The Raw W-W-W Factor of Offshore Outsourcing - When, What and Where

When:

The majority (68%) of respondents say their company began outsourcing offshore after 2000. 23% said they started offshore in 2000 while 18% said 2001. Twenty-seven percent started outsourcing in 2002.


            


What:

Eighty-six (86%) percent of IT executives surveyed said they currently outsource application development offshore and 26% outsource the call center offshore. Other applications frequently sent offshore include system administration/support (23%), help desk (17%) and business process (such as HR or financial applications) (17%). On average, the value of current offshore outsourcing contracts is $16.2 million in the 101 organizations included in this study.

             


Where:

When asked if there were processes or applications that their organization would not outsource offshore, IT professionals most frequently answered systems and architecture planning (45%), research and development (43%) and business process (38%).

India was the most frequently cited country for offshore outsourcing, with 89% of respondents saying they outsource in that country. Other countries listed included the Philippines (10%), China (8%), Ireland (7%) and Russia (6%).

Costs of Offshore Outsourcing

Survey respondents report that vendor selection costs, legal and contract costs and transition costs were in-house costs for the most part whereas the costs for application development and ongoing application maintenance costs were more frequently paid to the offshore outsourcing provider. The table below indicates what percent of costs were in-house versus paid to a provider:

Benefits of Offshore Outsourcing

Flexibility
Offshore Software Development is synonymous with flexibility. When facing a large project but of short duration, you can use Offshore programming to limit the number of new employees and administrative support personnel. It allows you to double the number of programmers you have access to and better yet, we are just a phone call away.

Cost Benefits
For start-up companies, the benefits of Offshore Software Development can be monumental for the simple fact that it allows you to go farther on your VC funding. The costs of offshore software Development are much lower than hiring programmers to fulfill your design. Our past experience with our international clients makes us very confident that we will deliver the best possible quality, at significant cost savings to you, every time! . Offshore outsourcing price-wise is hard to beat.

Independence

Most software vendors or investors cannot conduct independent analyses of their own or their competitors' products. They not only perform development work but also can obtain the competition's software for evaluation purposes for clients. This ability allows us to ask the questions you want answered and not disclose client identity.

According to 78% of the IT executives surveyed, lower cost was the main reason for outsourcing offshore. The greatest savings were realized in the areas of labor costs (86%) and reduced project timelines/time to complete (37%). Other benefits experienced as a result of offshore outsourcing included increased IT department productivity (44%), competitive advantage (30%) and internal customer satisfaction (20%).

RISKS

Offshore outsourcing is growing at an average rate of 25 percent per annum, with little evidence of slowing. Indeed, while most enterprises experience initial resistance, most technical issues are readily resolved and risks are deemed insignificant after careful evaluation.

The R-R-R Method – Risk-Return-Rating

Most companies will require some analytic structure to create the risk-return balance in a portfolio of outsourcing initiatives. The R-R-R method is an assessment tool designed to help companies balance the trade-off between risks and costs when implementing a strategy of geographic diversification. This helps maintain a company's risk within risk tolerance levels while continuing to generate good returns.

                 

A Balance of Risk and Return

Companies can shift their geo-political risks within risk tolerance levels while continuing to generate cost savings by performing a risk portfolio assessment and using the results to change their offshore outsourcing strategy. Using multiple service delivery geographies creates options and enables a company to transfer application development and support to unaffected geographies in the event of an emergency.

Operating different global support locations leads to the existence of more than one support center with knowledge of the in-scope applications and access to the associated data. By applying risk portfolio assessment to their outsourcing strategies, companies not only gain the cost advantages from offshoring, but also achieve lower risk and with greater flexibility to deal with future events

Risk Analysis

Cost-Reduction Expectations

The biggest risk with offshore outsourcing has nothing to do with outsourcing - it involves the expectations the internal organization has about how much the savings from offshore will be. Unfortunately, many executives assume that labor arbitrage will yield savings comparable to person-to-person comparison (for example, a full-time equivalent in India will cost 35-45 percent less) without regard for the hidden costs and differences in operating models. In reality, most IT organizations save 15 percent to 25 percent during the first year; by the third year, cost savings often reach 35 percent to 45 percent as companies "go up the learning curve" for offshore outsourcing and modify operations to align to an offshore model.

Data Security/Protection

IT organizations evaluating any kind of outsourcing question whether vendors have sufficiently robust security practices and if vendors can meet the security requirements they have internally. While most IT organizations find offshore vendor security practices impressive (often exceeding internal practices), the risk of security breaks or intellectual property protection is inherently raised when working in international business. Privacy concerns must be completely addressed. Although these issues rarely pose major hindrance to outsourcing, the requirements must be documented and the methods and integration with vendors defined.

Loss of Business Knowledge

Most IT organizations have business knowledge that resides within the developers of applications. In some cases, this expertise may be a proprietary or competitive advantage. Companies must carefully assess business knowledge and determine if moving it either outside the company or to an offshore location will compromise company practices.

