The (initial) hype is long over, but outsourcing is a recurring topic in Indian business, and an extremely controversial one at that. Hardly anyone knows success stories - instead, almost everyone knows about a failed software project with Indian “colleagues”. Most of the time this failure is blamed on “the Indians” instead of analyzing exactly why a project was not successful or could not have worked in the first place.

Why outsourcing projects with India fail

Ultimately, one can find very similar reasons for the “typical” outsourcing as for many other (failed) ventures in India, namely:

  • The business is based on overall false expectations and an unrealistic hope for cost savings, which can no longer be achieved (for a long time).
  • Half-hearted approach and too little attention when using resources (attention, investment) as well as when setting up and controlling structures and processes.
  • Wrong assessment of Indian partners - either overestimation (phenomenon of the “super Indian”) or underestimate (from a “late-colonialist” attitude)
  • Different perceptions of quality

Despite everything, many companies are now happy to rely on Indian services and employees. Especially in times of digitalization and a shortage of skilled workers, India is becoming even more interesting and necessary as a personnel market. The industry association Bitkom is currently expecting 55.000 vacancies in the ICT sector. According to estimates, there is a shortage of up to 200.000 skilled workers in the mining professions across Germany.

Trend towards insourcing: Building resources in India (Focus on Software)

But a medium-sized company cannot immediately set up its own development center with several hundred or thousand programmers and engineers in India, as some corporations do.

For example, SAP AG, which has been represented in India since 1998 and now employs over 7.000 people there. SAP Labs India is the largest research and development center outside of the headquarters in Germany. And the Linde company already has over 1.000 developers working for them in Gujarat.

But medium-sized companies are also trying to recruit software developers in India. The “screw empire” Würth from Künzelsau founded its own IT center in Pune in 2015 and is growing quite dynamically. Or Germany's market leader for engineering services, Ferchau, which we advised and provided operational support in setting up the structures in Bangalore (Case Study Ferchau Aviation).

There are also occasional takeovers of specialized Indian IT service providers by European companies, sometimes by startups (for example Applift from Berlin), which want or need to access programmers from India. We manage such transactions from the selection of targets to integration into the new parent company.

UBS is also bringing its IT back in-house after decades of an outsourcing partnership with a large Indian service provider. But you stay in India and operate here again from now on its own development center.

Outsourcing to India comes with risks

A few years ago, Lufthansa took the opposite approach and sold its own development and processing unit in India to IBM. What often makes economic sense usually leads to organizational problems. It is in the nature of things that managing an external partner is always more laborious and the quality of personnel and results is more difficult to ensure. The same conclusion was reached in April 2017 India business climate index. As a result, companies that have their own structures in India were above average successful and overall very satisfied with their performance in India compared to those that only worked with local partners.

Software developers and programmers from India as an export hit!?

Nevertheless, collaboration with service providers in the area of ​​software development and engineering services is still the predominant model for German/Indian cooperation. On the one hand, large Indian IT service providers and system houses such as TCS and Wipro are taking over large software projects from German banks and insurance companies. These are also the main reason why many thousands of Indian skilled workers come to Germany every year. According to the German Economic Institute (IW), more than 7.000 Indians now make up most of the foreign scientific and technical academics in Germany.

In addition to the global IT companies from India, numerous Indian companies are trying to “land” projects through a local representative in Europe and then carry them out in India. Another business model is the “sale” of dedicated programmers (so-called dedicated staffing). But very few of them are professional enough for European requirements.
For precisely this reason, we would particularly like to point out that you should invest sufficient time and resources in selecting a suitable service provider.

It is an art to distinguish the top class of efficient suppliers from the rest in India. Indian suppliers know how to present themselves attractively. However, they are often later unable to keep their promises and specifications and disappointment quickly sets in.

Your R&D center in India: acquisition, development or partner search

It doesn't always have to be building or taking over your own development location be in India. We also regularly support medium-sized companies in India in finding and selecting high-performance suppliers of technical services. In addition to due diligence, this also includes commercial negotiations and the conclusion of service level agreements (SLA) as well as audits of local partners. Further information on our website: India as a procurement market

In addition, with our Indian subsidiary Dr. Wamser + Batra India Pvt Ltd. Ten years of in-house experience in operations our own outsourcing unit in the areas of financial accounting, payroll and compliance services.