I was reading "The World is Flat" last week and this blog is inspired from a beautiful paradox that Thomas Friedman puts across in the section "India Vs. Indiana".
... In 2003, the state of Indiana put out to bid a contract to upgrade the state's computer systems that process unemployment claims. Guess who won? Tata America International, which is the US-based subsidiary of our India's Tata Consultancy Services Ltd. Tata's bid of $15.2 million came in $8.1 million lower than that of its closest rivals, the New York-based companies Deloitte Consulting and Accenture Ltd. No Indiana firms bid for the contract, because it was too big for them to handle.
In other words, an Indian consulting firm won the contract to upgrade the unemployment department of the state of Indiana! You couldn't make this up. Indiana was outsourcing the very department that would cushion the people of Indiana from the effects of outsourcing. Tata was planning to send 65 contract employees to work in the Indiana Government Center, alongside eighteen state workers. Tata also said it would hire local subcontractors and do some local recruiting, but most workers would come from India to do the computer overhauls, which, once completed, were "supposed to speed the processing of unemployment claims, as well as save postage and reduce hassles for business that pay unemployment taxes", the Indianapolis Star reported...
The contract became a political hot potato and was eventually cancelled. The people of the state of Indiana considered this as one of the biggest local employment insecurities posed by the outsourcing phenomenon in the US. The then Governer Joe Kernan, ordered the state agency, which helps out-of-the-work Indiana residents, to cancel the contract and also put some legal barriers and friction to prevent such a thing from happening again. He also ordered that the contract be broken up into smaller bites that Indiana firms could bid for - good for Indiana firms but very costly and inefficient for the state. A check for $993,587 was sent to pay off Tata for 8 weeks of work.
Friedman argues in terms of the intricate sorting out process that needs to be done during globalization and raises a critical question, "Who is the exploiter and who is the exploited in the India-Indiana story?"
A similar article on another IT outsourcing contract caught my eye recently. The Business Standard article titled "IBM wins Amul's 10 year outsourcing contract" sums up like this:
IBM will provide information technology services to Amul, the Gujarat Cooperative Milk Marketing Federation (GCMMF), and its milk unions to support their growth plans. The 10-year outsourcing deal is worth over Rs 80 crore and under the terms, IBM will manage and operate the IT environment of GCMMF for the next 10 years, primarily by setting up a technology platform based on ERP systems and a datacentre backed by a Disaster Recovery Centre. As a result, the cooperative will be able to improve its supply chain, strengthen customer focus and achieve stronger growth. Amul has deployed information technology from the grassroot level of Village Dairy Cooperative Societies and the new deal will affect the lives of millions of farmers.
There were several Indian bidders in this outsourcing contract and apparently, none could win. Surprising, isn't it?
And I end this blog right here with the two questions that confronted me:
- An Indian Software Firm bag which won a similar sized contract ($ 15 million) in the United States (mainly because of the cost efficiency element) lost out to an American firm in its home country??
- Is this an effect of true globalization or our own desi IT firms are busy getting pampered by American outsourcing jobs?
The recession has certainly reduced this American dependence and all the firms have now been forced to look at the Indian subcontinent for business. While this is definitely healthy to bootstrap our economy, the Amul contract only seems to suggest that the Americans, armed with their low cost workshops in our country have woken up now.