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 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.

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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).

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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 by providing:

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

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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 offshore:

  • The number of resources and percentage of IT budget dedicated to maintenance for each application
  • 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 guru dependency
  • Plans to retire or migrate applications within the next 2 to 5 years
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Q: What should an organization look for in an offshore outsourcing partner?

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 operations -firm's ability to mitigate risk

Bridge culture and process gaps - offshore firm's ability to manage diverse teams and understand cultural nuances

Flexibility in provision of service - offshore firm demonstrates the ability to scale and shift resources when necessary

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 locations

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

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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.
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