Due Diligence: Follow The Bits - ' Value for the Money '
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Value for the Money
Of those companies that have gone offshore, 88 percent said they had gotten better "value for the money" with U.S. firms. That isn't too surprising. What is surprising, and what has to be worrying U.S. IT services firms, are some other results of the survey: 71 percent said the "quality of the deliverable" was better than U.S. firms provided, and 67 percent said "on-time delivery" was better. In other words, India's IT services firms are outperforming their U.S. counterparts in three key areas: they're producing better products and services; they're doing it faster; and they're charging less. That's good news for CIOs, but bad news for U.S. firms.
As Yogi Berra said, "It's déjà vu all over again." I'm old enough to remember when Japanese automakers made their first inroads into the U.S. market. The initial appeal of Toyota, Honda and Datsun (now Nissan) was that they were cheap. Very quickly they also became known for building more reliable cars. Soon after that, they began to move up-market by building larger and more expensive vehicles. Today they compete with their European and U.S. counterparts in every segment of the market.
The same thing may be happening in IT services. IBM, EDS, Accenture and others may look like they have a solid hold on the IT services market, particularly at the high end, but don't bet on it. India and China are turning out tens of thousands of trained IT professionals each year who are every bit as competent, if not more so, than those educated in the U.S.
Just as important, many Indian firms have adopted business cultures and internal procedures that are more disciplined than their U.S. counterparts', says McCarthy. This may prove to be the biggest challenge for U.S. firms: It's relatively simple to cut costs by moving work offshore, but it's much more difficult to revamp an established company's culture and internal business processes.
It has been years since U.S. automobile companies started trying to close the quality gap with the Japanese, and they still haven't caught up. We'll just have to wait and see if U.S. IT services firms can do any better. If they can't, they will end up like U.S. auto companies, dinosaurs whose market share will slowly but surely slip away.
By the way, we ended up buying a Mazda Protegé 5. We didn't even bother looking at U.S. cars. The last American-made car I owned was a 1967 Chevy Camaro SS.
Eric Nee,, a longtime observer of Silicon Valley, has served in a variety of editorial positions at Forbes, Fortune and Upside magazines. His next column will appear in May. Please send comments and questions on this column to editors@cioinsight-ziffdavis.com.
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