A lot of people are confused with offshore outsourcing, in order to clarify what is it and why big internationals prefer to contract outsourcing companies, I decided to write an article about the benefits of offshore outsourcing and why it experiences tremendous growth right now.
First of all, what is IT outsourcing ? It involves the contracting out of a business process to another party, which is expert in IT. In most of the cases companies prefer to work with third parties, which are abroad, for example Vietnam, then it is called offshore outsourcing. The best is to go for an agile offshore outsourcing.
THERE ARE FOUR BASIC TYPES OF OFFSHORE OUTSOURCING
- ITO — Information Technology Outsourcing
- BPO — Business Process Outsourcing
- Software R&D — offshore software development
- KPO – Knowledge Process Outsourcing
KEY FACTORS LEADING TO THE GROWING TREND OF OFFSHORE OUTSOURCING
- Lack of expert-labor in some portions of the business process
- Availability of cheaper labor, whilst not comprising on the quality of output
- Ability and feasibility to concentrate on the other crucial business process
Currently, about 60% of European companies enjoy the benefits of technology outsourcing their IT projects rather than having their own IT specialists in-house.
WHY BIG FIRMS PREFER TO OUTSOURCE IT
- Outsourcing offers greater budget flexibility and control. Outsourcing lets organizations pay for only the services they need when they need them.
- It also reduces the need to hire and train specialized staff, brings in fresh engineering expertise, and reduces capital and operating expenses. some processes are temporary and the organization does not intend to hire in-house professionals to perform the tasks.
- Expertise. Most of the times tasks are outsourced to companies, which are specialized in their field. They have specific equipment and technical expertise. Effectively the tasks can be completed faster and with better quality output
- Concentrating on core process rather than the supporting ones. Outsourcing gives the organization more time to strengthen their core business process.
- Risk-sharing. One of the most crucial factors determining the outcome of a campaign is risk-analysis. Outsourcing certain components of the business process helps the organization to shift certain responsibilities to the outsourcing company. Since the outsourcing company is a specialist, they plan the risk-mitigating factors better
- Adaptability. Outsourcing IT allows companies to react and adapt more quickly to rising or slowing demand and changes in the marketplace.
- Wider knowledge base: When outsourcing software development or other technical needs, gives you professionals with a wide range of technical experience and capabilities. You have high-class IT specialists, working for you.
- Costs reduction – such as peripheral or “non-core” business expenses, high taxes, high energy costs, excessive government regulation/mandates, production and/or labor costs. Due to constant growth and the complexity of innovational solutions in the IT business, the cost of work of highly skilled specialists steadily increases. Outsourcing makes the resources more affordable for many companies.
- Lack of human resources locally
- Offshore outsourcing to a country like Vietnam, which is on a different time zone, gives you the added advantage of making full use of your 24 hour day. Since your night is their day, your outsourcing partner can take over and continue your work even after your employees go home and to bed. They can complete critical tasks and send it back for your review the next day. So the benefit of outsourcing here is that you get more work done in a day, increasing your overall productivity. A 24X7 customer support is a dream come true for your customers and this can be fully realized through offshore outsourcing
- Start new projects quickly. A good outsourcing firm has the resources to start a project right away. Handling the same project in-house might involve taking weeks or months to hire the right people, train them, and provide the support they need.
- Lower wages. The most powerful incentive to offshore outsourcing is financial. To put it simply, it is much cheaper to pay the wages of employees from offshore countries than it is to pay for the services of a European employee.
- Some companies also outsource to help them expand and gain access to new market areas, by taking the point of production or service delivery closer to their end users
According to the Forbes report, cost savings of up to 40% are common place on offshore deals. Over the next couple of years 75% of the top 1,000 companies in Europe will evaluate offshore outsourcing IT services.
If you want your organization to stay ahead of competition, concentrate on core competencies and make use of the latest technologies, then offshore outsourcing can help your organization achieve all this and more.