Outsourcing of tech services from developed Asian markets?

India has come a long way in providing outsourced technology development and IT services to firms in North America and Europe over the last three decades. As the market potential for firms from India max out in the developed world, many of them are turning to developed markets within Asia, such as Korea, Japan, Taiwan and even China to tap into new clients.

A major challenge faced especially by IT services and technology development firms from India pitching to clients in developed markets in Asia is the highly misplaced assumption that global brands hailing from North Asia would behave the same way as their western counterparts purely because they have a global name and footprint. Nothing could be further from the reality. Linguistic, cultural and, most significantly, a deficiency of trust often plagues such client-service provider relationships with the few cases where firms have tried to work together.

AMA has over the years tried to help outsourced services and product development firms from India. However, challenges remain. For one, many of the larger Asian multinational enterprises have their own back-office operations in India. So, there is little need for them to actually seek out services directly from their home markets in Korea or Japan. Secondly, the ones that could actually utilize services from India, namely mid-tier North Asian firms, have found competitive service providers from Vietnam, Russia and even Croatia, who seem to work out cheaper in the long run and seem to have fewer linguistic and operational challenges.

A major challenge faced especially by IT services and technology development firms from India pitching to clients in developed markets in Asia is the highly misplaced assumption that global brands hailing from North Asia would behave the same way as their western counterparts purely because they have a global name and footprint.

The only model that appears to work for the Indian firms is to have a project management office or affiliate in the target market to help manage the client and ensure smoother process management. But that ultimately may not be cost effective since the cost of the in-country office and personnel in Seoul or Tokyo or Taipei needs to be factored into overall cost to client. Therefore, unless the product development services provided are innovation-driven or are of a highly specialized nature, clients – many of whom are vertically integrated operations – are hesitant to trust external teams for product development work.