Setting up an offshore development center is a high-gain
– high-risk proposition, powerful and perilous.
The elusive key to a successful offshore development center
venture resides in a twelve-letter word - relationship.
An offshore development center is as much about technical skills
and quality as it is about a relationship based on compatibility,
trust and mutual respect - your supplier and
you.
The opportunities
- Provides enormous cost benefits
- Works according to Internet time
- Provides an extended resource pool
- Allows focus on core competencies
Risk factors
- Ensuring quality is difficult
- Communication is a problem
- Cultural differences form hindrances
- Infrastructure challenges hinder work
According to Gartner's IT Outsourcing Market Forecast: Worldwide, 2002-2007, overall spending on IT outsourcing by type, service line, environment, country and region will rise from $176.8 billion in 2003 to $235.6 billion in 2007. This phenomenal growth rate makes IT Outsourcing a definitive business solution.
IT columnists and strategists echo the success
of the offshore development center, citing cost efficiencies
and time advantages. But the extent of its potential
is yet to be realized. Many believe that the offshore development
center model is still facing teething problems of its
infancy. As increasingly complex, business-critical projects
are developed offshore, the offshore development center industry
will mature and contribute substantially to a global economy.
In the interim, the offshore development center
is fraught with challenges such as inferior quality; inflexibility;
slow-adapting infrastructure, political and natural disasters.
Possibly the biggest challenges that will hinder
the natural progression of the offshore development center are
- communication and cultural differences. Trying to communicate
the intricacies of a project across continents, through a constrained
medium, can lead to confusion and misunderstanding. The success
of offshore development centers is also hindered by culture as
it differs vastly from region to region, saying nothing of country
to country. As a result, companies continue to burn their fingers
experimenting with offshore development and offshore development
centers.
Discussed above are the operational hazards of
an offshore development center model. How can you traverse beyond
that and move from mere cost saving to strategic value?
Select the right supplier – the single
factor that successfully smoothens rough edges and ensures that
any offshore development center venture is a multicrop
harvest – compatibility. When selecting your offshore
development center supplier, the question that needs to be asked,
and answered, is – “Pepsi or Coke”.
Preferences, goals, objectives, drivers are all
important inherent traits that define the rhythm of an organization,
an important criterion when you need to tango to the frenzied
pace of the Internet economy and when you plan to leverage on
an offshore development center.
This has led to a paradigm shift in the traditional,
widely accepted concept of ‘supplier = partner’. According
to the management consultants, Everest Group, offshore
development center suppliers need to be allies, rather than partners,
as “Partners share joint liabilities and ownership. Allies
act together for each other’s benefit where and when their
interests are aligned.” There is a common goal and both
parties leverage their strengths to achieve it. Everest goes on
to recommend this shift in perception as the most important best
practice for outsourcing decision makers.
With so much at stake in an offshore development
center relationship, the act of selecting the right ally needs
careful consideration. According to the Offshore Development Group,
“One of the biggest challenges facing potential buyers of
IT services from offshore development organizations is identifying
appropriate vendors and performing due diligence.”
Location - Location plays an
important role when outsourcing to an offshore development center.
The choice of location determines the caliber of resources available,
language and cultural compatibility, time zone differences, innate
quality consciousness, availability of infrastructure, political
stability and, most importantly, cost. It is extremely beneficial
if the offshore development center provider also has a local presence
in your country or has extensive experience working with other
clients from your country.
 Outsourcing to India - India is the undisputed leader
in offshore development and offshore development centers. The
country enjoys first-mover advantage and is the most mature market
in the current scenario. It has a large population of culturally
sensitized, technically advanced, English speaking professionals
(most of the higher education in India is in English), who are
available at low costs. Outsourcers with operations in India or
offshore development centers in India are reporting 45 to 60 percent
annual growth. Gartner Group predicts that within two years, 40
percent of its clients will spend up to two-fifths of their legacy
budgets on offshore outsourcing to India.
India is an attractive location for the
following reasons
- Cost Saving - Fully loaded
costs for offshore work and offshore development centers in India are
30-50 percent lower than those in the U.S. and Europe.
- Faster time to market - Time
reductions result from 24/7 development cycles. offshore development center
rapid ramp-up through access to a large pool of resources and faster learning
curves in some areas stemming from past experience.
- High quality - According
to research findings by CIO.com, “India has the highest number of
CMM-certified companies in the world—37 companies meet CMM minimum
standards while 5,554 have ISO 9000 certifications. 260 of the Fortune
1000, including 3M, Amazon, Nortel Networks - outsource to India.”
- Greater value –
many companies are leveraging the technical expertise of Indian resources
for activities such as R&D.
|