Outsource Bulgaria

In a recent post on outsourcing, I reviewed a new book (Multisourcing: Moving beyond Outsourcing to Achieve Growth and Agility) which tries to change the way we think about outsourcing in general. It seems that the specifics are changing quite rapidly as well.

In an interview published Monday (in the German edition of the Financial Times), SAP CEO’s said that outsourcing software development to India is proving to be more and more expensive.

India’s the world’s largest market for offshore software development services. The increased competition from global companies (IBM, Microsoft, etc.) and local offshore companies is driving personnel costs higher and higher.

Frank Hartman, SAP’s spokesman, confirmed this and added that the major contributing factor to the high personnel costs is the high turnover. Recruitment and training costs have escalated rapidly in recent years.

Discussing plans for growth, SAP’s CEO said that the business software vendor is looking to Eastern Europe and China. China’s potential is seen as limited because of its lack of protection for intellectual property rights. At the same time, Eastern Europe offers political and economic stability. “Turnover is low and the costs aren’t too high,” he said.

The consensus in the “blogosphere” is that the three factors for successful “offshoring” are:

• Offshore interesting and motivating projects
• Develop local leadership talent
• Hire, train and manage local staff with a long term view in mindI’d like to add that all this holds true UNTIL Microsoft moves into the local IT market. Once this happens you either run (like SAP) or you switch all your products to open source. Steve Ballmer’s love for developers (video) is a well-known fact.