IT Outsourcing Blog

– We say the Core Principles of Successful Sourcing Remain to be Vital

Domestic Sourcing as the name suggests is procuring local talent available for getting software developed in-house and not going miles away or in a different time zone to get it done from a country far away at cheaper rates. A recently published article in NY Times reveals the changing scenario of US markets.
According to the article the practice of American countries to save money by outsourcing IT work at far offshore locations particularly India, China and other Southeast Asian countries is seeing a slowdown. The article says that companies are happier in outsourcing jobs near their own facility or at least in the same time zone. Some benefits which a company can avail from domestic sourcing are as follows:

1. Same time zone: Domestic sourcing cuts the problems which companies might come across while dealing with an Offshore SW Service provider. Geographically distant locations are important while considering outsourcing of complex software projects. While some companies are ok with this idea others might not fully agree to this practice. Benefits of face to face instant meetings are the reasons why companies which were happy earlier to outsource their SW work at offshore locations do not go with this anymore. Instead they are more convinced with an onshore or niche SW service provider so that instant face to face meetings can be held.
   
   
2. Cultural similarities: The main challenge in a geographically distributed software development process is cultural barriers. All countries have a culture of their own, precisely if a SW service provider happens to be from a different time zone thus limiting time to interact, cultural dissimilarities may slow down the process of software development. Holidays at client’s site may be a working day for provider and vice versa. To avoid such scenarios customers find it comfortable to hire service providers at their own location or within the same time zone for ease of communication.
   
   
   
   Fig. 1: Comparison between Domestic and Offshore IT Sourcing by pliXos
   
   
   
   
3. Language barriers: Of-course a valid reason for managers to think before choosing a location for finding a SW Service provider for their company. Language gap is fundamental to every outsource project. English being commonly spoken language in most countries throughout globe still some countries face challenges in serving clients of foreign countries. A simple example is China where English still needs to be adopted on a large scale for free flow of communication between the partners and client. It helps in building strong bond between the customers and SW service providers.
   
   
4. In-efficient SW Service provider: Some local SW Service providers in countries such as India, China, Pakistan etc which were singing the song of outsourcing from long time back failed to keep pace with the latest developments. Robotics, AI, IoT, Machine Learning etc are some of the new fields and technologies which these service providers were not well versed in. In short, they lacked the skills & qualities which are in demand now.
   
   

All the above and some other small factors were the major highlights that the article from NY Times wanted to put into readers’ mind. Despite all the above major factors and certain other microeconomic factors it was found that most companies use a mix of both Offshore and Domestic IT Partners for best benefits in global markets. A report from plixos survey on Global Software Development Trends 2017 reveals the same.


Fig 2: Survey result on Global Software Development 2017 by pliXos

pliXos (a Global Sourcing company for Software/Application Outsourcing) helps clients to find best providers based on customer feedback, scientific provider rating and in depth research which is available to customers all over the world through its popular B2B Marketplace duly agrees to the agenda of the article. pliXos strives to make a marked difference in the way companies outsource software development work to Offshore/Onshore/Nearshore firms.

We at pliXos along with agreeing to the facts of domestic sourcing would also like to put forth the real facts of successful outsourcing. We would say that core principals of successful sourcing of valuable IT partners is still a valid reason for companies apart from domestic sourcing. We are not disagreeing the reasonable benefits of Domestic Sourcing but there is something more which should be addressed. While agreeing to the benefits of local sourcing such as similar time zone, cultural similarities, communication in terms of language as mentioned in the above article as major barriers in Offshore software development, one should also try to address the short, mid, & long term objectives of customers/companies where clever managers are more keen towards reducing the cost by major factors and the project duration to almost half in order to benefit the organization as a whole.

This can be achieved easily by implementing agile methodologies, close collaboration with service providers (by the right tools and processes), governance of entire project, transparency and other standard procedures which will be executed only after selection of the right SW Service provider. Unfortunately, domestic/local sourcing does not provide all these privileges. We would further like to enumerate few benefits which are easy to avail from Offshore/Nearshore software development when domestic sourcing does not deliver projected growth and profitability:

1. Acute shortage of skilled talented IT professionals: Outsourcing simply fits the best where there is acute shortage of skilled people to get the job done within or near the company’s facility.
   
   
2. Budget constraints: Not all companies have budgets to hire highly skilled talent due to the fact that they have sky touching salaries which are beyond their budgets. Also, hiring local talent and training them would require good investments which may not be possible for SME’s. In this case outsourcing was, is, and will remain to be the best solution preferably at a nearshore location or offshore to a place not quite far from its own time zone.
   
   
3. Running short of time: If the project needs to be completed and implemented within a short period of time in that case local hiring would not be a good step for customers. Finding an experienced SW Service provider or consultant would definitely be the key in delivering quality result and best ROI for companies.
   
   
4. Economic balance: Domestic Sourcing will cause a spike in salaries of local talent within short span of time which can be counterbalanced with outsourcing of specific IT tasks to verified SW service providers.
   
   

Further sourcing of skilled IT talent from domestic/local markets requires immense & thorough knowledge of the region and also ample availability of skilled IT professionals as the companies will have to pay sky touching salaries for highly talented person which are definitely in less number. To meet up with the considerably high costs of organizing trainings for the existing population companies will have to drain out good amount of capital which may or may not be possible for all of them.

This raises a question on the SME’s how are they going to incur such costs? Is the future for SMEs not bright? What if the companies are looking to find quick solutions to their IT challenges? Will the domestic talent lower down their demand for serving their interests too? If we look at the offshore/nearshore market the salaries do not rise exponentially and follow a stable trend which we think can be managed by few if not all.

Moreover, quality and desired delivery of objectives decided long ago in an offshore software development project can be achieved if customers focus on their governance activities and create provisions for improvement in project delivery at intervals. A quarterly or half yearly visit to offshore active site can be a good sensible move to regain productivity. This can save a huge sum of money that will be wasted in creation & maintenance of IT Infrastructure, recruitment & training of existing population on a large scale.

Furthermore, most will agree that “Outsourcing can be a valid architect for innovative technologies as it allows to collaborate with excellent SW Service Providers” and help the company to grow economically and globally. Sharing of knowledge is critical in a volatile technology industry where things do not take too long to become obsolete whenever there is a new debut of latest technology.

Sources:
NY Times
Survey Report on Global Software Development Outsourcing 2017 by pliXos

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