Outsourcing IT Makes Horse Sense

July 14, 2010

Despite the controversy regarding outsourcing, IT outsourcing is catching on among U.S. firms. There are a few reasons why.

Firstly, IT is something not everyone is good at. To put it another way most companies do not have the talent pool inhouse to assign IT projects. This would translate to hiring permanent staff to fill these IT positions. IT is also not part of the core competency of most firms. Hence, it is a good idea to offshore IT to top software development companies in India, Philippines or China.

With a recovery in the offing, companies are scurrying to get back in the ball game after the recession. The latter half of 2010 is expected to bring about a more conducive global economic climate, where businesses are more able to stabilize from the recession that roiled financial markets in 2008.

It is during this time that costs savings play a significant role in a company’s strategies. And it is for this reason that it is preferable to outsource IT to software developers located in Asia.

With peripherals like IT taken care of North American firms can focus on their core competencies. Another case in point is that an engineer in the U.S. would have to be paid wages that include benefits if it is a permanent position. In contrast, the outsourcing deal leaves the company free of such burdens, when the company is trying to survive in a stiff competitive climate. On other hand, engineers in India, for example, are paid just a small fraction in terms of hourly wages.

Despite the rhetoric in Washington DC regarding outsourcing, the anti-outsourcing sentiments expressed by Pres. Obama and Senators like Charles Schumer are unlikely to keep companies from offshoring. The main reason is that companies need to book their profits and they have a duty to their shareholders. There is little that anti-outsourcing bill can do to keep companies from following a practice that has been used as a business strategy for the last twenty years.

While it is true that unemployment in America is skyrocketing at an alarming rate, it is also true that U.S. firms, particularly financial firms will need to the backing of foreign staff to solve some of the problems brought about by the credit crisis. The expertise to solve these problems lies abroad in some cases, and it is in the best interest of the U.S. to keep countries like the Philippines, India and China on its side, so that a similar catastrophe does not happen again.

Another issue that skeptics of outsourcing fail to realize is that it is not just the large multinational firms that engage in outsourcing, but that medium sized businesses are also dependant on it. In a financial environment with cutthroat competition, anything goes. And outsourcing is a major strategy that is likely makes a major difference in the next five to ten years.

According to a manager of an outsourcing firm in California, the only alternative to outsourcing is a hiring freeze that will make the unemployment problem even worse. Moreover, the relationship between suppliers and buyers are more mature and sophisticated now and it is possible to define the exact nature of outsourced work that is mutually advantages for all parties concerned.

Another reason why IT outsourcing is popular in North America is that IT deals with computers or machines and machines are the same all over the world. In contrast, HR and customer service suppliers have to deal with employees who are non-native speakers of English, who do not understand the culture of America. Apart from that, it is not fair to assume that a call center agent in India understands the consumer psychology in the U.S. However, this is not true of a PHP programmer. Whether he speaks English or not, a programmer can function independent of his language for the most part, reports MosoTechnology.com


3 Responses to “Outsourcing IT Makes Horse Sense”

  1. Outsource on July 22nd, 2010 7:33 pm

    Pretty nice post. I just stumbled upon your blog and wanted to say that I have really enjoyed browsing your blog posts. In any case I’ll be subscribing to your feed and I hope you write again soon!

  2. Mendel Potok on August 13th, 2010 4:55 pm

    Absolutely true. While I believe that outsourcing HR and customer service is pure madness, it outsourcing is an excellent business practice.

  3. June Harris on August 23rd, 2010 3:53 am

    Interesting post, however, I would like to bring to your notice that there are many services that are being outsourced and doing well.
    Have you ever realized that the most suited service/discipline for outsourcing is Financial Services – Accounting & Bookkeeping Services, because the Accounting systems are universal. The Double Entry system of Bookkeeping is practiced almost everywhere. Also, most of the call centers and BPOs are customer care centers for Banks and Financial Institutions.
    Most of the customers call their Banks for balance inquiry – credit/debit balance, credit card outstanding, cheque related issues, loan (housing, vehicle, personal, etc.) related issues, etc. For answering these queries, agents in India or anywhere else don’t have the thoroughly understand the psychology of US/UK customers. Though to quiet some extent the agents are trained on the culture of the west. In fact, you will be surprised to know that the customers in the US/UK are very happy with the services provided by these call centers. Before the call centers, they would usually end up just interacting with a machine -IVR (Interactive Voice Response), but now at least they get a chance to speak to a human being, and get information/clarification.
    Customer care and HR, and in fact even many other services are also well suited for outsourcing & are doing well.

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