Vendor Failure to Deliver

A common oversight for IT organizations is a contingency plan - what happens if the vendor, all best intentions and contracts aside, simply fails to deliver. Although such failures are exceptions, they do occur. High risk or exposure might deter the organization from outsourcing, it might shift the outsourcing strategy (e.g., from a single vendor to multiple vendors), or it might drive the company toward outsourcing (if the vendor has specific skills to reduce risks).

Scope Creep

There is no such thing as a fixed-price contract. All outsourcing contracts contain baselines and assumptions. If the actual work somehow varies from estimates, the client will pay the difference. This simple fact has become a major obstacle for IT organizations that are surprised that the price was not "fixed" or that the vendor expects to be paid for incremental scope changes. Most projects change by 10-15 percent during the development cycle of the project.

Government Oversight/Regulation

Utilities, financial services institutions, and healthcare organizations, among others, face various degrees of government oversight. These IT organizations must ensure that the offshore vendor is sensitive to industry-specific requirements and the vendor's ability comply with government regulations, and provide sufficient "transparency" showing that it does comply and is thus accountable during audits.

Culture

A representative example: although English is one official language in India, pronunciation and accents can vary tremendously. Many vendors put call center employees through accent training. In addition, cultural differences include religions, modes of dress, social activities, and even the way a question is answered. Most leading vendors have cultural education programs, but executives should not assume that cultural alignment would be insignificant or trivial.

Turnover of Key Personnel

Rapid growth among outsourcing vendors has created a dynamic labor market, especially in India. Key personnel are usually in demand for new, high profile projects, or even at risk of being recruited by other offshore vendors. While offshore vendors will often quote overall turnover statistics that appear relatively low, the more important statistic to manage is the turnover of key personnel on an account. Common turnover levels are in the 15 percent to 20 percent range, and creating contractual terms around those levels is a reasonable request.

Knowledge Transfer

The time and effort to transfer knowledge to the vendor is a cost rarely accounted for by IT organizations. Indeed, we observe that most IT organizations experience a 20 percent decline in productivity during the first year of an agreement, largely due to time spent transferring both technical and business knowledge to the vendor.

Bottom Line

As IT organizations consider the vast benefits and allure of offshore outsourcing; they must balance the risks and uncertainties with the potential for labor arbitrage.

Connect Carefully

Forming an alliance with an overseas partner is a complex process. There are three essential steps that every business owner will want to take before signing a contract with an overseas company.

Get a lawyer or two. This step is the first for a reason. International business law is far too dense and complicated to tackle on your own. Besides dealing with international laws regarding commerce, you need to be confident that your business will be well represented should disagreements with the offshore company arise.

Research, research and research. Some overseas companies have better track records than others. Find out which businesses they've contracted with in the past and get in touch with those people for personal testimonies.

Assign a simple task to numerous firms and compare the results as a way of weeding out the inefficient or inexperienced ones from the group.

Find out whether any of the firms have been involved in lawsuits. A local World Trade Center is a basic resource for gathering information about a company or an industry.

Try Eyes Wide Open

Draw up a comprehensive service level agreement (SLA). This document will be the primary reference for both parties. It should outline the expectations of service and production and the methods to be used in analyzing whether these expectations are met. It should also specify all applicable security, trademark and patent laws pertaining to the outsourcing relationship.

Outsourcing to an offshore business could be the best thing to happen to your business, but it could also be the very thing that ends it.

Take your time when choosing a company to work with and never fail to examine the positive and the negative outcomes that could result from the partnership.

AMARTECH: IT OFFSHORE OUTSOURCING

We at Amartech provide you expert solutions for Distributed/Web Application, Software Solutions, Web Development. The details given below clearly prove our strength and definitely pose us as a suitable option, if you are looking to outsource your work in any of the above application/domain.
                                     

DISTRIBUTED/WEB APPLICATIONS

Distributed/Web Applications Development in Amartech

The distributed / web applications development architecture can effectively kick start your performance and churn out miracles. But then, it is important to know how these miracles happen in today's world. The distributed / web applications development functionality is spread among multiple applications. These applications reside either on just one computer or on multiple computers.

Advantages of Distributed/Web Application Development in Amartech.

1.      Easy update of clients or servers possible.

2.      Scalability.

3.      Reusability.

4.      Server replication.

5.      Reduction in application development cost.

6.      Access to expert aid that would not be otherwise available to a project.

7.      Functionality encapsulation within a discreet unit and spreading of some of the application functionality across processors.

Technologies Used to Formulate Distributed / Web Applications
Development in Amartech.

Open standards based solutions
Java, EJB, RMI, IIOP, JTS/OTS, JNDI, JDBC, Servlets, JSP, Java Security, and CORBA

All-Microsoft solution
COM, COM+, Active-X, Visual C++, MTS, ASP, IIS etc.

Other proprietary solutions
Message oriented middleware (MOMs - MQSeries, etc.)

