For example, Wipro Ltd. in Bangalore, India, said in its latest quarterly earnings report last week that its workforce had reached 51,000 employees as of Dec. 31 -- up 30 percent from the start of 2005.
It's a similar, or even better, story at Bangalore-based Infosys Technologies Ltd., which said earlier this month that it had 49,400 workers as of Dec. 31. That amounts to a 40 percent year-over-year increase.
Those gains come as offshore firms and the Indian operations of U.S. vendors are seeking to expand into relatively new areas, such as IT infrastructure outsourcing.
Last month, Dallas-based Perot Systems Corp. started offering infrastructure management services from its facilities in India, where 6,000 of the company's 17,000 employees are based.
Mike McClaskey, Perot's CIO, said last week that the infrastructure work is a small part of the firm's business and that the Indian unit will provide the management services remotely. There's no cost advantage for a U.S.-based vendor to move servers to India, he said. Moreover, India still lacks the third-party disaster recovery facilities that are available in the U.S., McClaskey said.
But most of Perot's employee growth in recent years has been in India, according to Mc-Claskey. He said he isn't worried that the rapid workforce growth will affect his ability to keep wages from rising too quickly or prevent him from finding people with the right skills in India.
Bangalore, where one of Perot's facilities is located, is India's equivalent of Silicon Valley, but the company also has an office in Noida, a suburb of Delhi. And McClaskey said there are several hundred other cities in India with the required skill levels and educational facilities, as well as a wage advantage over Bangalore.
'Labor arbitrage'
"I think we are going to see labor arbitrage in India for a long, long time, and I think it's going to move around geographies inside of India," said McClaskey, referring to the practice of reducing costs through the use of lower-cost labor.
Wipro is also offering remote infrastructure-management services. Sridhar Ramasubbu, general manager of Wipro's financials and investor relations office in India, said infrastructure management now accounts for about 7 percent of the company's revenue, which totaled US$617 million in the quarter that ended Dec. 31.
Pavan Chahal, managing director of NeoIT Inc., a consulting firm in San Ramon, Calif., that provides advice on using offshore services, estimated that infrastructure management will grow from between 5 percent and 10 percent of the market for offshore firms now to between 20 percent and 25 percent over the next two years. The trend will begin with help desk services and move up the IT scale toward outsourcing of functions such as storage management, Chahal predicted.
Creighton University in Omaha is doing a form of infrastructure outsourcing through a deal it signed last year to have Atlanta-based Cox Communications Inc. manage its communications services. Creighton CIO Brian Young said he's unsure whether he would outsource management of his other IT systems. But he thinks IT managers have to investigate offshore providers and see what they can offer. "You at least need to know the numbers," Young said.
Sidebar
Gap checks out on managing IT internally
Retailer Gap Inc. and IBM announced last week that they have signed a 10-year IT outsourcing deal valued at approximately $1.1 billion.
The San Francisco-based clothing retailer, which operates stores under brand names such as Gap, Banana Republic and Old Navy, is hiring IBM in an effort to streamline its IT operations and reduce costs. As part of the deal, about 400 Gap IT workers will be transferred to IBM's payroll.
IBM will manage the mainframes, servers and networks that support Gap's corporate offices and its 2,850-plus North American stores. The retailer will also hand over control of its help desk and deskside support operations, and the deal calls for IBM to install a new wireless network for Gap's stores.
Gap declined to make CIO Michael Tasooji available for comment on the outsourcing deal. IBM also wouldn't provide an executive for a telephone interview.
The estimated value of the outsourcing deal is approximate because some of the costs assessed to Gap will be based on its actual consumption of IT services. In addition, the contract includes a provision designed to keep Gap's costs down while ensuring that IBM's fees don't become "significantly higher" than the market rate for the services being provided, according to a filing that Gap submitted to the U.S. Securities and Exchange Commission.
To help accomplish that goal, the agreement allows Gap officials "to periodically perform benchmark studies ... to determine whether IBM's price for the services is consistent with the then-current market standards," the SEC filing said.
Most enterprise outsourcing contracts now include benchmarking provisions, with the cost usually split between the user and vendor, said Chris Engle, who heads Gartner Inc.'s benchmarking service.