Why Outsourcing?

Businesses today need highly functional, high-performance applications in order to remain competitive. Billions are spent each year by firms to upgrade existing systems or develop new systems. However, the high cost of in-house software development makes such efforts prohibitive to many businesses. As a result outsourcing IT services has become a trend during the last decade and is now becoming more and more common. The main reason for this is that the labour forces in many low cost countries, especially Asian ones, have become more advanced and better educated.

This has allowed ICT companies in high-cost countries to employ well educated and qualified labour at a reasonable cost. This lowered cost will provide the company with a valuable cost advantage that relying on their home labour markets can’t provide. Outsourcing will allow companies to experiment, venturing into riskier projects with the capital saved from development expenses. Even if the project proves a commercial failure, losses sustained will never be so high as to endanger the financial situation of the company. This sort of operation can stimulate growth in a stagnating company, both domestically and abroad.

If a company is experiencing temporary peaks in the need for development resources, it can avoid expensive new recruitment or equally expensive consultants in favour of lower priced Asian engineers. Consulting and programming capacity gained this way can be made available at short notice without increasing the company’s long-term personnel commitments, as well as allowing the company to gain the knowledge and experience through offshore software development and consulting assignments.

Why outsource to Asia

Asian software companies are providing you with crucial competitive advantages. The most important is clearly cost advantage, which will allow them to either take a larger part of the market by lowering prices, or taking a larger profit by selling with a bigger margin. Another important advantage is the access to expertise which might not be easily attainable in Scandinavia. Since outsourcing is a common practice in today’s extremely competitive market, everyone will eventually take this route lessening cost advantage. A company without this advantage will be unable to compete, and will fairly soon find itself out of business. Furthermore, selecting the right partner is of paramount importance for the success of the venture. For smaller companies in the western world, selecting a same size company with similar values and business practice is vital. A partnership of this nature will create success strategies for small companies in the West and enable them to compete with bigger players in their own market.

How to pick a Right partner?

In order to get all these benefits from an outsourcing venture, it needs to be conducted properly. The company needs to pick the right outsourcing partner and then conduct the partnership correctly. Picking a partner that is fairly similar to the outsourcing company will be a good idea. This way miscommunication can be avoided and there will be a higher probability of getting a good fit to the company and its needs. For instance, a country the size of Sri Lanka will appear less confusing to a European company than a company size of China or India.

After picking the country to cooperate with, it is important to choose the right company. This can be equally confusing, since there is a myriad of companies offering outsourcing services today. Focusing on the relationship between the two companies will be meaningful here. One of the key aspects of a successful joint venture or any other outsourcing effort is a good understanding of each other’s business. The companies involved need to understand each other’s motivation for joining into the partnership as well as having a good relationship. This relationship is of course built over time, and it is thus hard to use it as selection criteria, but an evaluation of the key people involved will also go a long way.

How to establish the Right communication?

Having picked a partner, perhaps the most crucial success factor is building a good communication mechanism between the two parties to avoid misunderstandings. This is also the best way of ensuring a high quality outcome and that expectations are met. The practical arrangements are also of a certain importance. It can be done in several different ways, all depending on the nature of the companies involved and the nature of the task needed to be done. A common way of doing this is by entering into joint ventures or partnership development with an Asian company. You can then either get the Asian software engineers to come to your company for a shorter or longer period of time (Onsite contract worker/projects), or you can send parts of your team to Asia. Another twist which is gaining increasingly popularity is creating virtual teams. A project team could for example consist of two Swedes and six Sri Lankans, who communicate using various methods of telecommunication. This way the company gets all the benefits of local presence in Scandinavia with regards to marketing, sales and customer contact, in addition to getting the actual development and programming done at a very competitive cost.

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