IT Offshore Outsourcing: An Overview

The new wave : Outsourcing

The Outsourcing market is expected to rise with more and more companies planning to outsource low end as well ashigh-end jobs to offshore destinations. If you are involved with any facet of the IT industry, it is important to learn more about this latest development in evolution of the industry.

Offshore Outsourcing :

What the term “Offshore Outsourcing” means. ‘Offshore’ in the phrase offshore outsourcing refers to any country where wages for IT professionals are substantially lower than in the US, UK, Western Europe, and Japan. The major destination countries for offshore work are India, Russia, and Ireland. Other places include countries in Eastern Europe, such asUkraine and Bulgaria, Brazil, South Africa, Israel, and China. The low wages in these countries as of the low cost of living can be anywhere from one-third to one-tenth of the wages for similar skills in Western markets.

It is a situation in which a defined piece of work is performed by an external third party provider. At times the line of authority of an external provider can be blurry - a global company may pass around work among different departments spanning the company’s own offices in multiple countries.

Well, “IT offshore outsourcing” can be defined as the outsourcing of IT work to offshore countries. It has been occurring as early as the 1970’s. It started to take off in the early 1990’s and gained further popularity during the Internet Boom of late 1990’s. Then, with the crash of the Internet Boom, offshore outsourcing came into center stage – the biggest driver was the fact that businesses were scrambling to cut costs and offshore outsourcing provided a viable means of lowering cost of operations and new development.

Types of Companies working in this field :

1) Fully Offshore 

These are small companies, having up to 50 employees, operating in the offshore countries. They spend very little on external marketing. Their business comes from word of mouth promotion and referral from existing clients. Seldom do they have offices in countries where their clients come from.

2) Fully Offshore with representative office in client countries

Companies operating in this space are medium to large sized, with an employee pool ranging from 50 to several hundred. They have representative offices in client countries mainly for marketing, requirements engineering etc. Indian companies like Satyam and Wipro, employing thousands and generating revenues in millions of US dollars, fall in this category.

3) Client companies with their own development centers in offshore countries

Using their offshore centers, client companies can leverage their local talent in the respective country and use it for a variety of tasks. Most major global IT companies have a presence offshore, and now several medium sized companies are also turning to this alternative.

4)Western companies acting as middle men foroffshore companies

Often known as service brokers, they maintain their own list of fully offshore companies. They offer end to end management of projects, including project and financial risk management, or simply introduce a Western company to an offshore provider and charge a commission on the work performed.

This business is doing great and you could also join the wave too ...........