Top 10 Benefits of Outsourcing

Outsourcing and offshore are interchangeably used by people. Some of them think that these terms are same. But there is different between Outsourcing and offshore.

Outsourcing means sourcing from outside. The term is increasingly used to refer to sub-contracting of a set of functions or processes by one firm to another, or to a group of individuals. The latter organisation is often in another physical location, or another country altogether.

When a company's operations or business processes are outsourced to firms in foreign countries, often to take advantage of cheap skilled labor, it is referred to as Offshore outsourcing or Offshoring.

Outsourcing enables a company to focus on core-competency areas. It also frees the firm from resource and labour intensive functions, which are now performed by trained personnel at much lower costs.

The processes or activities that are being outsourced could range from customer service and telemarketing, to IT management, software development, market research and even financial portfolio management.

Most of the outsourcing firms are based in the USA, some in the UK or Australia and fewer still in Europe, while most of the outsourced workforce is Asian.

There have been loud protests against outsourcing in the USA, and more recently in Australia, since some of the professionals might be dislocated; when processes are shifted, jobs are naturally shifted too. However, this kind of dislocation is mostly temporary and there are very few highly-skilled professionals who are actually losing jobs because of outsourcing.

Benefits of Outsourcing

1. Reduce overheads, free up resources
2. Minimize capital expenditure
3. Eliminate investment in fixed infrastructure
4. Offload non-core functions
5. Redirect energy and personnel into the core business
6. Free your executive team from day-to-day process problems
7. Focus scarce resources on mission-critical projects
8. Get access to specialized skills
9. Reduce need for internal commitment of specialists
10. Save on manpower and training costs

Apart from above mention benefits there are some other Benefits of Outsourcing are as follows:

* Establish long-term, strategic relationships with world-class service providers to gain a competitive edge
* Enhance tactical and strategic advantages
* Focus on strategic thinking, process re-engineering and managing trading partner relationships
* Benefit from the provider's expertise in solving problems for a variety of clients with similar requirements.
* Obtain needed project management and implementation consulting expertise.
* Acquire access to best practices and proven methodologies
* Spread your risks
* Avoid the cost of chasing technology
* Leverage the provider's extensive investments in technology, methodologies and people
* Reduce the risk of technological obsolescence
* Increase efficiency by consolidating and centralizing functions.

Source ezinearticles.com

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Key differences between local and offshore software development

While many of the processes and practices for managing offshore outsourcing are similar to outsourcing to local suppliers, we have found that there are four major differences that are unique to offshore software projects.

1. Vendor selection and contract negotiation are more complex.

Today, more than twenty countries are considered to be offshore outsourcing locations. And within many of the most attractive countries there are at least several hundred potential suppliers. The processses of identifying an appropriate set of potential companies, conducting meaningful RFI and RFP activities, and negotiating project arrangements are much more difficult and time consuming than evaluating outsourcing vendors within one’s own country. The diverse cultures, foreign language barriers, differing time zones, difficulty in understanding and interpreting the information received, and unfamiliar legal systems and contract provisions are just a few of the factors than complicate using offshore suppliers.

2. Software requirements specifications need to be more clearly defined.

Customer requirements and design documents need to be developed with much greater accuracy and detail because the geographical separation between the onsite business users and the offshore team makes real-time communication much more difficult. Because of the physical separation and, in many cases, time-zone differences, the individual team members don’t have the luxury of getting answers and clarifications as quickly and easily as if their colleagues were sitting just a few seats away.

3. Roles and responsibilities of the project team need to be explicit.

Moving work offshore also focuses attention on clearly defining the roles and responsibilities for each step in the software development process. While most of the common software development methodologies can be followed to guide offshore work, the activities and tasks need to explicitly assigned and modified, as appropriate, to take into account that the people and groups responsible for the various work steps are geographically separate. On most projects, team members will never meet face-to-face over the duration of the project.

4. Successful completion requires better project management, including team communications, progress monitoring and reporting, and formal review of intermediate and final project deliverables.

Companies considering offshore development must recognize that offshore outsourcing presents a major management challenge and that the level of project planning, coordination, technical integration, and remote support for offshore projects is more complicated than performing software development solely in-house or with a local supplier. A huge hurdle is overcoming language and cultural barriers. For example, even in cases where the offshore supplier had an excellent command of the English language, we found that small nuances and slang terms in the requirements and in our online discussions introduced huge misunderstandings in the project outputs. More intermediate progress reviews should be conducted to make sure that the timetable is being met and test results should be constantly monitored.

By Dr. Bernard L. Palowitch, Jr., President & CEO of Incoda Corporation.