Outsourcing Offshore: a Forced Trend?

Article

By Boris Kontsevoi

[Published in Global Management, Sterling Publications Limited, London, 1999]

The benefits IT can provide a company, independent of its size, are common knowledge, as are the rapid changes in the IT field. The effectiveness of outsourcing is also well documented.

It is generally held as a good idea to turn IT operations and especially IT development over to external providers, as it significantly saves on staff, equipment, training and maintenance, as well as it allows customers to concentrate more on business. However, the lack of IT professionals in developed countries reached critical proportions, with 340, 000 vacant IT positions in the USA alone. This fact makes outsourcing increasingly challenging and expensive. The solution is, therefore, to go offshore.

Offshore development is usually defined as the practice of moving software and other IT work, such as project analysis, design, coding, testing, and maintenance from companies in developed countries to software companies in low-wage areas. Nearly all of the Fortune 500 companies use offshore development services or have their own branches set up offshore. Major hardware and software giants like Microsoft, IBM, Apple, Novell, Sun and Siemens have extensive offshore operations. Many of the world's famous software applications are developed offshore, either partially or completely.

Offshore operations can provide a lot of benefits, including:

Technical Competence: top IT professionals are available offshore and they can work for you.
Quality: customers can be assured that their projects will be done on time and according to the highest quality and technical standards.
Costs: customers are sure to save at least 50 per cent of all expenses if development is done in-house, not even taking into account the expenses on infrastructure and equipment.
Start-up time: it is usually much easier and faster to start up a project offshore than in-house. Besides, offshore companies can take projects at any stage.
Protection: all intellectual property rights will belong to the original company.

Financial protection is also guaranteed as payments are made only when specific milestones have been achieved. In addition, it is quite usual now for offshore companies to offer fixed-price solutions on guaranteed deadlines.

There may be several obstacles as well.

Cultural differences, inadequate project management and communication problems are among the most common. However, cultural differences and management problems can be overcome by keeping a tight control over a project from the site. Offshore houses can even adopt the standards and procedures of the customer's company. Communication would not seem to be not a problem anymore: electronic communication and, if really necessary, on-site support can solve it. It no longer matters whether the development staff are located the other side of the town or the other side of the world. Offshore companies are aware of these problems and they do their best to eliminate them, co-operating with the customers.

You can outsource offshore many types of work such as client/server and Intranet systems, advanced engineering and system integration, consulting and re-engineering, customisation and localisation, testing and bug fixing, multimedia and Web design, data entry, processing and conversion.

But there is another strategic problem: what is better, to develop a custom solution or to rely on packaged applications? Of course, there is no universal answer, but whatever your choice is, you should keep in mind that effective use of packaged software also requires planning, consulting, system integration and quite often customisation or enhancements. Again, you will need help and offshore companies could be a solution.

You can send your opinions on the subject to Boris Kontsevoi.

About the author: Boris Kontsevoi is the President of Intetics Co. He has 18 years' managing experience of software development. Intetics Co. is an international software development and Web design house with nine years' experience in the field.
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Outsourcing Offshore: a Forced Trend?