Dec 15, 2006

Brains & Hands

After a basketball game last week I had the pleasure to meet Andre Varma, CEO of Multimedia Professionals ( MMP is a software development company. They are working with an appropriate business model; ‘brains’ over here and ‘hands’ over there (Bangalore, India). I talked with him about the pro’s and con’s of offshore outsourcing. Offshoring is mainly management problem/challenge. MMP tackled this problem by starting their own office in India; local management, 50 developers (expecting soon to be with more than 70).
I asked his opinion on the fact that a lot IT companies, that I know, are outsourcing to Eastern Europe instead of India. Varma thinks that in the long term, this isn’t a good idea, East European countries will soon be part of the European Community and then the price will be nearly the same as in other European countries. ‘Maybe they’re 15% cheaper, but that isn’t enough to withstand competition’. I think that could be the case, but this raises another issue; when a large amount of East european developers are entering the market, they become a critical mass and ultimately setting (a lower) price. More and more, companies are demanding that a sufficient part of the project must be outsourced offshore (or near-shore) and they want to know the margins made by he contractor. In the near future will this also be the case in smaller projects. The only value we (as West European countries) can add is innovation, entrepreneurship, being smarter and Management/control. Because ‘Hands’ will convert to ‘brains’ and therefore ‘our brains’ have to become smarter.

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