Technology, Venture Capital, Private Equity

Perspectives from an Indian VC

Captives and India

Posted by Arun Uday on May 25, 2007

Venture Intelligence points to two somewhat related articles on captives / product development in India. One refers to the closing down of the Bangalore development center of hi-profile startup The other is a report by Forrester on the challenges being faced by captives in scaling up their India operations. In fact, the current issue of Business Today also has an article on the same topic.
There are various reasons attributed to the inability of captives to replicate the success of third party service providers, chief amongst which are issues like – wage inflation, crumbling infrastructure, attrition etc. But as an erstwhile techie, let me provide the “insider’s view” on this issue. In my opinion, the main problem is not so much issues like infrastructure, high costs etc. After all, that is something even the other regular IT Service cos have to grapple with. The main problem is that in the employees’ minds, the career growth in such places is just not as rewarding as that in other IT services cos – no onsite opportunities, limited scope for graduating from programming to middle mgmt and in many cases, being stuck with repetitive and low end work. Note that for most programmers in India, the aim is to “progress” from being a programmer to team leader to PM etc. However, in US, I have seen folks who are happy being programmers for their whole life. So, it has a lot to do with peer pressure. When an programmer in an offshore R&D center sees that his peer in other regular IT co keeps going onsite or meeting clients or is managing a team and no longer spending all his time coding, there is a sense of insecurity that creeps in. He fears – “Maybe if I continue to do this for long, I may end up damaging my long term career prospects because the moment I approach another co, the first question they would ask is – “Have you managed a team?” or “Do you have client facing skills” and I don’t have a good answer.” Unless startups like Riya and the rest understand the mindset of an avg techie in India, they will always end up with such a conflict of expectations between the co and the employees. Therefore, it should not come as a surprise to such captives or offshore centers of startups etc that it would take them a lot more to get resources on board as compared to the other regular IT service firms. The only way to make it work for such captives would be to provide additional carrots in the form of higher remuneration, or better work or periodic visits to the HQ etc so that the tradeoff from an Indian programmer’s standpoint makes sense as well. They cannot come with a Silicon Valley mindset and hope to make it work only by throwing more stock options. The scenarios in the two places are significantly different and that needs to be taken into account for making a success of it here.

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