| > | | | | external marketing. Their business mostly comes |
| The phrase offshore outsourcing has | | | | from word of mouth promotion and referral from |
| become ubiquitous in the Information Technology | | | | existing clients. Rarely do they have offices in |
| (IT) industry. It is spread all over in trade | | | | countries where their clients come from. Also, |
| publications, and you can hear it in many places | | | | freelancers and informal teams of friends and |
| ranging from the company boardroom to the | | | | associates working together are part of the Type |
| water cooler. If you are involved with any facet | | | | I category. |
| of the IT industry, it is important to learn more | | | | Type II: Fully offshore with own representative |
| about this latest development in evolution of the | | | | office (for marketing, requirements engineering, |
| industry. | | | | etc.) in the client countries. Given the |
| In this article, I will present an overview of the | | | | representative office in the client countries, Type |
| offshore outsourcing scene and the various ways | | | | II companies can more effectively get client leads |
| in which companies are involved in offshore | | | | and market their services. Companies operating in |
| outsourcing. At the end, a set of | | | | this space are medium to large sized, with an |
| recommendations is listed for business owners, | | | | employee pool ranging from 50 to several |
| managers, and other stakeholders who are | | | | hundred. On the top rung in this category are a |
| considering offshore outsourcing for their | | | | handful of companies like Indian Satyam and |
| organization. Please be advised this article only | | | | Wipro, employing thousands and generating |
| addresses IT offshore outsourcing. It does not | | | | revenues in millions of US dollars. |
| cover outsourcing in other industries. | | | | Type III: Western companies with their own |
| Let’s start by defining the term | | | | dedicated development centers located in |
| offshore. Offshore in the phrase | | | | offshore countries. This arrangement is commonly |
| offshore outsourcing refers to any country | | | | referred to as the hybrid model. Using their |
| where wages for IT professionals are substantially | | | | offshore centers, Western companies can |
| lower than in the US, UK, Western Europe, and | | | | leverage their local talent in the respective |
| Japan. The major destination countries for | | | | country and use it for a variety of tasks. Most |
| offshore work are India, Russia, and Ireland. Other | | | | major global IT companies have a presence |
| places to note include countries in Eastern Europe, | | | | offshore, and now several medium sized |
| such as Ukraine and Bulgaria, Brazil, South Africa, | | | | companies are also turning to this alternative. |
| Israel, and China. Low wages in these countries | | | | Type IV: Western companies acting as middlemen |
| are a result of the low cost of living. The wages | | | | for offshore companies. Also known as service |
| in these countries can be anywhere from | | | | brokers, they maintain their own network of |
| one-third to one-tenth of the wages for similar | | | | offshore firms (mostly Type I). Type IV firms |
| skills in Western markets. It is worth mentioning | | | | may offer end to end management of projects, |
| that IT skills in these nations translate into | | | | including project and financial risk management, or |
| 20-50% higher salaries than their respective | | | | simply introduce a Western company to an |
| national average salaries for all professions. | | | | offshore provider and charge a commission on |
| Next, let’s define the term | | | | the work performed. |
| outsourcing. From a business point of view, | | | | Following is a set of recommendations for using |
| outsourcing is a situation in which a defined piece | | | | offshore resources - |
| of work is performed by an external third party | | | | - Identify potential companies by inquiring in your |
| provider. At times the line of authority of an | | | | circle of associates and checking online offshore |
| external provider can be blurry - a global company | | | | provider directories. Unless your organization is |
| may pass around work among different | | | | fairly large, it would be ideal to approach only |
| departments spanning the company’s own | | | | Type I and III companies. Type II companies |
| offices in multiple countries. Generally speaking, | | | | mostly work with Fortune 1000 caliber clients. |
| however, outsourcing involves two or more | | | | - After identifying some prospects, learn as much |
| independent companies working together. For | | | | as you can about the company. Carefully look |
| example, American Company A prepares the | | | | through their online case studies and portfolios. If |
| specifications for a software application, and then | | | | a company looks like a good candidate for |
| passes it to Ukrainian Company B for actual | | | | partnership, contact them for names, email |
| design and development. After the work is | | | | addresses and, if possible, phone numbers of their |
| completed, Company A receives the finished | | | | existing clients. If their existing clients are |
| product from Company B. Software development | | | | established companies themselves, it is a good |
| is one type of IT work that can be outsourced. | | | | sign that the company you are considering is |
| Remote system administration and product | | | | reliable. |
| maintenance are some other types of work that | | | | - Once you have made a decision on partnering |
| are routinely outsourced by IT firms. | | | | with an offshore provider, start by giving them |
| Putting our definitions of offshore and outsourcing | | | | small, non-essential projects or pieces of a |
| together, we can now effectively define IT | | | | project. This will allow you to assess the |
| offshore outsourcing — it is the outsourcing | | | | relationship without jeopardizing any of your own |
| of IT work to offshore countries. Offshore | | | | business in case the arrangement does not work |
| outsourcing is actually not a recent phenomenon. | | | | the way you had envisioned. In which case, try to |
| IT offshore outsourcing has been occurring as | | | | resolve the issues. Any reasonable business |
| early as the 1970’s. There were several | | | | owner will endeavor to work with his or her |
| Indian companies that provided services to | | | | clients towards a mutual resolution of any |
| American firms at that time. IT offshore | | | | differences or misconceptions. |
| outsourcing started to take off in the early | | | | - Be sure to have risk management mechanisms |
| 1990’s and gained further popularity during | | | | in place and sign service level (SLAs) agreements |
| the Internet Boom of late 1990’s. Then, | | | | with your offshore partners. As the situation |
| with the crash of the Internet Boom, offshore | | | | requires, non-compete and non-disclosure |
| outsourcing came into center stage — the | | | | agreements may also be signed. Before sending |
| biggest driver was the fact that businesses were | | | | off work to an offshore provider, it is well worth |
| scrambling to cut costs and offshore outsourcing | | | | the time to lay out formal procedures to respond |
| provided a viable means of lowering cost of | | | | to events like network crashes (at your site or |
| operations and new development. | | | | the provider’s site) and deadline extensions. |
| Below are the different categories that can be | | | | Offshore outsourcing has become an integral part |
| used to group companies working in the offshore | | | | of the IT industry. In the next few years, its role |
| outsourcing space - | | | | will only become more important. Gartner |
| Type I: Fully offshore. These are small companies | | | | Research predicts that 25% of IT jobs will be |
| operating in the offshore countries. They can | | | | offshored by year 2010. The question |
| have anywhere from 1 to 50 employees. A | | | | organizations will ask is not whether they should |
| major feature that distinguishes these companies | | | | outsource, but which offshore outsourcing |
| is that they spend very little, if anything, on | | | | strategy best fits their needs. |