SOFTWARE SOLUTIONS

Software Solutions from Amartech offer the following:

1.      Project and program management

2.      Technology and strategy consulting services

3.      Documentation, help systems, graphic design

4.      Application and solution development

5.      Quality Assurance

6.      Product quality assessment

7.      Validation Testing

8.      Design and Architecture

9.      Automated test scripting

10.  Commercial and enterprise software development

Our software centers located in Amartech can be trusted for quality software solutions from Amartech. Technologically well versed and custom - developed, our software solutions from Amartech are economical. So when you decide to choose a firm for software development in Amartech, think of us- IT Outsourcing Amartech.

Technologies Used:

Architectures:
Microsoft. NET, J2EE, J2ME, WAP

Application Servers / Middleware:
BEA Web logic, Microsoft Transaction Server and Message Queuing, IBM Web Sphere, JRun, JBoss, Tomcat

Web Servers:
Microsoft IIS, Netscape Enterprise, Apache server

Server Languages:
Active Server Pages (ASP), Servlets, Java Server Pages (JSP), CGI/Perl, and PHP

Programming Languages:
C, C++, Java, Visual Basic, And Visual C++

Markup Languages:
HTML/DHTML, XML/XSL, WML

Scripting Languages:
JavaScript, VB Script

Distributed Object Technologies:
COM/DCOM, Enterprise Java Beans (EJB)

Communications:
JMS, Java Mail, RMI, and SSL

 Databases:
 Oracle, MS SQL Server, and MySQL.

 Front end Design Tools:
 Macromedia Flash, Adobe Photoshop, GIF Animator, 3D MAX, Adobe
 Premier, Macromedia Dream weaver

Our software solutions in Amartech ensures clients

1.      Code review / code inspection / software auditing

2.      Code and documents transfer through secured FTP server and over high speed access links – hourly, daily, weekly from our center doing software development in Amartech.

3.      Project management, co-ordination and monitoring from our project management center at Kochi, Amartech.

4.      Weekly/ bi-weekly status meeting, design and code review meeting with the team regarding the software solutions in Amartech.

5.      We also arrange client visits to centers working on software development in Amartech.

WEB DEVELOPMENT

A lot of people try to make websites. But we create it.

To be a professional web designer, one ought to be familiar with the market, user needs, competitive landscape and the functional requirements. This helps to form a digital strategy that fits your online requirements.

Our rates are economically priced to fit everyone’s purse.

We are economically priced for our web development and design services. We fix our rates after reviewing project specifications and consolidating it into a fixed customized quote by adding the number of hours and multiplying them with our costs. We offer a fixed price for our web design and development services; knowing that it is comfortable for most clients.

      Web Development in Amartech

1.      Development of business-to-business websites with search engines and applications.

2.      Development of E-commerce / consumer websites with order placement and credit-card facilities

3.      Development of fully functional websites (B2C, B2B, Community, Portal)

4.      HTML, DHTML, XML, Perl, CGI, Java, ASP, PHP and CF programming

5.      Development of fully interactive websites with audio-video streaming and animation development

6.      Development of web based ERP/Intranet.

      Internet/Web/E-commerce application development

1.      Back-end integration of Oracle, SQL server, Access, DB2, Sybase, Informix etc.

2.      Enabling existing applications to web/internet/intranet

3.      Java scripts, applets, Servlets

4.      Tools for integration and other applications to web

      Java related web development in Amartech

1.      Application Development using Java (sun, IBM, Java Swing, JDK, etc.)

2.      Converting existing application to Java

3.      Distributed computing for Java

4.      System prototyping

5.      Java security (JDK)

6.      Testing the website performance

7.      Load testing

8.      Web-site testing

9.      Develop Java middleware tools

 RISK MANAGEMENT AT AMARTECH

 Besides holding an expertise in the above mentioned application domains, we at
 Amartech are also well aware of various risk involved in offshore outsourcing and
 consequently we do take appropriate measures for their management.

Data Security/Protection

We surely understand that the risk of security breaks or intellectual property protection is of paramount importance when working in international business. We have sufficiently robust security practices to completely address privacy concerns. Requirements are well documented and the methods and integration with vendors are clearly defined.

Vendor Failure to Deliver

A common oversight for IT organizations is a contingency plan - what happens if the vendor, all best intentions and contracts aside, simply fails to deliver. Although such failures are exceptions, they do occur.
Amartech was founded with a single promise to our clients: to do whatever it takes to deliver the right business results, on time and on budget. For the last four years, our teams have consistently delivered on this promise, achieving success at nearly two times the industry average.

Scope Creep

All outsourcing contracts contain baselines and assumptions. If the actual work somehow varies from estimates, the client will pay the difference. This simple fact has become a major obstacle for IT organizations that are surprised that the price was not "fixed" or that the vendor expects to be paid for incremental scope changes. Most projects change by 10-15 percent during the development cycle of the project.
From the very beginning we at Amartech were aware of this fact and we have always kept our promise of fixed rate- fixed time delivery.

Knowledge Transfer

The time and effort to transfer knowledge to the vendor is a cost rarely accounted for by IT organizations. Indeed, we observe that most IT organizations experience a 20 percent decline in productivity during the first year of an agreement, largely due to time spent transferring both technical and business knowledge to the vendor.
We have 365*24*7 available dedicated staff to speed up knowledge transfer via email, fax, phone etc.