Advantages of outsourcing
Companies often get off-shore outsourcing offers from low income countries, such as India, Pakistan, Bangladesh, Bulgaria, Romania and others. In the key European IT trade fairs companies from these countries also participate and try to sell their off-shore outsourcing services. Lately, we often hear from European companies that when they receive an outsourcing offer, they only get information on the positive aspects of off-shore outsourcing.
There are quite a number of advantages of offshore outsourcing:
Cost reduction and cost structure optimisation: is (still) one of the major driving force of outsourcing. In low income countries labor is cheap compared to wages in Europe or the United States. Companies often offer their services between € 5 – 35/hour. This, of course depends on a number of factors, such as the length and value of the project, number of people involved, qualifications, technology required and many others. Price is also influenced by marketing considerations or the potential of establishing a long term relationship. Beside labour, overhead costs are also often much lower in low income countries than in the USA or Europe. Further, by outsourcing IT processes, companies not only can lower but also re-engineer and optimise their cost structure. Certain fixed cost elements could be turned into variable costs, for instance. Outsourcing can also help to achieve more predictable cost levels.
Immediate access to technical staff: one of the advantages of off-shore outsourcing is the immediate availability of the required number of qualified technical staff. In the last couple of years in Europe we all had problems finding the right people at the right time … or keep them with the company. Low income (or developing) countries often have qualified, well educated technical staff in abundance. Most companies we have visited in the last couple of years for technical positions only employ people with university degrees. These people often have many years of experience in various technologies, project management methodologies or vertical business domains.
Immediate access to technology: technology changes rapidly. Following all the developments, even in one or two technology domains, is very time and resource consuming. Staff has to follow courses, learn the new technology, build libraries and gain experience before the newly introduced technology can be used efficiently. IT outsourcing can shorten the learning curve of new technologies and reduce cost spent on training.