My reasons to outsource
I mentioned already the top reasons for offshore outsourcing typical for many organizations; let me list some of my own:
- Diversity. Diversity in terms of bringing individual contributor with different background into the team often means a tremendous increase in productivity. A healthy portion of resources with different education, practical background, and way of operating could bring a fresh breath of air in stagnating organization. Also “diversifying” your portfolio of resources might help a great deal to deal with micro factors affecting employment / recruitment landscape of a specific geography.
- Education. In countries such as India, Russia, China you find many people who value education to much higher degree than we do in the states. On one of my teams from St. Petersburg a majority of developers had at least MS and over 40% had Ph.D. That including QA engineers! Needless to say the brain power of the team was absolutely amazing.
- Work Ethics. That doesn’t go across all geographies and companies, but fortunately you still can find outsourcing organizations with resources who’s work ethics are far superior to what you find for example in corporate America.
- Talent Pool. Some outsourcing organizations instead of typical “selling mediocrity in bulk” build their team with top notch experts and people with exceptionally high IQ. Building such a team, no matter in which area of the world takes very long time.
- Processes. Getting process right is time consuming and costly. When ISO or CMM processes are a requirement it’s often much easier to build relationship with a subcontractor who already has those in place.
- Project Management. Project and program management is often something that a small software organization can not afford (or more often VPE can’t sell his execs / team on the need for it). Many, especially Indian vendors have that in perfect shape.
- Cost. While I do not believe that offshore guarantees cost savings I do believe that there is a huge potential there especially with careful execution of multi-sourcing or/and micro-sourcing strategies.
Top reasons for outsourcing
Whenever I have to introduce using offshore to executives I start with a slide with has title “Good reasons for going offshore”. The slide is otherwise empty. With all the headache it will cause why would I go offshore if I do not absolutely have to? I have been using offshore vendors since ‘92 and there is no place on my body which doesn’t have scars left by that experience – from grotesque stabs on the back to burned fingers. And yet again and again I find myself using offshore vendors and recommending them to my clients and partners. So what are the main “bad” reasons for using offshore? What typically drives companies to consider offshore outsourcing? For many companies those reasons could be roughly grouped into 3 categories:
Reducing operations cost, some most obvious examples would be:
- Lower resource cost; this topic deserves a separate discussion but for now let me just say that if you are good at utilizing offshore you may realize 25-30% savings;
- G&A savings (benefits, office space, utilities, etc.);
- Other resources related savings (reasonable severance, resource add-on acquisition cost, training cost, etc.).
Reducing time to operations / time to market, some examples include:
- Access to existing pool of resources vs. hiring; I will need to touch upon that subject in more details, for now let me just say that that in some cases that is true;
- Establishing development / operations infrastructure vs. using existing or building upon existing;
- Access to specific skills / domain expertise / methodology, etc.
Solving specific organizational issues, a lot of diverse and unique items here, here are just a few common examples:
- Outsourcing legacy maintenance to motivate developers by moving them onto more glorious tasks. That is a well known double-edged sward though.
- Dealing with sawmill of resource demand. Need for resources goes up and down if you staff at the top level your resource utilization suffers, if you target the bottom you can not react to market needs. Proper offshore supplement can help alleviate the issue.
- Risk mitigation, for example: should you hire for dealing with substantial spike in demand? Is the change permanent or when the novelties ware off you will be facing RIWFs? Outsourcing could be a better way to handle the spike.
- In some way the same idea as above but put into terms very clear and dear to hearts of CFOs – eliminating fixed cost
- Using third party operational expertise, existing processes, certifications, etc.
While in a way each of the reasons above could be enough to consider offshore in my view you need more than one reason to actually go offshore. The risks and penalties are just too high. And that deserves a separate discussion.
About
The price one pays for pursuing any profession or calling is an intimate knowledge of its ugly side. [James Baldwin]
In IT outsourcing one does not need to go too far to get ultimately familiar with its ugly side. However, despite all disappointments and failures I honestly believe in offshore capacity and its positive impact on the industry. I’ve seen enough success stories to continue using offshore resources myself and recommend it to others. Offshore outsourcing is one of most powerful weapons in technical leaders arsenal. And like any other powerful weapon it requires careful handling and great deal of knowledge in its use and application. Ugly enough even slight mistakes in its utilization could cost companies enormous pain and expense and technical leaders their reputation and career.
The goal of this blog is to bring to everyone involved in offshore outsourcing my 5 T’s – Thoughts, Tools, Tips, Tricks, and Traps of outsourcing. I hope you find it helpful.
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Tools & Links
