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Offshore operation may not be money-saving move

By Mike Cassidy
Knight Ridder Newspapers

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SAN JOSE — Uzair Sattar had heard all about the beauty of moving work overseas: cheap labor, round-the-clock operations, bigger profits.

Offshoring was the thing to do, the wave of the future.

So, when he launched his business-software company two years ago, he hired three engineers in Hyderabad, India, to develop his product. He quickly expanded to seven engineers.

"Then things didn't go so right," said Sattar, chief executive of Proteligent of Sunnyvale.

There has been a gusher of stories about tech companies moving thousands of U.S. jobs to India, China and other countries where labor is cheap. But it turns out, offshoring brings with it its own business problems.

"There is definitely a lack of communication," Sattar said. And, he says, there are cultural differences that can wreak havoc.

Deadlines seen as hard-and-fast in the hurry-up culture of Silicon Valley were seen as much more flexible in India, Sattar said. Long nightly computer chats between engineers in Sunnyvale and Hyderabad often left open as many questions as they answered.

Today, Proteligent's development team is back in Sunnyvale, with the exception of two engineers in India who helped start the project.

"For a small- to medium-size company, we have to rethink to what level we can continue to do it," said Sattar of offshoring.

Yes, Sattar said, there are things he could have done to smooth out the global project, which is aimed at building software to monitor computer networks and systems at smaller businesses. But they all cost money.

He could have regularly flown engineers back and forth from Sunnyvale to India to better weave together the cultures of Hyderabad and Silicon Valley. He could have invested in emergency generators in India to avoid power outages that sometimes left the Sunnyvale team wondering into the night why they weren't hearing from India.

But does that make sense?

"The whole purpose of going offshore is for cost-saving purposes," Sattar said.

Sattar discovered that India's best engineers were anxious to work for tech's big-name companies — like Oracle and Microsoft. And the offshore boom has made top talent in India more expensive and harder to find.

"The cost facing employers in India, where we have the office, has tripled in the last three years," he said.

Like many startups, Proteligent, a 14-employee company, is working on a shoestring with no sure source of new money.

Ultimately, Sattar decided there was little advantage to doing major development work in India — especially as he watched his launch date slip from March 2003 to December and now to next month.

Proteligent joins a handful of companies that have moved work back to the United States. Most notably, Dell recently moved some tech-support operations back. But none of this is cause for U.S. tech workers to relax.

The Dell move, for instance, was meant to appease valuable corporate customers who'd complained about poor service. Dell spinmeisters were quick to point out that its overall work force in India would not be reduced.

Those comments no doubt were meant to calm investors, who want work done cheaply no matter where it's done. Even Sattar realizes that business reality. And he realizes that his company's move is a tiny exception to a huge rule.

"This tide that we are in," he said, "it's not going to stop."

Mike Cassidy is a columnist for the San Jose Mercury News.

Copyright © 2003 The Seattle Times Company

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