Every organization that opts for Outsourcing has one basic concern – cut on costs. Ofcourse there are other concerns but if this primary concern is not met than there is very less meaning to outsourcing your work. Some even say why not go local with a little extra cost as atleast the work would be executed to quality within our own premises or nearby.
Every organization should keep checking their outsourcing ROI (Return on Investment) on a quarterly basis to substantiate their choice of Outsourcing as well as the partner involved. Some or rather many organizations tend to slag out after an initial relationship is staged. Thus it is very pertinent that you keep checking your ROI and keep your partner on the toes. Yes, it is tedious what with management of running projects and a constant requirement for following up your sales leads for the next project.
Every relationship that we form needs to be kept running and in good spirits, so it is never something that you should not be doing. Below are certain points that you should be checking out for on regular basis:
- Check the turnaround in work.
- Make notes on the quality of development.
- Follow up on documentation and their thoroughness.
- Cross Refer to Project Plan with actual development.
- Run cost checks on a per project basis.
- Keep the team posted on new development sales wise.
- Maintain a constant touch with fortnightly meetings with key persons like Project Managers, Delivery Head and Account Managers.
Yes, this does increase your project management costs – but its worth every cent spent.
Trust me, I have been there done that!!!
Offshore Development Center also known as ODC is fast evolving. Initially only large corporate like Microsoft, Google, Yahoo, Oracle opened centers around the world in the name of Research and Development. But everyone knows today that they were centers with lower resource costs and with equal or better resource talent pools.
ODC is a center opened by an Onshore company in countries like India in joint management venture with local companies. The revenue is shared between the Onshore and Offshore partner depending on various factors like set up, recruitment, management and day-to-day operational costs. Depending on the cost sharing the partnership is evolved and in which either partner is open to walk away after a honeymoon period as may be negotiated. This helps in controlling the operations ate low costs and yet with better set ups than local companies. The edge
Today any company having operations of 20 or more people in IT development or IT Support Services is opting for setting up their own offices in India known as Offshore Development Center. ODC as it is popularly known as offers transparency at all levels and helps build a set up that is robust and strong.
ODC helps in stable operations with lower dependency on the Offshore Partner. ODC gives you full control of your operations with only certain tasks like management and infrastructure not controlled by you, but yes surely to your required standards. When setting up an ODC always remember to set the standards right. The set up is the key aspect for an ODC so as you have the right balance of standards with a set of good operating rules.
ODC is a very successful concept under current market scenario as the attrition in India is very high. ODC gives the resources a stable and good working environment which makes them stay on longer than they do with Local Development Companies. The attrition rates in ODC are much lower for the following reasons:
- Infrastructure: The infrastructure in very similar to available in the Onshore market and much better than available in Indian companies especially the smaller ones.
- Pay structures: The pay structures are higher than Indian standards as Onshore companies require stability of resource and also comparing to their Onshore rates they still manage to bargain a good deal.
- Work Culture: 5 days or 40 hours a week as per US, Europe, UK or Australian standards is beneficial to the employees as most Indian companies work 6 days a week with no hour cut offs on weekly basis.
- Organized Approach: The management approach is more stable as both Onshore and Offshore are looking at a long term relationship for obvious reasons and thus both try to maintain a very organized approach when it comes to people management.
- Superior Management: European and Western countries are known to be better managers while Indian’s are known for their better service oriented approach which gives a balanced set up.
All in all ODC is a win-win situation for both onshore and Offshore companies as they both have reduced risk, better resource pull and a guaranteed long term relationship. Only greediness can spoil this – which any business house knows is never the way for a long term operations.
With time the concept of outsourcing is not an only consideration for Onshore companies. They now are looking at the pie and want to eat it too! The outsourcing companies have started venturing to set up their own development centers in India and other offshore countries in partnership with local companies or on thier own.
It is not an easy job to start a set up in countries like India where the bureaucracy and other factors heavily affect the day-to-day functioning. The most difficult aspect of an ODC set up is its infrastructure and recruitment of resources.
Onshore companies do not have the cultural and economic background of India and thus land up investing heavily in infrastructure while their recruitment costs go very high. Under such a scenario it is best to align with a partner that provides a service known as BOOT (Build Own Operate Transfer) as part of their ODC set up program.
