Enterprises Look To India To Outsource Internal Software Development

By Paul McDougall, InformationWeek

An Indian services firm's role in an outsourcing contract with the New York Stock Exchange shows that the overseas outsourcing of higher-level processes is becoming more common. Having mastered tactical IT projects, Indian firms are even starting to do payroll and transaction processing.

The exchange has just completed the first phase of a project managed by Wipro Technologies in Bangalore, India. The project, which uses a Java-based application to manage data that determines the eligibility of companies to be listed on the NYSE, will expand to include applications that power the NYSE's regulatory-compliance processes.

U.S. businesses can trim 30% to 40% of a task's labor costs by contracting overseas, says Forrester Research director John McCarthy. Many Indian firms adhere to strict process controls that can be more stringent than U.S. standards. "This isn't like manufacturing, where companies had to trade off quality to get lower costs," McCarthy says.

Wipro just bought American Management Systems' global energy practice so it can sell vertical-market services. But compatriots Infosys, Satyam, and Wipro have to beware: U.S. outsourcers are moving more operations overseas. Application-management specialist Corio Inc., for example, is forming an Indian subsidiary, and Hewlett-Packard is moving chunks of its service operations offshore.

If nothing else, companies such as HP and Corio will have one advantage over indigenous companies, according to analysts: They already own a lot of big client relationships.