| As organizations consider
outsourcing some general questions come to mind while
deciding which outsourcing approach is right for them.
Here are some frequently asked questions:
Q: What is Offshoring?
A: Quite simply, offshore outsourcing is shifting
work to low-cost locales. This strategy, the norm
in industries from agriculture to manufacturing for
many years, is now mainstream in the information
technology community.[Back to Top]
Q: What are the key indicators for optimum geographic
location for offshore delivery?
A: Although there are many choices for offshore
outsourcing, each option has merits and pitfalls.
Selecting the right option requires balancing factors
such as cultural affinity, geopolitical risk, cost,
and resource availability.
Offshore development centers offer services throughout
the world. Buyers can choose from locations across
Asia/Far East (India, Philippines, China), Europe
(Ireland, Russia, Hungary, Poland, Czech Republic,
Romania), the Americas (Canada, Mexico, Brazil),
and Middle East/Africa (Egypt, Israel, South Africa).[Back to Top]
Q: What are the primary business benefits that organizations
gain from offshore outsourcing?
A: IT organizations must find ways to reduce costs,
gain higher productivity from skilled resources and
effective practices, lower risks through diversification,
and speed up time-to-market for critical deliverables.
Offshore outsourcing helps companies meet these demands
Cost advantages from labor
arbitrage - While IT
salaries may be high by local standards, they are
significantly lower than those found in North America
and Western Europe. This wage differential translates
into cost savings.
Access to large pools of skilled
workers - Offshore
service providers set up facilities in developing
countries where IT jobs are considered prestigious
and are highly sought after. Employees with doctorates
and other high-level degrees are common. What's more,
larger service providers typically offer extensive
additional training to their staff.
"State-of-the-art" practices - Focusing
heavily on quality and continuous process improvement,
offshore development centers operate at high levels
of efficiency, predictability, and reliability. High
process maturity greatly reduces the risk of project
failures and provides significant advantage when
managing to service level agreements.
Expanded work schedules - Offshore development facilities
located in distant time zones work on different schedules
than their internal IT counterparts - offering the
opportunity for "round the clock" development.
If work assignments are properly allocated, this
arrangement can significantly reduce development
cycles and time-to-market for critical functionality[Back to Top]
Q: How do companies determine which application(s)
could and should be migrated to an offshore environment?
A: Prior to considering an approach for identifying
the specific applications that are appropriate for
outsourcing to an offshore environment it is worth
considering the wider IT applications environment.
It often does not make sense to move the entire application
management process to offshore. Activities that involve
intense day-to-day user interaction, for example
Level 1 help desk support and interaction with the
functional owner for each application, ideally remain
close to the user base, either on-site, off-site,
or possibly near-shore. It is easier to migrate Level
2 (issue analysis and resolution) and Level 3 (code
changes) support to an offshore environment since
these activities do not generally require instant
interaction with the functional owner or user base.
In fact, individuals who are dedicated to these tasks
and not distracted by the interruptions that occur
in the daily user work environment best perform Level
2 and Level 3 support activities.
Once the pool of potential applications has been
identified, the following criteria are used to prioritize
which application(s) will produce the greatest return
by migrating the Level 2 and Level 3 functions to
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- The number of resources and percentage
of IT budget dedicated to maintenance for each
- Applications with recurring problems that
are not alleviated by quick fixes, indicating
the need for root-cause analysis
- Significant or growing backlog of application
issues or enhancement requests
- A high or growing number of user-reported
help desk issues that are due to lack of
or misleading documentation
- Poor quality and/or low user satisfaction
with existing support
- Concerns regarding depth of skill sets or
- Plans to retire or migrate applications within
the next 2 to 5 years
Q: What should an organization look for in an offshore
A: Establishing a relationship with an offshore
services provider helps corporations improve the
performance of their own IT organization while reducing
cost and improving the overall quality of IT operations.
The following elements are critical to the selection
process in order to establish and maintain a successful
relationship with an offshore provider:
Quality culture fit - compatibility between the hiring IT organization and
offshore outsourcing firm's quality standards
Maturity and stability of offshore
ability to mitigate risk
Bridge culture and process
gaps - offshore firm's
ability to manage diverse teams and understand cultural
Flexibility in provision of
service - offshore firm
demonstrates the ability to scale and shift resources
Process and metrics driven - offshore firm is committed
to process, methodologies, and metrics management
Excellence in project management - offshore firm
has proven program and project management methodologies
Global delivery model - offshore firm offers the
optimal mix of resources spread across geographic
[Back to Top]
All Paalam's outsourcing projects are supported by
proven practices in program and project management
and quality assurance. This gives our clients significant
advantage over other industry approaches
Q: Why has India become a popular destination for outsourcing?
A: India has emerged as the dominant player because
it is the strongest option across a range of factors:
Competency in delivering IT
services - India has
a strong understanding of business applications and
has many years of experience delivering IT services.
Conversely, although Russia has many highly educated
computer scientists, they have little real life experience
with business applications
Availability of skilled resources - By any measure,
India has the largest pool of skilled, experienced
IT workers. India's universities and industry training
programs add thousands of well-educated professionals
to this pool annually.
Government support - The Indian government is a
strong supporter of IT services and has invested
heavily in building its capabilities.
Cultural affinity - India is the second most populous
English speaking country in the world and, as a group,
IT professionals have extensive experience working
with their American and European counterparts. In
contrast, China has a low rate of English speakers,
significant cultural differences, and far less experience
in working with client IT organizations.
[Back to Top]