Indian immigrants in the US, especially in the Silicon Valley, planted seeds of global and Indian outsourcing industry

The global outsourcing industry, and its linkages with the contribution in outsourcing of American-Indians in US’s Silicon Valley, occupies an important position in the general discourse of outsourcing.

For a potential outsourcing company anywhere in the world, considering whether to outsource to India -– Indian entrepreneurship and management skills displayed in the Silicon Valley – make the case to outsource to India stronger.

The tremendous success that India enjoys in Information Technology (IT) and outsourcing of IT enabled services has its roots in the way Indian immigrants arrived and thrived in American cities – especially the Valley. Their creativity and hardwork laid solid foundations on which current Indian outsourcing companies are continuously building their outsourcing muscle – presently unmatched by any outsourcing location in the world.

In fact, so strong has been the influence of American-Indians on Indian and global outsourcing that the Valley, the southern part of the San Francisco Bay Area in Northern California, conducted a two-year survey to examine their contribution.

Its 3,000-page report, released in November 2009, was compiled by the Bay Area Council Economic Institute (BACEI). The report is an eye-opener for anybody who wants to understand India’s connections with outsourcing, the role of Indian immigrants in the Valley’s success, and why and when US firms started to outsource to India.

BACEI’s findings indicate the critical role American-Indians played in building the Valley as a technology and innovation hub – from where, today, technology companies outsource high-end projects, and outsource a large proportion of them to India.

The report also says that American-Indians’ reputation in the Valley paved the way for American and European software and service companies to outsource and offshore to India.

The seeds of global outsourcing lie in this causal and symbiotic relationship between Indian talent and the Valley’s sound capital and technological resources.

"When the Bay Area's innovation infrastructure research institutions, technology companies, and capital and risk-taking culture comes in contact with India's talent and entrepreneurial energy, the combination has been explosive, unleashing powerful business and wealth creation, says the report.
(If this can be highlighted or put in a box when the story is put up on the site, it will create impact. It’s a very powerful quote.)

This wealth creation essentially arose due to the vast numbers of Indians present in the US and the Valley. The success of the Indian immigrant population in the US, today numbering 2.48 million, majority of them in California and New York, shows how far they have come as a community that’s highly capable in starting from scratch and thriving in challenging circumstances – an environment they are well-versed with back in India. These attributes also bring into relief how Indian outsourcing companies are able to service any project that the West decides to outsource to India.

And it’s only due to their daily slogging, that today the median income in the Bay Area's Indian community, having 215,000 Indians, is more than $107,000 a year.  Many Bay Area firms and outsourcing companies have large presence in India, and outsource to major Indian outsourcing destinations.

Entwined as their success seems to be, the common and critical factor and link between the two has been to outsource to the US the education of Indian students - India's most valuable export.

In the 2007-08 academic year 94,600 Indian students enrolled in American universities - the seventh consecutive year that India has sent the most international students to the US. It’s when they are getting educated that the transformation begins.

They furiously absorb American qualities and build on them Indian soft and hard skills such as togetherness, hardwork, tolerance, and raw intelligence – making them powerful entrepreneurs and managers that the BACEI has described so eloquently.

In today’s context, all these are extremely important qualities in managing outsourcing operations, and encourage US firms to outsource projects in varied fields. This, in turn, continues to encourage clients to outsource to India.

So it’s not surprising then, that many Silicon Valley start-ups are started and have been started by Indians, after having studied in US universities. These very companies either end up as outsourcing companies, or outsource, or offshore.

Many of India’s modern IT and BPO leading companies’ CEOs and owners, such as Infosys’s Nandan Nilekani, and Wipro’s Azim Premji, studied or worked in the US, before they built outsourcing and software firms in India. Today, they themselves outsource within India and abroad.

Thus, as far as the US is concerned, its contact, trust and even dependence on American-Indians, and by default, the work it chooses to outsource to India, can be considered as ‘given’, ‘natural’, and ‘traditional’. To outsource to India, then, is a natural extension of the almost 160 years of common history between immigrant Indians, and a country that allows talent to nourish and grow beyond expectations.

The beginning: Sikhs become the first immigrants to California – sow seeds of outsourcing talent
Ties between Indians and the Valley go back to 1850s – when Sikhs from India were the first Indian immigrants to California. By 1920, Indian immigrants owned or leased thousands of acres of land in California.

At the turn of the 20th century, Indian engineering, medicine and agriculture students began joining West Coast universities. In years to come, they would head outsourcing companies or be part of US firms who would outsource to India.

The US itself opened floodgates to outsourcing, leading its firms to outsource to India
Through the 1965 Hart-Celler Act, the US eliminated country quotas and refocused immigration policy on attracting engineers and other professionals with scientific training.

This led to a wave in Indian immigration. Early immigrant families and businesses saved every cent they could by choosing to outsource in-house work and tasks within their family.

In the 1970s and 80s, expansion of personal computing and deregulation in telecommunications in the US, increased Indian immigration from the UK, Asia, Africa, and India.

Perhaps the turning point came in 1969, when IBM decided to unbundle its computer hardware, mainframe operating system and applications software lines in India.

This ignited a technology revolution. Engineering and software graduates from Indian science and technical institutes pooled personal funds to start small computer and software companies.

Soon, to outsource to India became expensive due to strict joint venture rules and high taxes and tariffs in India - until Indian firms and their clients devised a solution: 'exporting' Indian engineers and programmers to work in the US at client sites. This is how the Indian IT industry was born.

By 1980, 21 Indian firms were actively sending programmers overseas. Many of them stayed put after completing their projects. In 1986, almost 60 per cent of students from India’s premier engineering institutes, the Indian Institute of Technology, were migrating to the US. And American firms, facing a paucity of trained manpower (given that the number of H-1B visas given out were limited) readily absorbed them to stay competitive.

Y2K scare and mantra: Outsource to India and change your fortune
Threats from Y2K had led to many US and European firms to outsource Y2K work to Indian outsourcing companies. These outsourcing companies proved their worth and built business relationships with their clients.

When the tech meltdown led to a world-wide economic crash in 2001, Indian outsourcing companies were well placed to ride the outsourcing wave and service projects that the West chose to outsource to India.

India’s success in tackling Y2K outsourcing projects encouraged Texas Instruments, Hewlett-Packard, Oracle, IBM and others, to outsource software R&D to India. And from here on, Indian software and their outsourcing subsidiaries began to grow gradually.

Today, major corporations around the world outsource software application; they outsource IT systems management and engineering services. Fortune 500 companies outsource data mining, and knowledge processing. Even international governments outsource their IT projects.

The outsourcing trend is turning a full circle as Indian outsourcing companies are choosing to outsource to Indian outsourcing firms, and also MNCs – but now that one knows the contribution of American-Indians in entrepreneurship, both local and global – the trend is better appreciated.