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Offshore outsourcing to India is one of the most popular management practices today. Though it is generally spurred by the cost reduction factor, this is just one of the reasons one should consider offshore outsourcing. Most parties who outsource are unaware that Indian Service Providers do not just offer cost effective solutions, but also value addition by improving productivity and quality.
One should understand the need for offshore outsourcing better before making a decision. Cost is definitely one of the major reasons for offshore outsourcing to India, but one should realize that this cost advantage may not be seen immediately. Initial investment in infrastructure, training, and other such preliminaries may make one believe that the cost advantage promised is just the illusory pot of gold on the other side of the rainbow.
However, this cost advantage is seen over a period of time in a outsourcing venture which involves a committed relationship and understanding between both parties involved. A recent article on IBM and outsourcing illustrates this.
"Outsourcing services companies frequently have to make substantial investments in IT equipment, facilities and personnel. Yet IBM, HP and others prize these multiyear contracts because they can help bolster higher-margin sales of hardware and software by creating a long- term, interdependent relationship with clients". ("IBM cements outsourcing dominance", CNET News.com, October 02, 2003)
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There will be savings and along with these savings there is great value addition. Most who outsource only realize the quality and value addition after the offshore outsourcing relationship begins. This is not usually the primary goal when deciding to outsource, and the creativity and talent in India comes as a surprise to many.
"Certainly cost reduction, but it's not as simple as that! Cost reduction was only part of the reason that companies were considering offshore outsourcing, there were benefits to be had in time-to-market and quality, leading to an adage that companies initially chose India to save costs but stayed for the speed and quality!" (National Outsourcing Association (NOA), 1st Annual Offshore Outsourcing Conference - 23rd July 2003)
Offshore Outsourcing to India is about quality and value addition at a reduced cost.
The shift in motivation is already apparent. The fact that so many companies continue to outsource is proof of this. Along with the sheer volume of work that is pouring into the country comes recognition of the talent and expertise possessed by Indian Service Providers.
Indian companies also realize that cost cannot sustain the country's current dominant position in the offshore outsourcing industry. Nandan Nilekani, CEO Infosys, points out that the way business is conducted is changing. The perfect formula two years ago is no longer the way to do business today. Now the mindset is changing from a company that simply provides services to one that provides solutions.
"Our selling pitch so far was, 'We have a 100 Java engineers, and we can deliver for you from offshore, now tell us what you want us to do.' Today that is being replaced with "we can give you a technical solution which can cut your inventory expenses by $100 million", says Nilekani.