Passing Off to India

North American marketers are finding their closest service partners halfway around the world. Tech firms in India have been handling increasing amounts of back-office computer work for U.S. companies. With infrastructure built during the dot-com boom, Indian firms are beginning to compete for marketing work from those companies.

“Business process outsourcing” (BPO) is big business in India, the dominant player in offshore IT work. Worldwide, BPO revenues were $124 billion in 2001 and may reach $178.5 billion by 2005, per research firm Gartner. Most of the current work is manufacturing, data processing (payroll, processing insurance claims) and customer service, but marketing — especially database management and online promotions and fulfillment — is poised to grow.

“First, manufacturing was outsourced. Now it’s information,” says Sreekant Khandekar, founder of marketing site AgencyFaqs.net.

A handful of U.S. promotion shops and online developers already contract with Indian companies to write computer code for online promotions or database management. Marketers and traditional promo shops contract with a U.S. online agency for Web-based promos or data management. That agency in turn hires a development company (usually in the U.S.) to set the IT architecture; then the development firm subcontracts with Indian developers to write the computer code.

AT&T Wireless uses an Indian-built Web site, AT&T Wireless Photo Zone, to display consumer photos taken by street teams demonstrating phones like Sony Ericsson’s T68i Camera Phone. Reps roam AT&T-sponsored events (sports, concerts and festivals) snapping pictures; consumers get a code to download their photos. Lead agency Seismicom, San Francisco, tapped tech firm Octane Technologies, San Francisco, to build the site last March; Octane subcontracted overseas.

Promotion agencies can channel labor savings into their profit margin — and labor can be as much as 75% of the cost of software development. “If you can get comparable service overseas for half the cost, you can undercut competitors’ pricing and still make more profit,” Seismicom CMO Bill Carmody says. The challenge for U.S. promo agencies is to be tech-savvy enough to know just what architecture an online promo needs. Plus, it helps to have an intermediary like Octane to manage offshore work.

Working with U.S.-based brands “holds us to a certain standard, since our work must be approved by U.S. marketing staffs,” says Neeraj Roy, CEO of Mumbai-based agency Hungama (Hindi for “joyful noise”). Roy has begun approaching U.S. shops “now that we have the bandwidth and the experience to handle U.S. business.”

But some remain skeptical of the value of offshore fulfillment. EastWest CEO Chris Bragas argues that most assignments are too small to be worth outsourcing. “If you have to keypunch a ton of entries, maybe. But no promotion agency is big enough to need systems help to that magnitude” to justify overseas outsourcing.

“The price is attractive, but cultural and time differences offset that,” adds Real-Time Media President John Hopper. “In this economy, you can get good programmers for reasonable rates in the U.S. That’s changed from the dot-com heyday, when we paid above market level due to demand.”

A high-tech culture

U.S. software developers first tapped Indian programmers during the dot-com boom, when there weren’t enough programmers here to keep up with the work. “It began as a way to manage overflow,” Carmody says. “When funding was cut, outsourcing to India became a financial advantage. When the dot-com bubble burst, it took a year or more before Indian programmers felt it, because their lower prices were so competitive.”

These days, IT startups in the U.S. need a contract for offshore development to get venture capital funding, Octane CEO Sameer Bhatia says. “Investors think, ‘If your chief technology officer isn’t smart enough to know you can outsource to India, we don’t trust you with our money,’” he says.

Indian tech firms have three big advantages. First, English is India’s primary language. Second, salaries are about half what they are in the U.S., and workers have as much (or more) college education. Programmers make about $120,000 in the U.S., and $50,000 to $60,000 in India — a relatively high salary there, for a prestigious job. Third, India’s time zone (9.5 hours ahead of the East Coast) facilitates fast turnaround.

Besides, India is a sophisticated market in its own right. Online and cell-phone promos are hot, and text messaging outpaces even Europe, never mind the U.S. (see sidebar). About 28 million Indians have Web access, and 20 million have cell phones.

Two school networks lead India’s push for computer literacy. Delhi-based NIIT (formerly the National Institute of Information Technology) has been called “The McDonald’s of IT education,” with 2,497 training centers throughout Asia and in Africa and the U.S. Education accounts for half its $167 million in revenues; the other half comes from software sold worldwide.

