The tech industry in America is faced with intense competition from foreign vendors, most notably India. Although painful at times to American technology service providers, the rise of offshore competition creates quality options for outsourcing and creates value for your company.
I am an American, and I look at the world and at business through the lens of my red, white and blue-colored glasses (metaphorically speaking—I don’t really wear glasses). I take pride in the individual achievements of great Americans like Ben Franklin, Alexander Graham Bell, Jack Kilby and Bill Gates who have spawned many an industry. It is because of achievements like theirs that I believe anything is possible in America.
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The success of Americans is due to many factors and influences, but no achievement would occur without the work ethic that produces the desire to “get it done.” We like to believe in being patriotic and insist that we “buy American” and forgo any trade outside the good ole US of A. However, we wouldn’t have the economy we have without access to the goods and services from other countries. (For the other side, see “Eight Reasons Why Outsourcing to India Could Hurt Your Business.”
I have seen the need to import services as I seek to deliver for my clients; therefore, I have embraced the so-called flattening of the world and now regularly utilize firms in India to help deliver my projects and operate my business. I offer to you, from my own experience, the reason why you should consider outsourcing your technical work. And although outsourcing options exist in Eastern Europe, the Pacific Rim and Latin America, I will use India as my reference point for the sake of this article.
1. Achieve more with less. Everyone in business is under constant pressure to produce ever-increasing volumes of work to generate more revenue using existing staff. With outsourcing, you can utilize your existing staff to manage outsourced projects. Your staff manages the outsourced team, thus improving the output of each staff member. Outsourcing leverages several factors, including your staff’s experience and the productivity per individual.
2. Real-time access to skilled people. Business is not a steady, constant stream. You can never fully predict what situation the next day, week or month will force upon you. Ensuring you have the appropriate number of staff with the appropriate skills for the current workload is next to impossible.
Outsourcing provides a certain level of scalability to help solve the enviable situation of significant growth. If you have a solid team that can manage the outsourced projects, then you are well positioned to handle the growth by outsourcing projects.
3. Focus on your core competencies. When your business grows, it does so because you successfully deliver a product the market demands. But what if you experience exponential growth and need to ramp up your support infrastructure? How will you support your expanding customer base? How will you research new products and test them? And how will you meet either of these demands while continuing your current rate of growth? Outsource it, that’s how. Need a customer support call center? Find a partner in India. Need help researching new products and/or testing them? Outsource it to India. Outsourcing allows you to delegate noncore activities and lets you maintain your focus on the activities that make you successful.
4. Flexibility when negotiating contracts. The plain truth is that American labor is expensive—and should be, given that the cost of living is high compared to the majority of the world. In addition to each staff member’s salary, there is the cost of taxes, health insurance, liability insurance, computers, cubicles and much more, depending on the perks you offer. The typical range for a good developer can be anywhere from $50 to $80 an hour for a full-time staffer (depending on skills and experience). Compare this to the hourly cost of a developer in India, which can be negotiated down to as low as $15 per hour for experienced staff. Pricing flexibility allows you to be much more creative in managing your budget when you can’t afford higher-priced staff.
5. Higher value per person. Maintaining the proper staff levels to meet the needs of your business is a difficult art to master. Too little staff, and you run the risk of failing to deliver in times of increased activity; too many people on staff, and you risk losing quality people due to boredom and the lack of challenging work. Outsourcing gives you flexibility when determining appropriate staff levels. You can hire a core team capable of meeting the demands of your business 80 percent of the time. As activity spikes due to seasonal or similar demands, you can add bandwidth through outsourcing. This strategy will keep your full-time staff at a steady utilization rate throughout the year. The result will be a higher value received per person as you dramatically reduce the “nonproductive” time caused by staff sitting on the bench.
6. Educated people with deep skill sets. This may come as a surprise, but we Americans are not the smartest people in the world—just the most productive. When you outsource to India, you will be outsourcing to people who are highly educated, often holding degrees from the United States’ finest universities. Clearly language and cultural barriers exist. Just resist the urge to speak with increasing volume, and relax. The good people of India speak better English than the majority of Americans.
7. Getting started is easy. If outsourcing sounds even remotely interesting to you, I suggest you take appropriate action. Notice I didn’t simply say “take action.” Getting started with outsourcing is as easy as finding a vendor and signing a contract. Moving forward with wisdom, however, requires you take measured, deliberate steps to ensure you outsource only what you can handle. Here is my list of suggestions to help you start:
- Consider your needs first. This appears obvious, but it never hurts to be reminded of the basics. Avoid the urge to rush yourself and outsource a project because you think it is the answer to your problems. Take a step back to consider your situation first. What are your goals? What problem will outsourcing help you solve? How will you ensure outsourcing will meet your goals? Should you hire a U.S. firm that is experienced with outsourcing?
- Perform your due diligence. Like any product or service you purchase, it’s important to investigate the market and the potential vendors. Not all outsourcing providers are equal, and you need to determine their fit for your needs.
- Get the appropriate tools. Outsourcing partners work remotely. So you should invest in solid tools for communicating with remote teams. I suggest Web conferencing tools such as GoToMeeting and Webex. Both of these allow you to share screens with remote individuals and work together in real time.
- Start small. Outsourcing can fall into a ditch quickly, so control the number of variables as you experiment. Choose a simple project to test your chosen outsourcing provider. This will help you develop a relationship with your team in India, learn its culture and develop effective channels of communication.
- Don’t forsake responsibility. Ultimately you remain responsible for the work delivered by your outsourcing vendor. Avoid the temptation to assign the work and forget about it until the delivery date. I recommend managing your outsourcing partner as you would your staff. Document your expectations and define your deliverables and time lines. In addition, schedule a recurring meeting to review status and set priorities. In essence, your outsourced team is an extension of your staff and requires your oversight and guidance.
Our economy continues to undergo significant change due to increasing competition. Given our changing situation, it is a wise proposition to begin experimenting with Indian outsourcing. Doing so will provide a potential competitive advantage over your competition. In the end, you will find your company in a position to produce more product, profit and net income, and continue the American tradition of business productivity.
Ty Anderson,,CPA, is a partner at Cogent in Dallas. He spends his time consulting and building software using Microsoft technologies. He writes frequently about Microsoft technologies including SharePoint, Office and SQL Server.