Today, businesses irrespective of their size and location are adopting Offshore Outsourcing to gain cost benefits and deliver quality services to their customers. But what exactly the Offshore Outsourcing is and why businesses are implementing it? Let’s find out.
What is Offshore Outsourcing? – An Eye Opener
Offshore Outsourcing is the modern business approach of outsourcing / assigning some of its commercial activities to expert offshore companies in order to fetch better quality, cost and technical excellence than what is available domestically.
“Hire rather than own expertise” is the concept behind Offshore Outsourcing. Rather than spending money on developing and maintaining certain non-core activities, businesses can outsource them to offshore experts and get quality work at much lower price.
Gartner, one of the world’s largest research and analysis organization, has predicted that total global offshore spending on outsourcing IT Services will reach $50 billion by 2007. The report has also mentioned that emerging countries like India, China, Brazil and Russia possess required capabilities in terms of labor, technology and infrastructure to undertake IT related outsourcing activities successfully.
Benefits of Offshore Outsourcing
Offshore Outsourcing offers businesses multiple benefits in terms of Cost, Quality and Technical Excellence. Here are some of the noticeable benefits of Offshore Outsourcing:
- Realistic cost savings of about 40%as compared to onshore or domestic markets. (Source – Ventoro Research Report)
- Quality Product Delivery by offshore companies using their expertise, extensive domain knowledge and implementation of Matured Execution Models in their processes. (Source: NASSCOM)
- Technical Excellence offered to clients by capitalizing on quality Human Resource, robust infrastructure and domain related Research and Development (R &D).
- Maximum time benefit by leveraging the time difference between service provider and service requester.
- Reduced project cycle by implementing globally recognized Project Management systems in their operational activities.
- Operational Flexibility by quickly adapting to changes in business requirements.
- Better finance management through clearly defined financial obligation and reduced cost.
- Improved competitiveness since offshore companies deliver quality services at affordable rates.
- Renewed focus on company strategic plans by outsourcing certain non-core business operations to offshore companies.
- Exposure to new markets by making alliances with offshore companies and taking business to unexplored areas.
How Offshore Outsourcing Works? – Implementation
As mentioned above, Offshore Outsourcing is based on “”Hire rather than own expertise”” concept. In other words, businesses prefer to outsource/transfer their non-core activities to offshore companies who are experts in their working domains.
By doing this, businesses get expert services at low cost as compared to the domestic market. Besides, businesses also get more time to concentrate on their growth plans that they might have spent in maintaining these activities.
It won’t look surprising if we call India as “Mecca of Offshore and Outsourcing”. According to a study conducted by Forrester in November, 2001, India’s edge over other competing nations in the IT outsourcing business is based on the country’s decade old experience in this area, fluency in the English language, supportive Government policy, infrastructure, and high quality offerings. (Source: NASSCOM)
Below, we present you some reasons that justify why India is a preferred destination for businesses to outsource their offshore-based activities: –
- Large Human Resource with approximately 17 Million people available in IT industry by 2008. (Source: NASSCOM)
- Maximum Cost Advantage.An independent report estimated that for every $1 invested in India via Offshoring, the American Economy gained $1.14 in direct and indirect benefits. (Source: NASSCOM)
- Incorporation of Quality Standards like globally recognized SEI-CMM, P-CMM Levels and ISO 9000 Certification by Indian IT companies to ensure quality services for their customers. As on 31 st March 2002, India had 42 companies at SEI CMM Level 5 assessment and 316 companies who have already acquired quality certifications worldwide.
- Friendly Government Policies towards Offshore Outsourcing by offering various tax benefits and sops for IT and ITES industry.
- Address security concerns by introducing IT Act, 2000 that legalizes laws and policies related to data security and data crimes.
- Quality Manpower with strong technical skills, good language command and eagerness to accommodate Clients
- Strong Education System that emphasizes on mathematics and science along with English language proficiency.
- Decade old Experience in Offshore and Outsourcing justifies why India is considered the best in this business.