August 31, 2003

Freedom From Geography
Coders To The World

The irrelevance of geographies is, at once, an opportunity and a threat for the Indian knowledge industry.

By Priya Srinivasan

Michael Meeks is a 45-year-old programmer who lives in the city of Seward in Alaska (don't reach for the map just yet, we're about to tell you why geography is obsolete). Seward has 3,000 residents with over 500 seasonal businesses, or so Meeks helpfully informs this writer over e-mail. He works for the Seward administration and is the ''systems manager'' for the city and a ''very busy programmer''. Well, guess what, Meeks has found a way of getting around the issue of overload on the job. He simply outsources programming jobs that he is too pushed to handle, thanks to the internet. With a little help from sites like Rent-A-Coder, a resource pool with a database of coders across the world, Meeks farms out jobs to programmers in India, France and Russia where he submits, ''all the best programmers live''. Meeks has outsourced a total of 111 jobs online.

A few thousand miles away, John King, a programmer in France, employed by a British company that specialises in systems development for advertising agencies follows a similar modus operandi. Spelling out the kind of paradigm shift he has seen in the course of his 18-year programming career, thanks to online help, he launches into the details of his recent outsourcing successes. King is currently developing an intranet system and has three online experts working with him. ''I reckon we've shaved about two-to-three months off the development time and will end up delivering a much better product,'' he says.

For programmers like Meeks and King, help on the job is always at hand, at a distance of about a few thousand miles at a fraction of the cost they are used to paying for similar jobs in their own markets. King has outsourced a total of 133 jobs to coders in India, the former Soviet Union, South America, Singapore and the US and UK. "Before I discovered online outsourcing, I developed my shareware programs single-handedly, the profit margins were just too small to consider employing someone full time to help me and I just didn't have the office space. It was frustrating because I had loads of ideas," says King.

Helping outsourcers like King bring their ideas to fruition are thousands of online coders. For the record, the coder with the highest rating online is Ludhiana-based Anuj Gakhar who beats his peers from across the world hands down with a rating of 9.86. According to Ian Ippolito, CEO of the Tampa, Florida based, Rent A Coder, the average cost of an Indian coder has increased from a tenth the cost of a US one to a seventh. "A large percentage of the top 10 coders on the site are Indian and this reputation for achieving results gives Indian coders the ability to charge more for their services," says Ippolito.

Freedom from cost differential? Maybe, just maybe, Indian programmers have begun to command their due online, free from the shackles of location-based pricing. Ippolito adds that Indians have also started to bag research projects online. The top three countries for research projects are United States (54 per cent of all such projects), United Kingdom (23 per cent) and India (10 per cent).''

Creation Of A Virtual Firm

How often have you bought the lines "the online economy is dead", or, "India can never create (software) product companies"? Turning both statements on their heads is the story of Cypherix, a Mumbai-based security product firm that specialises in 448 bit encryption. The firm's product Cryptainer sells exclusively on the net. With customers in over 40 countries, Cypherix founder Abhay Mehta proudly claims that he is in a position to fund all expansion plans through internal accruals and has never taken external funding. Everyday four to five customers on an average download the Cryptainer from countries as diverse as Brazil and Estonia, for $90 a piece. Now Mehta has hit paydirt. A Japanese company, TechnoBlest, has signed a licensing deal with Cypherix to sell Cryptainer in a packaged form across shelves in Japan, in association with a software distribution arm of Softbank. The product, christened SafeFile will hit the Japanese market mid August. Mehta has never seen any of his overseas business associates or customers. "All interaction is online, I discourage phone conversations as far as possible," says Mehta, ensconsed in a two-room mid town Mumbai office with a panoramic view of the sea. The sound of the breakers drowns out voices in his office but to Mehta, it's inconsequential. When this writer left his office he was busy online answering some query on his product that had just come in from a Brazilian customer.

The Great BPO Wave

Rinu A is an Executive Assistant to a middle management executive in a Fortune 500 company. She lives in Chennai and heads off to work everyday at the Spencer Plaza Complex. Her boss heads out to work around the same time. Only he's about 10,000 miles away in New York City. She answers his calls, takes messages, completes all his documentation and does everything that an ea does. And she manages to skirt chores like bringing him coffee. "We have pools of assistants for mid-level management people overseas," says Joseph Sigelman, Co Founder, OfficeTiger, Rinu's employer.

Business Process Outsourcing companies complete entire processes offshore. For instance, firms in the banking and financial services space can offshore any process that does not require face-to-face interaction or critical transactions. Standard Chartered Bank's offshore outsourcing arm scope manages in real time, the entire back office processing required to conclude a foreign exchange transaction irrespective of wherever in the world the bank strikes such deals. Financial services firm J.P. Morgan Chase plans to offshore the entire backend, particularly research, required for any investment banking deal to India. Some industry observers like Noshir Kaka, Principal, McKinsey & Co see "a complete recreation of the supply chain in services. Today when you open up a pc, 90 per cent of its parts have come from 36 different countries, that is the diversity I expect to see in the supply chains of the future."

The offshore BPO phenomenon is attributable to a few key factors: availability of stable cost-effective bandwidth, secure communications and the ability to split activities across the business. Industry veterans like Jerry Rao, Chairman & CEO, MphasiS-BFL have an economic term for the phenomenon, "global resourcing". Sigelman seconds that definition. "Our business is to find the best talent anywhere in the world." Adds Rao, ''What we are now seeing actually redefines the term remote. The only things that are remote now are things that can't be digitised.''

The trend has its own flipside: the movement of millions of jobs offshore has sparked off protests in the United States, UK, and Australia. Rao has his own way of looking at that. "The job shift isn't a one way phenomenon. Consider e-Learning where universities overseas are targeting students in this part of the world, or areas like expert medical opinion where patients in Asia solicit expert opinions from overseas doctors. It's clearly a two way street."

The Global Delivery Model In IT Services

One of the more recent buildings to grace the Infosys campus in Bangalore's Electronics City is the offshore it Services outsourcing centre where about 50 software engineers manage, in real time, it networks of their clients thousands of miles away. It's a high security zone. Two large TV screens run international news channels so the engineers can catch any development that is likely to impact a client-location anywhere in the world. Adding to this surreal atmosphere is the fact that each engineer glued to his screen is actually working real time with someone 10,000 miles away and probably doesn't exchange more than a casual greeting with the person next to him in the course of a working day.

The global delivery model is here. This could be the trigger that will accelerate the creation of Indian multinationals. Every major Indian software company is setting up delivery centres across the Asia Pacific region in a bid to build redundancy as well as tap cost effective local talent. In the meantime every multinational company worth its salt is doing the same. Says, Dion Wiggins, Research Director, Gartner: "US multinationals like Accenture, IBM, Microsoft, Oracle are fully engaging local citizens, hiring local employees in order to leverage the advantage that each location has." All these companies are working to perfect the global delivery model whose complexities are only just beginning to surface. "In the future, we will be talking of a multicentric model; it will not be just the English speaking market. You will have France, Germany, Japan, possibly Korea and Taiwan, Scandinavia and a host of other markets which will shape the global delivery system," says Partha Iyengar, VP (Research), Gartner.

While we may be inching towards a seamless world, it will be a long time before it turns borderless. The very move towards global resourcing has triggered five proposed anti legislation bills in the US alone. Immigration regulations are altered by the day in a bid to stem travel to countries where the threat of mass scale job loss looms large. The Indian government plans to take the dispute to the World Trade Organization. It's going to be a long drawn battle before freedom from geography is actually won.