helps. Please feel
free give me a buzz if you have any other questions/concerns.
Regards,
Mohan
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