NIIT won a 2003 All-India Promo Award in September for its World Computer Literacy Day, a $75 million joint effort with three IT partners. The goal was to get 1 million Indians online for the first time in a single day. Prime Minister Shri Atal Bihari Vajpayee kicked off the day by e-mailing all members of Parliament (only half of whom use computers). By day’s end, 140,000 had logged on for the first time, and another 10 million pledged to learn computer skills.

Aptech Worldwide, Mumbai, has 2,449 training centers in 52 countries. Its Arena Animation Academy specializes in Web animation, and grads have worked on U.S. promos and films. Both NIIT and Aptech have focused the last five years or so on Web and mobile-phone technology. Government-run Indian Institute of Technology (IIT) has six campuses that compete with MIT and Stanford; each Indian state runs several regional colleges.

“We have an amazing talent base, driven by decades of education infrastructure,” Roy says. “The colleges are a huge sourcing ground for IT professionals.”

Immigration fuels the U.S.-India link as NIIT and IIT grads come to the U.S. for jobs, then refer work back to India. About 25% of NIIT and IIT grads emigrate, Roy says, compared to 5% to 7% of Aptech grads. But even those who stay home are working more and more on U.S. brands. And many of those living in the U.S. want to return to India, bringing business (and income) with them. That group helps drive the development of infrastructure in India.

Call me

Call centers have flourished in the last four years, fielding customer service calls for U.S. financial service and insurance companies. Indian entrepreneurs began small and have attracted investment from the technology companies that supply call-center hardware, companies keen to leverage that infrastructure with more U.S. clients. Most call centers are independent firms serving several clients (with category exclusivity).

They’re staffed by 20-something college grads who learn American accents and get daily briefings on U.S. news to make small talk with customers. Briefings get pretty precise: In the days after the August East Coast blackout, Indian kids knew what happened in specific Manhattan neighborhoods. They can chat about the weather, the local baseball team, or an upcoming movie.

But leading a double life is tough for affluent youngsters who work at night (to serve the U.S. daytime). Their relatively high income and exposure to Western ideals put them at odds with family and traditional culture. “Their parents say, ‘Knock off the accent and attitude and come back down to earth,’” says one Indian marketing exec.

They won’t be alone for long as IT pros continue to bridge the distance between India and the U.S.

Home Advantage

Indian marketers run some slick digital promotions. Bharat Petroleum Corp. tied into James Bond: Die Another Day to reward its 1.2 million Petro Card loyalty cardholders. Members earned points when they bought gas, then redeemed them for movie tickets. Bharat sent clips from the trailer to members’ cell phones; 2 million consumers watched the clips in two weeks. An online game let players “be” Bond, and Bharat hosted virtual shooting galleries in theater lobbies. Hungama, Mumbai, handled.

Three years ago, Smirnoff sent brand reps with laptops into bars to invite consumers to play a dating game: Players chose elements of a date (music, location, clothes), then winners were randomly chosen to get tickets to a D.J. party.

Coca-Cola and Levi Strauss both built Web sites using clips from TV spots as the framework for online games. Coke’s “Diwali” (party) game let players manipulate a dancer from the TV spot to earn sweeps entries. Levi’s built a site consumers could “hack” into to play in the TV spot’s setting, an Internet café. Hungama handled both.

Teacher’s Pet

Hewlett-Packard and Intel Corp. make teachers the stars of their in-school computer literacy campaign. Kids take a digital photo of their teacher, then give her a virtual makeover on an HP PC. Teachers get more than fashion advice: HP and Intel put their lesson plans on the school computer, for free. Kidstuff Promos & Events, Delhi, handles.

Heard, Not Seen

It was a face off without face time. Sreekant Khandekar started AgencyFaqs.net in 1999 in Delhi, running the marketing Web site through a shared server in New York City. The server promised unlimited space, but when AgencyFaqs.net took off, traffic overwhelmed the server and it shut off access to the site. By then, Khandekar was ready to move to his own dedicated server, but had trouble getting AgencyFaqs.net’s data from his New York supplier.

So Kandahar trolled the Internet to find a lawyer in New York City who could get him his data. “I had never met my supplier, I never met my lawyer — and here I am in the middle of a legal situation in New York City through my little business in a garage in Delhi,” he laughs. “Amazing.”