Outsourcing jobs to India

Salon.com has an interview with venture capitalist Ravi Chiruvolu where he claims that outsourcing to India isn’t just a cost saving measure, but a competitive necessity.

More and more of our competitors will be doing [outsourcing], and all it takes is one or two to pull that model off, and they will have a cost base that’s maybe one-third of ours. They just have a lot more leeway, and a lot more ability to develop products faster, and to bring them to market faster.

Now that Mr. Chiruvolu has more experience with the process and complications of outsourcing, he is a more qualified supporter, though he says it is still an absolute necessary course of action.

What are some of the difficulties that you’ve faced?

One of the natural ones is just the hiring. How do you hire the best possible people given that you’re often coming in as an outsider, and given that people know you don’t know the market and want to charge you more, not just on a salary basis, but for all the corollary, ancillary services — the rent, the connectivity, all those things. There are certainly people more than willing to take advantage of anyone.

And let’s say you’ve got the best prices, or best cost structure: How do you know that you’re getting the best people? Oftentimes, these people aren’t committed to your vision and what you’re doing. They’re a long way away, and maybe they just have a different philosophy or mind-set.

He makes some good points about the need of American workers to move up the value chain. A similar arguement is made in a FastCompany blog entry.