Lately, a few of the multinational companies have shifted their India base back to the United States. Salaries have been on the rise and employees with specialized skills here get approximately 60%-70% of salaries that they would normally get in the United States, along with the drop in efficiency that may arise due to the time difference. Dipping value of the dollar vis-à-vis the rupee also doesn’t make the situation easy.

So am I saying that offshoring to India doesn’t make sense? No, but offshoring just to save cost doesn’t make sense. Recently, Pari, our CEO, and I were discussing the areas where companies go wrong in offshoring and identified a few rules in this arena:

• The India center shouldn’t just be looked upon as a cost-cutting measure but should be looked upon as a strategic unit. India has a vast talent pool that is not so inexpensive but which definitely is talented. Besides, India is also a potential market and a growing ecosystem for a lot of industries. Therefore, it makes sense to capture full advantage of this country.
• Dependence on the various teams between the two destinations (say, US and India) should be less. The pieces of work sent here should be independent pieces.
• The impact of the time difference should not be underestimated. While the same geographical factors can be utilized for support activities, they cannot be overlooked by product development companies for research centers.
• The offshoring center should be autonomous and must have authority to make decisions. Waiting for overseas approvals brings delays in the system.
• Two-in-the-box reporting systems should be avoided, and, if required, authority, roles and responsibility of the managers should be clearly defined. Similarly, the staff augmentation model should be avoided and, ideally, must be in place for transitioning processes.
• Documentation is important and should be encouraged as a culture. It averts over-dependence on individual employees and eases the transitioning of processes.
• There should be metrics (to measure productivity, etc.) in place. This would help evaluate each center to estimate the workflow and avoid fingerpointing. Productivity of each resource (irrespective of where they are placed) should be estimated as the same and hence the burden of work should be equal.
• Hybrid models of having a captive and third-party vendor is gaining ground and one should not feel hesitant in dividing work accordingly. For processes that are simple in nature and which require a small and independent team, a third-party vendor is a good option.
• Communication between the two centers should be open and frequent. Long-term goals should be shared and weekly reports should be sent.
• Cultural differences should be understood and worked upon.

These are but a few of the areas to be looked at when opening an offshoring center. The process does take time, but once the wheels are oiled and the centers function smoothly, there is no dearth of benefits one can acquire from such business models. We have many examples to learn from, like the R&D center of Yahoo! and Microsoft in Bangalore and Hyderabad. They have managed to successfully offshore some critical part of their Product Development here. I am sure there will be many more to follow!

-- Priyanka Rana, Consultant, Market Expansion

I had a discussion with my friend (who is a journalist by profession and doesn’t appreciate management jargon) about my work and told her about a project I am working on, which involves identifying how companies localize. She wanted to know what localization is and I tried my best to explain in a way we relate best - sharing a recipe!

Have you ever tried eating Chinese cuisine in a Chinese Restaurant in India? It is adapted for the Indian taste, keeping in mind the availability of Indian vegetables and probably a Chinese person wouldn't appreciate that dish as much as an Indian does! That’s localization for you in a layperson’s term.

For a company to capture new markets, especially companies offering consumer-based products, it needs to tweak the product for the local use. A simple task of checking various country portals of Yahoo! can give anyone a fair idea of how companies look at minor details to win the attention of natives. They use a videogame console as a sports icon in Korea (a country known for its popularity of video games), while they use a football in the United States and cricket wickets in India.

There are a few questions that revolve around this issue and I have tried to answer them in this blog.

How important is localization?

A lot of people might shrug and call it over-rated. I have given some examples here to validate my point. Kelloggs was a flop in Indian market. Cornflakes, popular in other countries, did not match well with the Indian habit of eating cereals with hot milk. How many of us like the advertisements of Head & Shoulders or Garnier Fructis? They both show young models of countries we don’t relate to! These companies saved money by using the same advertisement everywhere, but did it really help? On the other hand, we have examples like Nokia, which offers SMS texting in Hindi, a made-in-India version which is prone to dust. Nokia has been such a hit in India that they are expecting India to be their second largest market, next only to China.

What are the strategies usually used for localization?

Strategy for localization itself has to be localized depending on the culture and nature of people. It also depends on the similarity between nationals of the country the product originally belonged to and the country where the product is being launched. Besides looking at practical things like usability issues, regulations, and infrastructure support, companies can follow strategies listed below:

• Partnering/buying with local players
• Hiring local teams/native CEOs
• Competitor strategies - Looking closely at the existing products to understand the needs and familiarity of the nation
• Hiring advisory companies for market expansion, which have experience of that country
• Partnering with the existing ecosystem—suppliers, complementary goods, etc.
• Pricing and volume of sales have to be calculated on the basis of realistic market trends and not on boardroom meetings.
• Having a clear sales strategy roadmap defined for the localized product and setting up processes to take regular feedback from customers

All said and done, we will never stop having paradoxes like Hyundai Santro. When Santro was launched, analysts told them it would be a flop in the Indian market and that the company needed to localize the look of the car. However, the product proved everyone wrong by becoming a roaring success!

