Sometimes problems are simple - simple to state, not so simple to solve of course.

In case of outsourcing, qualified man power will NEVER be the constraint in India. At a raw level we're talking about a sixth of the world's population here and whichever way you slice and dice, that's a ratio that is not going to change for a while.

The real problem is electricity. It is not the widely cliched 'lack of infrastructure'. It is electricity.

Stephanie Overby is wondering about Tier-2, 3 & 4 towns. How about tier-99, the ultimate village in India? Here is the case in point.

Read Friedman's opinion piece in NYT 10/31/07.
http://www.nytimes.com/2007/10/31/opinion/31friedman.html?_r=1&hp&oref=slogin

Granted, this is not common but as you will readily observe, there is NO infrastructural issue here except....electricity.

BTW in 2001 there were 32 towns with population over a million and literally hundreds of towns on the verge of a million. At the 2% (population) growth rate do we really think there's going to be a dearth of outsource'able towns
in India? These towns typically have 4 to 5 sizable colleges, one or two professional schools and frankly better standard of life than the top five (Mumbai, Bangalore, Chennai, Delhi, Kolkota/Hyderabad).

Places such as Pune, Ahmedabad, Coimbatore etc offer a great value for companies in terms of infrastructure, access and human resource pool which is perhaps more stable (locals don't migrate out too willingly)

Definitely,.
Kochi will Shine , and Smile.
Smart City will Boost the IT boom.
One major problem is kerala's political Issues.
Strikes , Hartals..usual there.
Let the IT field free from these political dramas / staging .
It is serious.

This is so true - outsourcing to Bangalore is so passe.

Bangalore and its high profile IT cousins are so overcrowded that it has become extremely difficult to think of working there.

However, the fact remains that the best talent pool, especially in niche segments, continue to make Bangalore their home. They are not willing to move to the tier 2 and 3 cities.

Companies like mine - InfoBeans - are trying a hybrid approach. We have an office in Pune and one in Indore - in Madhya Pradesh - the heart of India. Indore offers all the advantages of a developing tier 2 city. Pune offers all the advantages of a metropolis.

The above combination helps us effectively create a team structure with the best of both worlds. Lost cost and a good life in Indore, while a much better talent pool available in Pune.

You can read more about how smaller Indian IT companies like mine are coping with the changing scenario at my blog here.

Hello,
This was a great article and I think that beyond what you describe here, another factor for prospect clients to consider is how insecure India has become. I believe that these two facts combined with the challenge of coordinating work when companies are separated by such a big time zone difference can be an explanation of why outsourcing companies in South America such as mine are growing so fast and why large IT companies (Google, IBM, etc.) are using near-shore more and more.
I some information about Argentina as a growing Outsourcing destination here.