In the current economic climate, one of the most important responsibilities for CIOs is to develop creative solutions to help their companies make it through tough business conditions. Most often those solutions involve cost reductions in the way business is done, and a common choice is to outsource IT functions or special projects.
In the world of IT outsourcing, costs are not just related to the price charged for the service—what is often just as important are the costs clients will bear associated with managing relationships with IT services providers. Coordinating work with your IT outsourcing partner can be a challenge, especially if the provider is located a significant distance from your company. And the synchronization of business hours and geographic locations can be key factors in getting the most from your IT outsourcing partnership—real-time communication and feasible business travel are crucial to effective and efficient collaboration of project teams.
The outsourcing of IT projects by North American companies to India, China and Hong Kong has been the norm for years, but today many of these businesses are realizing the benefits of near-shore IT outsourcing. Companies also want to mitigate risks and diversify their portfolio of vendors. Cost of labor in India is not as cheap as it used to be and the current geopolitical climate there may be a concern to executives in North America.
Near-shore IT outsourcing allows companies in North America to outsource work to countries in Latin America. Geographic proximity means that travel and communications are easier and less expensive, there are likely to be at least some commonalities between the cultures, and the partners are more likely to speak the same language.
Brazil in particular has fast become a major hub for cost-effective IT support for businesses in the U.S. and Canada, and a top-five location worldwide for IT outsourcing. Brazil has a low employee turnover rate and its IT professionals have a high degree of technical skills and business savvy. Sao Paulo has the second-largest community of Java programmers outside of the United States. And, because of a thriving financial and banking industry, Brazil’s IT workforce includes many mainframe programmers as well.
North American companies are finding that the Brazilian business culture is also very similar to their own. Brazilian employees are quick to share their ideas to improve projects. If they believe projects can be done in a different, more efficient manner, they share their thoughts and work in collaboration with their project leaders. Executives that have outsourced offshore often mention that this can be a challenge in countries such as India, China and Hong Kong, where culturally employees are taught to follow the rules and guidelines presented to them by their employers.
Despite these synergies, most companies outsourcing to Brazil or Latin America will say that the number one reason they prefer near-shore IT outsourcing is the time convenience. Brazil is only one hour ahead of the U.S. east coast for 10 months of the year (the other two months Brazil is three hours ahead). In comparison, India is 11 to 12 hours ahead of the U.S. east coast, and Beijing, Shanghai, and Hong Kong can be 25 hours ahead. Also important is the time it takes to travel to a location. Brazil is a nine hour flight from the U.S. East Coast, compared to 18 hours of travel time to India and 16 hours to Shanghai and Hong Kong.
Travel time was a big factor in HNI Corp. deciding to outsource projects to Brazil. HNI Corp., the largest U.S. office furniture manufacturer located in Muscatine, Iowa, wanted to augment its staff of developers but did not want managers to travel halfway around the world when they needed to check in on development progress. HNI realized the need for some measure of face-to-face interaction and wanted it to be as convenient as possible. The cost for outsourcing to Brazil instead of India and China was the same, but the ease of travel convinced HNI to choose a near-shore partner.
Many companies find that managing an outsource development team across an 18- to 24-hour time difference is extremely difficult and frequently results in delays and setbacks in projects. Feedback and agreement on initial project details can delay a project enough that companies need to change the way they function so projects stay on schedule.
Idera, a Houston-based software company that creates tools for managing and securing Microsoft Windows Server, outsources to Brazil and the time-zone was a major reason. Idera competes for talent with the energy industry in Houston so outsourcing some of its IT projects was a perfect solution. Idera’s biggest concern was finding IT professionals that would embed themselves into their teams and work simultaneously with them. Idera was concerned that a major time-zone difference would require extremely detailed plans and schedules for every project. By outsourcing to Brazil, Idera says the lack of a major time-zone difference keeps everything on the same schedule; teams can work together and be more productive.
Not only are companies outsourcing more to countries closer to their own, but are increasingly outsourcing more business processes. Non-transaction business process outsourcing (BPO) involves non-core work, such as human resources, training, and finance and accounting functions. Companies can offshore these business processes for a fraction of the cost of running the same functions in their home countries. And because processes such as human resources and accounting are essential and fundamental parts of a business, having those functions performed during similar business hours is imperative.
In the end, the reason near-shore IT outsourcing has developed into a viable and effective solution comes down to control—outsourcing closer to home helps companies more effectively and efficiently manage any IT project.
Gabriel Tinti is the marketing manager for Stefanini IT Solutions in North America.He has worked in marketing and business development for more than six years and is also responsible for managing relationships with clients and partners.