September 20, 2016 1:12 pm | Updated 1 month ago.
Benefits of Offshore Outsourcing
It is a common belief that offshore IT outsourcing has an adverse effect not only on jobs in America but also adversely impacts the business of the American IT companies as a result of offshore IT outsourcing companies exploiting cheap labor in offshore locations.
The facts, however, are different as we have seen in several previous posts, at least as far as the impact of offshore outsourcing on American jobs is concerned.
In this post, we analyze, the impact of IT offshore outsourcing on American IT companies, both big and small. As far as the large American IT companies are concerned, they all have set up global delivery centers and global R&D centers in almost all major offshore locations and are benefitting from the cost advantage as well as talent availability in these offshore locations as much as the offshore IT outsourcing companies. In addition to leveraging the labor arbitrage and talent availability, these American IT companies are also bidding for and winning large contracts from both governments and domestic businesses in these offshore locations.
A number of small American IT companies have set up their R&D centers in these offshore locations and have established partnerships with local IT companies for their country-specific or regional sales and marketing activities. As part of the US-India Market Access Corridor initiative, D2E in collaboration with some of the large incubators and technology parks is leading an initiative to connect these small to mid-size American IT companies to enterprise level customers in India and also help them in their sales and marketing activities.
It is D2E’ opinion that in today’ global environment and keeping in line with America’ openness as far as most policies and decisions are concerned, it really is a level playing field for both American IT companies and the Offshore IT outsourcing companies to leverage global talent pool and global deals.
We will now analyze, what specific benefits American IT companies can get, especially those of small to medium size, from offshore outsourcing in addition to the obvious ones like labor arbitrage and talent pool.
Focus on core competency:
Offshore outsourcing allows the American IT companies to focus on their respective core competencies like Analytics or Program Management etc., by outsourcing activities like QA and Testing to Offshore IT companies.
Larger spectrum of offerings:
By having the option to outsource certain technology or domain functions to reliable Offshore IT outsourcing companies, the American IT companies can offer a larger bouquet of offerings to their customers. For example, an American product company can outsource provisioning of services to an offshore IT outsourcing company and thus provide a comprehensive end to end solution to their customer.
Managing ramp up and ramp down:
By having the option of outsourcing to offshore IT companies, the American IT companies do not need to invest in resources that are not core to their business strategy and can also manage project amp up and ramp down without having to significantly change the headcount of FTEs.
Outsourcing sensitive applications to local vendors:
American IT companies can participate in large government tenders in foreign countries by outsourcing some of the sensitive applications that require either local resources or companies with local expertise, to the offshore IT companies.
Exchange of organizational processes and competencies:
Both the American IT company and the offshore IT outsourcing Company can strengthen their organizational processes and competencies thru mutual collaboration.
Sales and marketing collaboration:
There could also be sales and marketing collaboration between the American IT Company and its offshore IT outsourcing partner.
In conclusion, while many large American IT companies have been leveraging the benefits of outsourcing to offshore IT companies, it is D2E’ recommendation that the small to medium size American IT companies should also explore how to leverage this to their strategic advantage. D2E’ US-India Market Access Corridor initiative can also be facilitator towards this.