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Article by Mohan Babu


Small-scale outsourcing to India

[If you are interested in offshoring, you may also be interested in Mohan's new book on Offshoring Management]

Despite all the furore about outsourcing in the US, several companies ranging from Fortune 500 giants to smaller organisations are successfully outsourcing work to India. MOHAN BABU answers the queries of a small company which wants to engage a one-man workforce in India

Globalisation and outsourcing are turning out to be among the most commonly used words in technology management and executives and managers of all kinds of companies in the US are starting to consider outsourcing. Following is an interesting e-mail from one such executive I received a while ago.

Mr Mohan Babu,

My name is Bob (name masked for this discussion) and I am the CTO of a US-based software company, ABX Corporation. I read your article on the Express IT People website and found it interesting... hence I have determined that you might be an expert or at least know where I might be able to go to get information on my questions.

For the past two years, we have employed an intern engineer working on his Masters in Computer Science at a US University near our facility. His university visa is expiring at the end of December (after graduating) and he intends to move back to Mumbai. He would gladly accept a job offer from us, but at this point we are not in a position to offer him a full-time position and H1-B status.

We are interested, however, in continuing to work with him from India as an independent contractor with future hopes of starting a software R&D centre in Mumbai. I have a few questions about this:

1) Are there any governmental issues that we (the company) would have to work through, or is he the primary person responsible for setting up his personal status as an independent contractor?

2) I am looking for a report on IT compensation in India. Any ideas on where to go for this?

Please Advise,

Bob [CTO, ABX Corporation]

This mail was definitely intriguing and set me thinking. Outsourcing, or at least a flavor of outsourcing, is the kind of remote-work-management being proposed by Bob whose company does not want to throw the baby away with the bathwater, so to say. They want to continue to avail the services of the Indian engineer, who has proved to be good, but cannot remain in the US because of visa hurdles.

After thinking for a bit, I decided to offer my two cents to Bob, with the disclaimer that this was not a legal advice. My reply to Bob went something like this:


Thanks for writing to me.

The topic of “outsourcing” (although what you are attempting is not exactly outsourcing) is especially close to my heart. I have researched a number of successful cases of outsourcing for my articles. Several companies ranging from large Fortune 500 giants to smaller organisations are successfully outsourcing work to India. I will attempt to answer your queries the best I can:

Regarding your first question, the candidate could work as an independent contractor bill-ing your company at a mutually agreed-upon rate.

The legal work system in India—although I am no expert, but have a general knowledge of it—is similar to that in the US. The candidate can choose to work for you from his garage (literally). Of course, I am assuming that you will be going through the motions of signing a contract, non-disclosure, non-compete agreement with the candidate before he embarks on the project.

You should also take steps to ensure the protection of your intellectual property rights. In the future, if/when you decide to expand your operations, you will need to form a subsidiary or incorporate a

branch in India. (History of EDS’s expansion into India makes for interesting reading:

The answer to your second question: Most IT outsourcing companies charge clients rates ranging between $12 to $15 per hour for work done offshore.

Although I have not been able to get hold of “official data”, the following article should give you some idea: Another article on “Current trends in compensation practices in the software industry” might give you some more input on the trends:

It should be noted that your contractor may incur additional expenditure in the form of access to the Internet/intranet, networking, phone calls to/from the US and other logistics that need to be factored in. Hope this helps. Please feel free give me a buzz if you have any other questions/concerns.





About the Author

  • A Bio and profile of the author, Mohan Babu, can be found at his homepage
  • Mohan has authored a book on Offshoring and Outsourcing (Publisher McGraw Hill, India), a link to which can be found here
  • Mohan has also authored an Online book on "Life in the US," available for free download.
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    For FAQ, Trivia and Information on Life in America, visit the Ask-A-Desi section

    ©Mohan Babu: All Rights Reserved 2005

    Mohan Babu is an international consultant trying to find the ‘sweet spot’ where IT meets business. E-mail: mohan He is also the author of a recent book on "Offshoring IT Services"

    All rights are reserved. Mohan Babu ("Author") hereby grants permission to use, copy and distribute this document for any NON-PROFIT purpose, provided that the article is used in its complete, UNMODIFIED form including both the above Copyright notice and this permission notice. Reproducing this article by any means, including (but not limited to) printing, copying existing prints, or publishing by electronic or other means, implies full agreement to the above non-profit-use clause. Exceptions to the above, such as including the article in a compendium to be sold for profit, are permitted only by EXPLICIT PRIOR WRITTEN CONSENT of Mohan Babu. 

    Disclaimer: This document represents the personal opinions of the Author, and does not necessarily represent the opinion of the Author's employer, nor anyone other than the Author. This Article was originally published in Express Computers


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