Mark Hillary, a European outsourcing expert recently reported on his blog a chat we had about comparing China and India (read his May 4’s post). One of my points was the price advantage that Chinese companies usually offer over Indian ones.

While agreeing with me, he commented that prices were usually not the major decision factor; “India may be getting more expensive in the software development sector, but it’s all part of a complex mixture where cost remains a factor in sourcing decisions, but cannot be considered the primary driver. Low-cost services are useless if they don’t deliver, so some of the management maturity that is developing in India could be the silver bullet those firms seek when trying to consider how they market themselves against other regions in future.”

Mark is right when he says that price is usually not the major decision factor. I would even go further: from a vendor perspective, when price is the determining factor, it is a serious warning about the financial stability of our prospect.

However, I disagree with Mark on the alleged advantages of the maturity model, at least when it comes to small and mid-size businesses.

Simply put, I believe that when applied to smaller companies, this CMM stuff is hype used by the outsourcing vendors to charge more. OK I said it, my apologies guys, but it is my opinion.

Let me elaborate on this. The CMM models do not yield to a better quality, mostly because most of the smaller companies are not even equipped to provide their offshore suppliers with the required inputs in terms of specifications, validation, etc.

In fact, my observation here in the Silicon Valley is that customers are looking for solutions tailored to their own needs and constraints. The relationship I am setting with my customers does not touch on CMM (although we have the accreditation), but rather revolves about the frequency of communication, the quality of deliverables, mixed teams with people on both sides of the ocean, etc.

SMB is a fast-growing segment of the outsourcing market, yet to be addressed specifically, i.e. with solutions that are different from the ones applied to larger companies.

Commercial offers that are tailored to the needs of SMBs naturally yield to more efficiency and higher quality, without necessarily drive the costs higher. Better prices do not always come from lower quality; they also come from higher efficiency!

And coming back to my comparison between China and India, we all know that new entrants usually tackle emerging markets more efficiently than well-established players, which have to deal with their legacy. Future will tell!

Posted by Remi on Tuesday, May 15th, 2007 at 1:40 PM.