Indian outsourcing not all it's cracked up to be?

David E. Gumpert writes for Business Week Online: "Misadventures in Indian Outsourcing"

If you own a small business and are thinking of outsourcing info tech or call-center work to India, read this column before taking another step. Signs are mounting that India's outsourcing industry has become overheated -- and less competitive in important respects -- for American companies seeking the vaunted advantages of lower costs and round-the-clock production schedules. . . .

Husband-and-wife entrepreneurs Arun and Sangita Shastry of Westford, Mass., learned this lesson the hard way when they launched totalETL, a business specializing in sophisticated desktop information-extraction tools for project managers. A decision to outsource very nearly cost them their startup. . . .

Now, as the couple tries to raise venture capital backing, Arun and Sangita look back on their experience and see two main problems. First, they feel that India's outsourcing shops are stretched too thin. Observes Arun: "Bangalore is like Silicon Valley in the late 1990s. People take jobs, and they leave when someone offers them $5,000 more." . . .

Second, the outsourcing boom has placed smaller U.S. businesses a low priority with the Indian companies, since it's large corporations with big budgets that receive the primary attention. Notes Sangita: "The big corporation will hire 50 people or 60 people, while we were hiring 5." . . . Read more

Interesting.

Just American propaganda trying to slow the much-feared loss of IT jobs to India? Or is it accurate reporting on quite typical experiences? Who knows.

But I'd sure look into all angles very thoroughly before taking the plunge to massive outsourcing of key intellectual work.