Outsourcing Technology Drivers

Good to Great or Good to Gone?

Subject: Outsourcing, high technology products, software development, IT, Core competency

By Victor Antonio

Outsourcing has become a hot topic over the last few years.  It may have even played a role in determining our current President.  Forrester Research estimates demand for outsourcing will account for 28% of IT budgets in the United States and the EU in the next couple of years.  It is also estimated that IT workers will grow to more than 1 million by 2005 worldwide.  These numbers are quite incredible if you give it some thought.

Here are some major drivers companies consider when deciding to go to off-shore development and testing:

COST

The cost of utilizing off-shore resources are significantly reduced in countries like India, China and others when compared to U.S..  The main reason for the disparity in cost is obviously wages.  A person earning $50,000 developing software here in the U.S. is pitted against another person in a developing country who costs $6,000 a year.  The cost of doing business in a developing country is further reduced when you look at the low overhead associated with setting up an office or development center.

LANGUAGE

Years ago outsourcing was often dismissed because of a technology and language barrier.  The internet has bridge the gap on technology eliminating it as a barrier to entry in the game of outsourcing.  Now, countries have figured out that in order to participate in the global connected economy, they’re citizens must know English.  Outsourcing has been accelerated by more and more international countries adopting English as a second language.   Bottom-line: English speaking resources are now available for a considerably lower cost.

TIME-TO-MARKET

You can get more bang for your R&D buck in other countries because of the number of people you can hire to work on a project.   Large teams can be easily assemble to work on major projects on a 24 hour a day basis.  For example, let's say you have a major software design project which need to be completed 'yesterday'.  What you can do is outsource “modules” of the design to different employees internationally who will be working on it while we here in the U.S. sleep.  This gives companies who are behind in the development cycle an opportunity to close the time-market gap and catch up to their respective competitors.

CORE COMPETENCY

The problem most companies face in expanding their product offerings in order to gain market share is losing site of what made them successful in the first place; core competencies.  The hesitation to expand is understandable given the cornucopia of companies that have gone under because they'd spread themselves to thin or strayed to far from what made them great in the first place.  Outsourcing allows a company to dabble (i.e., invest in other complementary markets) without investing to much and not getting burned if the logistics don't work out.

So is outsourcing good for a company?  Well the answer really depends on the situation and a company's resources.  Outsourcing mitigates risks by taking new business development off-shore and not getting distracted at home.  It also prevents a company from confusing their established customer base when it begins to venture outside their core competencies. 

Companies who outsource are allowed the luxury of focusing in on what’s in front of them instead of what may lie over the technological horizon.  Some companies choose to use outsourcing wisely and sensibly.  Outsourcing is not the 'killer application', nor is it the answer to what may be ailing a company's financial state or loss of market share.  

Outsourcing, used without some well thought out plan (i.e., logistics and coordination) and contingencies, can take a company from  “Good to Great”, to “Good to Gone”.  

Victor Antonio is a Sales Trainer and Motivational Speaker with 20 years of industry experience in the market.  He has a BS in Electrical Engineering and an MBA.

Copyright © 2005 by Victor Antonio   All rights reserved.  This article MAY be reproduced in any form or by any means, electronic or mechanical, including photocopying, as long as the author’s name, website and email address are included as part of the article’s body.  All inquiries, including information on electronic licensing, should be directed to Victor Antonio.