The outsourcing pioneer revs up for a new era of offshoring.
So you think offshore outsourcing is new? You should spend a little time listening to Naren Patni, CEO of Patni Computer Systems Inc., in Cambridge, Mass.
Patni tells it this way: In the 1970s, the MIT grad and his wife were living in a Cambridge apartment when they cooked up a plan to ship reams of paper forms from the United States to India, where they would be typed into ticker tape and then shipped back to the United States. The idea resulted in the creation of Patnis company Data Conversion.
"We started in a two-bedroom attic apartment in Cambridge. One room was India, the other was Cambridge. We experimented with using only written instructions between the two rooms," said Patni.
The approach was not, in fact, unique. Legal information and news provider LexisNexis used to do much the same thing. Lexis flew court briefs to India and flew ticker tape back. The process took seven days. Data entry wages were 50 cents per hour in India and $6 per hour in the United States.
Patni founded another company, Patni Computer Systems Ltd., in 1978 with similar intent. "The business model was to bring work to India," he said.
Then, in 1999 and 2000, as Patni put it, "time and distance collapsed," thanks to worldwide broadband Internet links. In 1999, Data Conversion merged into Patni Computer. In 2002, Patni received an infusion of $100 million in funding from General Atlantic Partners. A month ago, the company went public on the Bombay Stock Exchange at $5 per share. The drive to move work offshore is now "more than a flood. Its a tide."
With Infosys and other Indian giants breaching the $1 billion mark, Patni is still a small player, with $251 million in annual revenue, but Patni has growth in mind. He has implemented a three-tier approach, with 7,000 employees in India, 1,500 employees who shuttle between India and the United States, and 200 industry experts who stay in the United States. Patni is aiming for a variety of markets, headed by insurance and followed by financial services and manufacturing.
Patni brings the perspective of time and experience to the current offshoring wave. He notes that India is still weak in some ways. "The threat that America feels is unreal because the creativity and thinking is here [in America]."
And just how soon will Indian wages equal those in the United States? Patni said it wont happen for 10 years.
Out and About
An indication of Indian wage inflation was revealed at the recent Keane quarterly earnings call. Annual increase percentages, particularly for senior staff in India, average in the mid-teens, said executives of the outsourcing and services company.
Keane, which has significant operations in India, also has to worry about the bottom-line threats of the rupee-dollar exchange rate. The strengthening rupee has been putting pressure on the company. The result may be a sharing of the risk of exchange-rate fluctuations with clients, officials said.
Nonetheless, Keanes conference call had a decidedly upbeat theme. Keane reported total bookings of $409.7 million in the quarter, an increase of more than 100 percent, from $204.6 million in the year-ago quarter. "Were clearly seeing signs of recovery, but its still a tough environment."
So, you want to send work offshore? Ensuring secure access to source code by worldwide work teams is a requirement that Cyber-Ark Software is addressing with its Inter-Business Vault for distributed software development. The source code vault permits access only by trusted parties.
"Cyber-Ark was exactly what we were looking for. Were using it as a shared store," said Scott Vowels, vice president of security architecture and engineering at Comerica, which has been pilot testing Cyber-Arks product for a year.
Elsewhere, Resource Information Systems, a Calgary, Alberta, application support provider, has opened an outsourcing center in Romania. The company offers four tiers of support: on-site, near-site, near-shore and offshore in Romania.
Stan Gibson can be reached at email@example.com.
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