by Denis Syropushchinsky

Offshore Outsourcing is rapidly changing the shape of the modern industry. It is
important for companies not to underestimate the speed of this process and jump in to
grab the opportunities and benefits it offers. This article intends to delve more deeply
into the analysis of those driving factors that encourage companies to make a decision
to outsource any part of its activities/tasks.

Most executives view offshore outsourcing most of all as a source of cost reducing. The
greatest savings are expected to come from lower labor cost and reduced project
timelines. However offshore outsourcing also creates new challenges and expenses for the
organization involved. Those may include vendor selection costs, legal costs, costs of
transition and many others. That is why despite the evidence of possible major up-front
cost savings many outsourcing vendors have yet to prove that they are able to provide
positive ROI in a complex project.

Yet businesses have to perform deep analysis of its strategic program and goals before
making a strategic decision to outsource part of their activities. The main driving
factors are as follows:

::Lack of special expertise/knowledge.:: This is probably one of the most important
factors that force companies to outsource. Many projects require technical expertise
that is not present within the company. Moreover, very often the company can not hire
employees with required expertise, or it is not reasonable to employ them full-time. As
Outsourcing Institute has suggested “outsourcing is a clever alternative to hiring”.

::Floating demand for personnel.:: Often a company that engages itself into a large
project is reluctant to search for new skilled employees, because it estimates that upon
its completion it will be forced to discharge them (say, in a year or two). It is wise
in such case to outsource part of the project to an offshore vendor acquiring also the
possibility to reduce costs.

::High risk level.:: Companies working in high risk spheres often prefer to reduce them
by finding an offshore vendor with advanced expertise in the same domain. Also it is not
reasonable to shift all responsibility to outsourcing partner, attracting mature
specialists with needed skills and technical knowledge in most cases allows reducing
risks.

::Process management perfection.:: Outsourcing vendors earn their profits in many
respects because they have standardized their internal processes. Take the example of
software developers who integrated Capability Maturity Model raising their processes
from ad hoc, chaotic level to mature, disciplined software processes. Partnering with
such mature organization may allow for transfer of best practices across project
boundaries, thus providing some standardization for the outsourcing organization as well.

::Reduction of time spending on management.:: Transferring secondary functions and
processes to outsourcing vendor will allow management of the company to concentrate on
core processes and projects that have maximum priority.

::Achieving objectivity.:: Often companies fall into the trap of inertness of its
workers. The reason is that people minds can not manage with rapid technological changes
and employees are reluctant to refuse “old approved techniques and methods” thus being
not able to find and apply optimal solutions. Internal obstacles may delay or even block
new initiatives. That is why it is worth recruiting independent expert company that will
suggest the most appropriate solution for particular business needs.

The company shall clearly recognize all possible reasons for outsourcing and rank their
priority. A coordinated approach of management must be formed, in other case valuable
time and resources may be spent on finding a vendor whose effectiveness will not satisfy
one of the managers. As practical experience shows main reasons for resorting to
outsourcing are:

- increasing the overall company effectiveness;

- expanding technological advantages and manufacturing capabilities;

- cutting managerial costs;

- improving technical support and customer service;

- concentration on core activities;

- lack of qualified personnel;

- etc.

Probably the most important point to keep in mind while making decision whether to
outsource or not is that outsourcing is not the means to solve all company’s problems.
All problems arising within the company require careful examination. If their cause is
badly defined strategic aims, outsourcing is likely to worsen the situation, not improve
it. If a company does not realize its needs, it will neither be able to explain them to
exterior vendor nor gain success.

Will outsourcing be really profitable for your business? It depends. In first place it
depends on you and how much effort you put into pre-outsourcing preparation and
analysis. We hope that this article will help you to identify your needs and acquire
more clear vision of possible reasons for outsourcing. If you are still not sure and
hesitating, you may contact us, and our analysts will definitely help you.

::About the Author::

Denis Syropushchinsky is a Marketing Manager in Qulix Systems - Offshore Outsourcing
Software Development Company, located in Minsk, Belarus, Eastern Europe. Our
client-oriented approach and effective offshore software development services are the
things that will help you to achieve your business goals. If you have further questions
on offshore outsourcing, please contact us.

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