IT Outsourcing: the Right Way to Reduce Expenses?

The world financial crisis is forcing entrepreneurs to search for ways to reduce expenses. One of the popular ways is offshore IT outsourcing. On the Internet you may find many articles which are dedicated to this problem, but more likely most of them contain only information regarding positive aspects of offshore outsourcing, than a review of whole business. But during the process of cooperation with an offshore company, there might be a lot of problems. So, is that really such a good solution?

The main reason to establish partnership with an outsourcing company shouldn’t surprise anyone: every business wish to save money and the right solution for this problem is outsourcing. For securing business needs a company often has to keep departments which perform non-core functions. Yes, these functions are important, but for them to impact your bottom line probably they don’t need to be done every day. At the same time keeping these departments requires substantial expenses every month. If these non-core functions were handed over to a third-party company, you could only pay the performed work and you could have substantial money saving effect.

For example, these expenses might be reduced twice, if they were handed over to an offshore company. In low income countries senior-level specialists do not require so many wages as professionals at your domestic country. In such a way the offshore outsourcing can reduce your expenses significantly. At the same time outsourcing may bring you not only financial benefits.

Working with right offshore companies of outsourcing you’re able to get an immediate access to the required quantity of qualified technical staff. Outsourcing companies basically have a large talent pool of specialists who are experienced in the newest technologies, project management methodologies etc. Furthermore you should keep in mind that technology is being upgraded rapidly. That is why your specialists have to follow trends and study new researches which take time and demand funds. This outsourcing model lets you avoid those expenses.

Sometimes conditions require that software should be developed at the earliest possible date, but a company does not have enough money to do so as quick as needed. In such case the most optimal decision is partnership with an offshore outsourcing company. Usually, for the same amount of money you could be charged by your software development team at domestic country, you would have two to three times as many people (experienced and highly educated!) working on your project in a low income country. Of course it’s obvious, thirty specialists could not do the work three times quicker as ten specialists of the same level, but speed of development might be highly increased. So outsourcing may cut deployment time.

There is one more substantial non-financial benefit of partnership with an outsourcing company. If the outsourcing company you have chosen points at partnership over a long time, you may expect collaboration as an additional service. The company will keep your needs in mind and watch over development of new technologies. And if new technology, which could be helpful for IT processes in your business, is on the way, your vendor would immediately tell you about such an opportunity, so you would be one of the first who uses it. Such collaboration may be significant for increasing your competitive advantages.

As you may see, offshore outsourcing model does have many advantages, but the most important of them is the opportunity to focus on your core activities. You’re able to invest the saved money and time to stepping up your business. It means you will work much more effective and upgrade your products while giving your company a competitive edge.

However, in spite of all advantages, partnership with an offshore vendor may become a source of great problems. Let us make a review of some of them.

The first problem could arise if employees of the vendor do not speak English as well as you. It actually means there might be many incorrectly understood situations and finally you won’t get software of the desired quality. Also in that case you will have to spend pretty much time for explaining obvious things. And don’t forget about the cultural barrier. It will have some influence on the process of communication too. Summing up, the best way to avoid the problem is to work with company, which does have employees for whom English is native or at least with company, which can provide staff, perfectly speaking in English.

The second problem is about low quality of service. The quality of an offshore company often is not on a very high level. It’s sad, but it’s the fact. Of course you can find a reliable vendor, but you should be very careful. This problem was already described in our blog. You can read more about it there.

In the history there is no year, in which every country in the world had a completely stable situation. Efficiency of your offshore partner may depend on political and economic situation in its country really much. So you should also care about geopolitical risks.

After all, you have taken into consideration any possible risk and have found a vendor at last. Now your company doesn’t have non-core departments anymore, your partners, professionals, no doubt, are in charge… Have you thought about coordination between different business processes in your company? The conversion of your business processes to an outsourcing model should be planned clearly, otherwise the coordination might be lost. Later it may bring undesirable progress to your departments and the most upsetting thing here is that it is fraught with serious consequences such as decrease of manageability, risk of losing control of processes, dependence on vendors.

As we can see, offshore IT outsourcing has its advantages and disadvantages. For getting all the benefits of IT service delivery model you should be very careful in choosing a vendor and should consider about plan of your business very clearly. But if you do so, you would be able to enjoy successful work with all the benefits of offshore IT outsourcing.

Source: CIO

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