The relevance of the offshore development center model is no longer in
question; instead it has become the de facto business model for the Internet
economy. According to Gartner's IT Outsourcing Market Forecast: Worldwide,
2002-2007, overall spending on IT outsourcing by type, service line,
environment, country and region will rise from $176.8 billion in 2003 to
$235.6 billion in 2007. This phenomenal growth rate makes offshore
development centers a definitive business solution.
IT columnists and strategists echo the success of the offshore development
center, citing cost efficiencies and time advantages. But the extent of its
potential is yet to be realized. Many believe that the offshore development
center model is still facing teething problems of its infancy. As
increasingly complex, business-critical projects are developed offshore, the
offshore development center industry will mature and contribute
substantially to a global economy.
In the interim, the offshore development center is fraught with challenges
such as inferior quality; inflexibility; slow-adapting infrastructure,
political and natural disasters.
Possibly the biggest challenges that will hinder the natural progression of
the offshore development center are - communication and cultural
differences. Trying to communicate the intricacies of a project across
continents, through a constrained medium, can lead to confusion and
misunderstanding. The success of offshore development centers is also
hindered by culture as it differs vastly from region to region, saying
nothing of country to country. As a result, companies continue to burn their
fingers experimenting with offshore development and offshore development
Discussed above are the operational hazards of an offshore development
center model. How can you traverse beyond that and move from mere cost
saving to strategic value? Select the right supplier ?the single factor
that successfully smoothens rough edges and ensures that any offshore
development center venture is a multicrop harvest ?compatibility. When
selecting your offshore development center supplier, the question that needs
to be asked, and answered, is ?“Pepsi or Coke?
Preferences, goals, objectives, drivers are all important inherent traits
that define the rhythm of an organization, an important criterion when you
need to tango to the frenzied pace of the Internet economy and when you plan
to leverage on an offshore development center.
This has led to a paradigm shift in the traditional, widely accepted concept
of ‘supplier = partner? According to the management consultants, Everest
Group, offshore development center suppliers need to be allies, rather than
partners, as “Partners share joint liabilities and ownership. Allies act
together for each other’s benefit where and when their interests are
aligned.?There is a common goal and both parties leverage their strengths
to achieve it. Everest goes on to recommend this shift in perception as the
most important best practice for outsourcing decision makers.
With so much at stake in an offshore development center relationship, the
act of selecting the right ally needs careful consideration. According to
the Offshore Development Group, “One of the biggest challenges facing
potential buyers of IT services from offshore development organizations is
identifying appropriate vendors and performing due diligence.?br>
Location - Location plays an important role when outsourcing to an offshore
development center. The choice of location determines the caliber of
resources available, language and cultural compatibility, time zone
differences, innate quality consciousness, availability of infrastructure,
political stability and, most importantly, cost. It is extremely beneficial
if the offshore development center provider also has a local presence in
your country or has extensive experience working with other clients from
Outsourcing to India - India is the undisputed leader in offshore
development and offshore development centers. The country enjoys first-mover
advantage and is the most mature market in the current scenario. It has a
large population of culturally sensitized, technically advanced, English
speaking professionals (most of the higher education in India is in
English), who are available at low costs. Outsourcers with operations in
India or offshore development centers in India are reporting 45 to 60
percent annual growth. Gartner Group predicts that within two years, 40
percent of its clients will spend up to two-fifths of their legacy budgets
on offshore outsourcing to India.
India is an attractive location for the following reasons
Cost Saving - Fully loaded costs for offshore work
and offshore development centers in India are 30-50 percent lower than
those in the U.S. and Europe.
Faster time to market - Time reductions result from
24/7 development cycles. offshore development center rapid ramp-up
through access to a large pool of resources and faster learning curves
in some areas stemming from past experience.
High quality - According to research findings by CIO.com, “India has the highest number of CMM-certified companies in the
world?7 companies meet CMM minimum standards while 5,554 have ISO 9000
certifications. 260 of the Fortune 1000, including 3M, Amazon, Nortel
Networks - outsource to India.?/li>
Greater value ?many companies are leveraging the
technical expertise of Indian resources for activities such as R&D.