Outsourcing created a small stir in the 1980s. Today, it has become an intrinsic part of global business. The term refers to the delegation of non-core operations of a firm to an outside specialist. It quickly gained popularity as companies came to believe it lowered costs and increased profits.
Does It Deliver?
The biggest problem with outsourcing is that despite being around for more than two decades, it has yet to stabilize. Although most would agree that it offers more benefits than disadvantages, it continues to attract severe resistance and flak from critics and skeptics. Despite tremendous growth in outsourcing, its future progress remains uncertain.
Why Outsource?
Businesses outsource to lower costs, focus more on expertise in particular sectors, and utilize global workforces, technologies, and resources more efficiently. Most industry players, however, opine that cost savings are always a primary factor behind the decision to outsource.
Contrary to popular perception, many outsourcing veterans report that the practice of outsourcing has also helped their companies perform better. But don't get too excited. It would be a mistake to expect satisfaction with outsourcing in the very first year. However, satisfaction does increase over time as performance improves.
What about U.S. Employees?
According to a recent study conducted by the Greater Washington Initiative, U.S. employers will need the services of 30,000 additional software developers before 2014. Isn't outsourcing the best solution? It might be if you compare the average salaries of U.S. developers with those of workers in developing countries. An average computer science grad from the University of Maryland would not demand less than $51,000 to $70,000 per year, while annual salaries for developers in India, Taiwan, and China range from $10,000 to $13,000.
"People think there is no opportunity [in the U.S.], and that's so wrong," said University of Maryland computer science professor Victor Basili. The reality is that there is room for both domestically trained engineers and outsourcing.
How to Make Outsourcing Work?
The complexity of outsourcing can baffle even the most successful businessperson if it is not handled deftly. The following guidelines may be helpful:
- Be sure of your major objective, whether it is cost reductions or improved performance.
- Never treat an outsourcer like a service provider. Manage the relationship as a partnership.
- Learn the flaws and flukes of the process from veterans.
- Actively train your in-house staff.
- Be careful when choosing a vendor—assess domain knowledge, financial viability, and integrity.
- Put all of your requirements on paper in a clear and specific manner.
- Insist that your outsourcing company deliver consistent quality.
- Fully support your outsourced teams.
