But before you outsource there are few pro tips that we have hand-selected with our experience of developing multiple customized software. Time zone differences is another essential advantage of Offshoring. It offers businesses the liberty to use the dedicated vast Offshore Software Development pool of resources whenever they need it. In fact, Indian outsourcing companies employ a team that works for clients in the USA as per the time when the US company functions. This shows the availability of resources on time and over other time slots as well.

  • Also, if your developers are in vastly different time zones, say goodbye to your deadline.
  • Companies with offshore resources have access to a far more expansive talent pool, allowing you to streamline your business process.
  • “You need to keep employees there long enough to share their knowledge with their Indian replacements,” Zupnick explains.
  • Due to the size of the industry and concentration, there is a deep talent pool upon which to draw.
  • Ultimately, the main reason why businesses outsource to offshore companies is to save money.

Both of these benefits lead to the ultimate benefit of reducing long term costs and helping your business to expand its presence in foreign markets. Offshore outsourcing is the process by which a business hires a third-party outsourcing company to manage a certain part of its operations. The increasing global expansion of businesses has made offshoring an attractive option for those looking to reduce their costs. Basically, companies can offshore nearly every part of their daily business functions to offshoring providers from around the world.

The Pros And Cons Of Offshore Outsourcing

Travel time and distance are much shorter, and you also won’t have to deal with the hassle of international travel , which often makes in-person meetings with offshore developers impossible. Meeting in person makes it easier to build a relationship with the company you’re working with and to communicate your wants and needs. OWorkers, with a center in Europe, which is within three hours of flying time away from any major city in Europe, is culturally aligned to support customer business for Western European clients.

Most offshore outsourcing arrangements are doomed to failure from the start for the reasons outlined above. Before you make an outsourcing decision, think carefully about the impact that poor execution on the part of your IT outsourcing vendor will have on your business. At the other end of the process is quality assurance testing, an area which must become more robust in an offshore arrangement. In GE Real Estate’s case, the transition time for each vendor was three months at the very least and up to a year in some cases, in addition to the money-draining vendor selection period of several months. After all, offshore vendors can send their best and brightest over for a dog and pony show, but checking out the company on its home turf provides more insight.

While it may seem as a current phenomenon to many, the truth is, it has been going on since the 1950s. For example, you may use particular phrases or terminology commonly accepted within your industry or by businesses in the U.S. which people in other countries aren’t aware of and may misinterpret. Such cultural differences can lead to misunderstandings and confusion and hinder your ability to convey what you need. Onshore development tends to require fewer iterations since communication will be so much easier.

This CIO Focus guide looks at the pros and cons of offshore outsourcing, analyzes the trends, examines what the countries have to offer and provides insights for dealing with the vendors and brokers. Let’s start with the most obvious… when you hire a developer with a lower value currency than your own, you’re able to both pay them well and save money! Some people’s initial assumption when they hear the word outsourcing is exploitation, but this is such a fallacy. I pay my offshore developers above market rates for their country, and they love their job. If only there were a service with all of the benefits of an onshore software development agency and all of the benefits of an offshore development agency — and none of the disadvantages. They are call centers that operate closer in proximity to the service country, according to Bird.

India

A careful ROA will reveal the true costs and opportunity costs of offshore outsourcing do not justify the practice! After all, if you were to outsource, you would end up spending money training your vendors personnel! Do it before you find that you are the next one on the chopping block.

The desire to be the biggest and most profitable became sufficient justification. The Ukrainian IT market is filled with over200k highly-educated and specialized developers. An overwhelmingly large percent of these developers speak English and they have a firm grasp on the ever-changing and emerging disciplines in the global IT sphere.

Pros and Cons of Offshore Outsourcing

After all, this trend would not have begun without your complicity. Be aware that the future is now and your future is at stake as well. You need to evaluate many countries before making the decision to hire a particular offshore software development firm. Many of these countries have a large number of talented professionals. One more significant benefit of outsourcing software creation overseas is the fact that you do not need to spend time on recruiting, auditioning, and employing the top specialists for your product. All this can be done by the HR manager of the company you are going to work with.

In the past decade and a half of increasing globalization, offshoring has been the fastest growing segment of the outsourcing market. This is especially true in the case of manufacturing – with China being a leader – and information technology services, with India leading that space. Business process outsourcing is another area of offshoring that has grown tremendously. When outsourcing is combined with offshoring, not only is work contracted out to a third party, but it is also agreed that the work will be performed in a different country. The reasons are usually to take advantage of the benefits of outsourcing and offshoring both.

On top of cheaper development expenses, they are highly recommended offshore locations for software outsourcing that also offer a wealth of personnel reserves. Foreign companies that offshore to another country with major time differences allow them to have their daily operations overextended hours. Like in most cases customer services, these foreign companies are able to extend their contact center services even up to twenty-four hours.

Summary: The Pros And Cons Of Offshore Outsourcing

The key is choosing processes that can benefit from these displacements. From the clients’ perspective, the expertise built by a provider will only be beneficial in delivering them greater efficiency and quality. There could be the issue of being dependent on an external party which could be overcome by splitting across vendors it reached that point of risk. The IT market is highly-competitive, meaning that companies are always trying to attract new talent with tempting offers, but it’s worth mentioning that our business model also results in higher professional retention.