-- Priyanka Rana, Consultant - Market Expansion

For decades, the United States has been considered throughout the world as the "Land of Opportunities." The majority of the products built to date have addressed the customer needs of the US market, and this trend is set to continue.

In the last decade or even prior to that, global product companies had set up their subsidiaries with significant investments to leverage India as a key sourcing hub for IT R&D. Many companies started their R&D centers and used India talent as coding factories for their global products. The mantra for these companies will be and continue to be "Made from India."

However, in the last 12 months, there have been subtle changes in the mindset of these MNC companies. India is being seriously considered as a market for IT products. India Inc. is shaping itself to be the next big market not only in Asia but also globally. Companies are evaluating options of localizing the products for Indian customer needs. What began as coding factories are now looked at more from a strategic point of view. Senior management teams are now taking initiatives to understand the Indian market needs and potential. For the first time in history, the 1.1 billion population of India is looked upon as a billion potential customers waiting to make their lives better with IT products.

One great example of product localization that comes to my mind is the "Yuvraj Singh International Cricket 2007," the Indianized version of "Brian Lara International Cricket 2007." Microsoft has taken a good initiative to touch a billion Indian sentiments. India being a cricket crazy nation, the product would definitely play on a million minds as the gaming market matures. The other example of product localization is the Hindi version of Google News, which was launched recently.

With consumer internet companies leading the pack in localization, it will be interesting to see how the market will shape up in the next few years. So will our dream of "Made from India" take a 360 degree shift and become "Made for India"? Let us wait and watch.

-- Chandramouli
Consultant, Zinnov

Organizations, on their quest to improve their competitive position in the market, access new market and improve the operational efficiency are using M&A as a way to achieve these goals. The size and frequency of the deals have increased and so has the complexity of the integration process.

People, process and technology integrations make up the core aspects of the merger and acquisition process. Organizations should look at leveraging offshoring as a strategy to accelerate the integration process and reduce the costs involved. The integration of complex business processes, technology implementation and IT projects can be outsourced to large vendors. When these activities are measured through a series of stringent service levels and penalty/bonus clauses, it will enable the offshoring vendors to execute better on the integration when compared to the internal teams. These vendors can also drive cost savings significantly due to offshoring labor cost arbitrage apart from reengineering and economy of scale.

The Offshoring vendor who would offer M&A integration as a service and is willing to take up the risks along with it can make great strides in competing with some of the large outsourcing vendors in the world. When executed effectively, offshoring can be used as a tool even by mid-sized organizations without the financial muscle to execute effectively on their M&A strategy.

The real estate industry has emerged as one of the most happening industries in the country in the recent times. The industry got a major boost when government permitted 100% FDI in the infrastructure sector. Many foreign companies have since joined hands with domestic players to exploit the huge growth potential of the industry. MNCs like American International Group Inc., High Point Rendel of UK, Edsaw-US, Japan’s Kikken Sekkel, Lee Kim Tah Holdings and Cesma International from Singapore have shown keen interest in the sector.

Recently, Dubai-based Emmar Properties, the largest listed real estate developer in the world, joined hands with Delhi-based MGF Developments with an investment of US$500 million, resulting in India’s largest FDI in real estate sector. Total FDI inflow in the country in FY 2006 was $7.5 billion. Introduction on real estate venture capital funds in the country and change in FDI policy related to the development of Special Economic Zones (SEZs) is another reason for the spurt in the industry. Private sector biggies like reliance Industries Ltd. have proposed to spend Rs. 50,00 cr on its various projects. Alongside, Nokia, M&M and ONGC are investing and pouring huge amounts in building infrastructure for commercial and industrial use. Cashing in on realty boom, Gammon India ltd. comes out triumphant with net sales of Rs. 1429.36 cr. The company also significantly boosted its profits, which was up 173.26%, during the fiscal. With upswing at the top line and strong growth at the bottom line are Punj Lloyd, B L Kashayp & Sons Ltd. and Simplex Infrastructure Ltd., with net sales of Rs.1,407.33 cr and Rs.1334.62 cr, respectively.

These increasing investments in infrastructure and the rising demand for commercial as well as housing units augur well for the industry, in general. However, things such as rising input costs and continuation of housing tax incentives would be things to watch out for industry players.

-- Aniket Arekar, Research Manager