Under the BOOT set up the companies offer the following facilities:
- Build: The partner builds the necessary infrastructure and also does the recruitment of resources at rates and costs prevalent in the Indian Subcontinent. So you have a cost effective center up and running with best facilities as required by you with adequate resources available.
- Own: You as an Onshore partner own the operations and all payments and remittances are done through your channels.
- Operate: Your Offshore partner runs the set up for you at a percentile cost giving you an inside hand on the day to day operations if required or on monthly or annual terms as may be decided.
- Transfer: After a period of 3 or 5 years as may be decided the Offshore partner transfers the entire set up operations to the Onshore partner and walks away free.
ODC set up under BOOT is a good option for companies having requirement of 20 or more Offshore resources and with steady project workflow or for companies having inhouse teams that are eating into thier profit due to the competition.
While a plain ODC set up is a good option where the Onshore Company is a consultant with irregular project flow or for those companies that have IT as a service.
So if you are an Onshore company and want to get the added benefits of an Offshore development team with control over the set up, ODC is your approach with BOOT as an attractive option!
Outsourcing is a very good way when improvisation is required especially to save costs.
With the overnight success of FaceBook, Twitter, LinkedIn, YouTube, deviantART and other such online applications, there has been a flood of ideas. Everyone has dreams of making it big overnight. But the question is how many of these are feasible and would see the light of the day? Is there sustainability of such projects? The only answer to this is to try and float those ideas, make them functional and wait for the result. But this has costs and the pockets are not that deep. This is a time when outsourcing comes handy.
With the prevailing financial conditions it has become evident that finance is not that easily available for such projects whose lifeline is not known. A venture financer would not fund you unless you could prove your worth to the world and a presence be noticed in the online community. As per a study it has been noticed that in US alone there is a 250% rise in the Patents for Social Networking Applications in the years 2003 to 2008 – yes this is true!!
Source: Mark Nowotarski (http://en.wikipedia.org/wiki/File:Growth_in_Social_Network_Patent_Applications.jpg)
This is where outsourcing is really helpful. To get developed your idea into a working model prototype at minimal costs is a dream come true. With resource costs low and so many contenders to grab your order – it’s the right opportunity. But before you take that step forward do ensure to choose the correct partner. Yes costs are an issue but quality must be given priority. Don’t take the costs as the only factor but as an added advantage.
Quality is a must for any development if you are planning big in the future and yes it does come at a cost. Do you want your pet project to be burnt out even before you can prove yourself? If quality output is not considered than you would loose your battle even before you are ready to ride your horse to the battlefield. Chances are your prototype will never see the light of the day and even if it does it will be so horrific that you wouldn’t dare to showcase to your financer. Rather you will feel pride in scrapping it entirely.
Yes this is a true horrific experience that many have after they outsource. This is also a leading factor why companies prefer to get things done onshore after burning their fingers. We don’t suggest not to outsource, but we suggest you to dig well into your partner before outsourcing.
What a company looking for outsourcing partner needs to ensure before selecting a partner? This question has been the preface of many outsourcing stories. But has one got an answer yet is a mystery.
We have built a small checklist which could be handy for you to know and understand on a selection procedure. The list is not very comprehensive but only a guideline which can be further elaborated by you at the actual time of selecting the partner. As said experiecne helps!
Ensure to checklist the following (in order of priority) before selecting an outsourcing partner:
- What is the quality standard (guideline) followed?
- What are the different processes followed during pre-sales and post-sales of a project?
- How financially stable is the company?
- Does the company provide References?
- What is the level of understanding of the presales team?
- Does the company document its development?
- Does the company provide documentation of the project?
- Does the company have local presence?
- What is the cost of development?
- Are the Risks identified and mitigated?
- Is the scope finalized before starting work and documented for future reference?
- What are the various escalation levels available?
The above points may seem silly for quite many (not surprisingly) but are very important points for identifying that right partner.
Start a partnership by small projects and delve into larger projects with time. This is important so that you get a grip on the partners working style and so do they.
Last but not the least – a visit to the premises always helps in knowing and understanding your partner better.