Outsourcing – The Known Paradigm in a Flat World

Various cultures have had conceptions of a flat Earth, including ancient Babylon, Egypt, pre-Classical Greece and pre-17th century China. The modern belief that especially medieval Christianity believed in a flat earth has been referred to as The Myth of the Flat Earth. The Flat earth concept is also mentioned in the bible (ref:Isaiah 40:22).

Belief in a flat Earth is found in mankind's oldest writings. In early Mesopotamian thought, the world was portrayed as a flat disk floating in the ocean, and this forms the premise for early Greek maps such as those of Anaximander and Hecataeus of Miletus. The fallacy that the earth was flat also was a contributing factor in Columbus discovering the Americas. Though we know in the real world that the earth is geographically spherical but day-on-day it is becoming Flat!

As Corporations and Organization’s become multi-locational, multi-nationals and increasing availability of resources, modern communication, internet(world wide web), emergence of modern work-flow systems, global talent, raw material is truly defining the world as a level playing field in terms of commerce, where all competitors have an equal opportunity and equal reach to resources by varying degrees of separation. Modern Corporations aare adopting Global Philosophies of present day Management Gurus – “Diversification”, “Cost/Skill Arbitrage”, “Transnational Competitiveness”.

Organisations are focusing on their core-competencies and are outsourcing non-core activities to companies having core expertise in those competencies. Though for many enterprises outsourcing has became a preferential thing, for some enterprises it is still a proverbial dilemma to Outsource or Not to?

1. First of all, why is it worth outsourcing?
There are several reasons for using out-side services: someone can do something much better, than you (we mean company) and it is cheaper to buy these services than to make everything in the company.
Would Nike be as successful as it is now if it didn’t use cheap labor of Philippine workers? Nike concentrated on its core-competency Branding & Marketing and realized that manufacturing was not its core competency. Would you hire an accountant, create a work place, pay taxes, if your enterprise is not so big and your accountant works efficiently two days per month? Most likely you would buy services of accounting firm.
Everything depends on the tasks you need to accomplish. On the scale there will be the cost, on the other – quality/speed/security.
Let’s consider several situations
Situation 1. You are a big company. Every employee has a computer. You need to automate work of many divisions. You are worried about security; you want to protect your information to the maximum.
Solution: First of all, you should worry about security, consequently, the most responsible people – system administrators should work in your company. They would be responsible for undisturbed operation of your servers, network, and e-mail. It is enough having in your company a small IT division which would be engaged in adjustment of computers, printers and other office equipment. But probably it would be worth using services of local IT company in case financial arrangements show that it is really profitable.
Is it worth hiring programmers who would be developing software for your company, for example, for accountants? It is worth, but only if
- you are a software development company;
- you cannot buy ready software;
- you want to sell what your programmers would develop;
- you found a very talented manager who would be able to organize the work of prospective development division;
- you don’t know what to do with your profit.

Situation 2. You are a software development company. Your software is popular, but the expenditures for its development are still very high. You want to cut down expenditures, speed up development of new versions of the product(s). Or you would like to get new products and increase expenditures not more than by 30% (or less).
Solution: The biggest part of your expenditures is salary and taxes. You can refuse current “expensive” workers, hire a company with cheaper labor cost, and leave in your company the most effective managers who would be able to set tasks and control the process of these tasks implementation.

Situation 3. You are a not very big company, selling your products and services. You need a web site or a software product, but the project budget is limited. You turn to local software companies and understand that their services are too expensive for you.
Solution: You can work with other companies (or freelancers), who can sell these services to you at a low price.
So, you decided to use software outsourcing services, you need to accomplish several tasks then.

2. How can I choose the developer(s)? Russia, India, China, or Western Europe?
Developers can be situated anywhere: in another city, another region, or another country. I cannot elaborate or comment on other countries resource pool except India. The reason for differences is that historically, Indians have contributed towards the growth of mathematics and science. In 498 CE, Indian mathematician and astronomer Aryabhata stated that "Sthanam sthanam dasa gunam" or place to place in ten times in value, which may be the origin of the modern decimal-based place value notation.The oldest known text to use a decimal place-value system, including a zero, is the Jain text from India entitled the Lokavibhâga, dated 458 CE. The rules of Algebraic Math also was invented in ancient India. The growth of the intellect and analytical abilities in ingrained in the Indian Education system. Education in India is also more inclined towards developing Math & Science capabilities. More attention is paid to thorough study of math sciences. Also the Indian education system is very diverse and right through Pre-KG schooling a child is subjected to a lot of analytical and derivative studies. The reason the IT best brains have come from the IIT's and IIM's and Engineering Institutes of India. It is a known fact that Bill Gates has commented on the growth of Microsoft contributed by the best brains from the India. Major IT start-ups which have now spun into muti-billion dollar corporations have been started by Indians in the US. The US Silicon valley is full of these stories of young Indian's from IIT's/REC's starting off small IT corporations in Silicon Valley which gave impetus to the growth of the IT industry decades ago.

Thus, if you decide to outsource some work to some company, we recommend you to confirm the savings against vis-a-vis educational and experience.

3. How can I keep control over the project if the company developing it is situated too far (for example, in another country)?
Refer my previous blog- Deploy Offshoring Success: Define Metrics


4. What if there will be problems concerning intellectual property?
In any case, the person or company that ordered site design or/and development or software development gets the intellectual property rights. But you still need to discuss it with developers beforehand.

5. There can be communication problems, especially if developers speak some other language.
The medium of Higher Education(University education) is English. This does not pose to be a problem when comparing working with other countries like China, Japan, Russia or Phillipines.

6. Time difference may become a problem.
Sometimes time difference between customer and developers can be very sufficient. Nevertheless, we believe that time difference can be a great advantage. For example, if your company develops some project and you decide to outsource some part of work, you can work with the overseas team in shifts, so that programming goes on 24 hours a day.

7. Is it profitable to turn to third-party developers?
The answer is: yes, it is very profitable. First, using services of third-party developers you get high return on investment. Second, you can reduce the need to invest capital funds in non-core business functions, so capital funds more available for core areas.

8. How skilled are the companies acting as third-party developers?
Usually, such companies, especially if they work with foreign companies, have sufficient experience and skills which allows them to successfully operate on the international market of programming and Information technologies. You can view portfolio, clients list, find out the rates and pricing, how the work process is organized. Before signing the contract of long-term relations with a software development company, give some small project to this company and check the result. If everything suits you, you can continue the relations.

9. How do assure that Outsourcing would benefit me or my organization?
(Also Read my blog article- Deploy Offshoring & Outsourcing Success: Define Metrics)