When working with companies whose headquarters are located in non-English-speaking countries, you may encounter a language barrier. But companies that provide top-notch service are fluent in English and are constantly working to improve it. Offshore development in such a way as to objectively assess its pros and cons. Despite these cons, businesses still consider offshoring as a good business model to organizations of all shapes and sizes.

You don’t want to be dealing with a language barrier when you’re trying to discuss features or bugs in your project. At this point, the next step is deciding whether offshoring or outsourcing is the best method of realizing your business interests. Additionally, you may want to consider cultural and political differences, as well as the distance between your potential offshore nation and the US – all of these can affect the smoothness of relocating.

Pros and Cons of Offshore Outsourcing

For example, questions, concerns, and information will get across much faster since you’ll be communicating during the same business hours. Design and development teams will be able to work side-by-side without any communication barriers to complete your project on time. Finally, the application architecture will be a key component of the overall quality of the software. The architecture must be done correctly early in the project, which requires excellent communication and understanding of the business goals to achieve high quality. OWorkers provides transparent pricing to clients including a choice between rate per unit of output and rate per unit of capacity.

Also, it aligns with what business wants to invest and on that basis what they can achieve. Offshoring can be of mainly two kinds – production offshoring and services offshoring. If we have to define production offshoring then we can say that it is a process of physically relocating the manufacturing operations from one country to another. While in the same context services offshoring means the relocation of administration and technical services to third-party with/without changing the location. When you’re not covered by a reliable legal system, it’s hard to feel comfortable with spending thousands on an expensive software build.

Pros And Consequences Of Globalization

“You have to look at offshore outsourcing as a long-term investment with long-term payback.” Outsourcing to India can provide a huge payback—if you’re willing to work at it. Two offshore veterans share their hard-earned lessons to help you determine if Indian outsourcing is right for your company. One of the main reasons is that you don’t want to deal with the cultural differences.

Thanks to modern technologies it is easy to connect with people regardless of their location, but companies should still keep employees’ cultural differences in mind. That success might lead you to expand the services your company offers and ultimately attract more clients from a wider array of business spheres. With members of your team located worldwide, you’re able to take on even more clients than before, and increase your company’s overall profit. In today’s globalized world, highly-qualified workers from different countries are easily connected by modern technologies and a shared common language. They’re not only professionals but partners that are an integral part of your team.

Offshore IT outsourcing is not about obtaining greater value in the form of equal or higher quality services for less money? “On some of our projects, up to 50 percent of offshore workers are onshore; on others it’s closer to 10 percent,” https://globalcloudteam.com/ Hergenroether says. In some cases—where specific skills are the reason for offshoring—he may even bring in offshore talent over long term. “But if you’re going to do that, your cost savings diminish dramatically,” he says.

Summary: The Benefits Of Outsourcing

Probably the most obvious, it’s often simply not easy to communicate with non-native speaking people. Although English is the most commonly spoken language, there is still often misunderstandings and general difficulties in communicating. Perhaps it’s due to education practices in their respective countries, or maybe they are just harder and more grateful workers. I’m not sure, and I don’t want to make assumptions, but it’s evident to me and others I’ve come across, that this is the case.

This allows them to reduce their overhead costs as Filipino workers have low compensation as compared to them hiring local in-house employees. A lot of foreign companies have also tapped into offshoring their human resources tasks such as sourcing, hiring process, and more. More so, finance and accounting-related tasks like bookkeeping, tax filing, procurement processes, etc.

Comments: Offshoring Vs Outsourcing

Sensitivities pertaining to cultural differences could get further magnified if the process involves customer interaction, like Contact Center support and could even result in customer dissatisfaction. OWorkers operates as a local registered company in all its locations. As a preferred employer, it receives a steady stream of applications that reduces its hiring costs as well as attrition numbers. It also gives oWorkers the flexibility to hire short-term resources to manage peaks, to the tune of almost a 100 resources in 48 hours.

Disenchantment Of Processors

Companies with offshore resources have access to a far more expansive talent pool, allowing you to streamline your business process. When you’re pleased with the team’s results, it’s almost guaranteed that you’ll want to foster this working relationship in the future. Quality control problems– For manufacturing offshoring, ensuring that a product is strictly builtaccording to the parent company’s standardsmay be a challenge under the offshore location’s manufacturing set-up. Even if the parent company provides quality guidelines, the differences in working culture, language, logistics and supply chains of the country where the factory is located may affect the quality of the finished product. Returning earnings back to the U.S. – A company earning more revenues from tax benefits, financial incentives, and other costs savings from offshoring will be able to achieve its goal of more income and maximum profits.

And certain areas around the world specialize in different aspects of technology that may be needed for the development of your software. It can be easier to find qualified software engineers with specific areas of expertise in certain countries, making their services more affordable. This has given rise to the phenomena that is offshore outsourcing which is a term used to describe the geographical proximity of the supplier, or lack of it, from the clients’ geographical position. It is normally used to indicate the vendor’s location in another, distant country.

Thank you for writing such an informative article about the pitfalls and hidden costs of IT outsourcing. In the IT world of today, the major motive in the mind of corporate executives seems to be cost, not quality or value. Well-defined and accepted internal software development and maintenance processes are also key to making an offshore situation work.