Today, businesses irrespective of their size and location are adopting offshore outsourcing model to gain cost benefits and deliver quality services to their customers. But what exactly the offshore outsourcing model is and why businesses are implementing it? Lets find out.
What is offshore outsourcing model?
Offshore outsourcing is the modern business approach of outsourcing / assigning some of its commercial activities to expert offshore companies in order to fetch better quality, cost and technical excellence than what is available domestically.
“Hire rather than own expertise” is the concept behind offshore outsourcing model. Rather than spending money on developing and maintaining certain non-core activities, businesses can outsource them to offshore experts and get quality work at much lower price.
According to a report released by Nasscom and McKinsey, Indian companies will maintain their share of 46 per cent in the global BPO market and 65 per cent in the IT outsourcing market till 2010, even as the combined market is estimated to grow 10-fold from $30 billion at present to $300 billion by 2010.
Benefits of offshore outsourcing model
Offshore outsourcing model offers businesses multiple benefits in terms of cost, quality and technical excellence. Here are some of the noticeable benefits of offshore outsourcing model.
- Realistic cost savings of about 40% as compared to onshore or domestic markets.
- Quality product delivery by offshore companies using their expertise, extensive domain knowledge and implementation of matured execution models in their processes.
- Technical excellence offered to clients by capitalizing on quality human resource, robust infrastructure and domain related research and development.
- Maximum time benefit by leveraging the time difference between service provider and service requester.
- Reduced project cycle by implementing globally recognized project management systems in their operational activities.
- Operational flexibility by quickly adapting to changes in business requirements. Better finance management through clearly defined financial obligation and reduced cost.
- Improved competitiveness since offshore companies deliver quality services at affordable rates.
- Renewed focus on company strategic plans by outsourcing certain non-core business operations to offshore companies.
- Exposure to new markets by making alliances with offshore companies and taking business to unexplored areas.
How offshore outsourcing model works?
As mentioned above, Offshore outsourcing model is based on “Hire rather than own expertise” concept. In other words, businesses prefer to outsource / transfer their non-core activities to offshore companies who are experts in their working domains.
By doing this, Businesses get expert services at low cost as compared to the domestic market. Businesses also get more time to concentrate on their growth plans that they might had spent in maintaining these activities.
It won’t look surprising if we call India as “Mecca of offshore and outsourcing” . According to a study conducted by Forrester in November, 2001, India’s edge over other competing nations in the IT outsourcing business is based on the country’s decade old experience in this area, fluency in the English language, supportive Government policy, infrastructure, and high quality offerings.
Below, we present you some reasons that justify why India is a preferred destination for businesses to outsource their offshore-based activities.
- Large human resource with approximately 25 Million people available in IT industry by 2010.
- Maximum cost advantage. An independent report estimated that for every $1 invested in India via offshoring, The American economy gained $1.14 in direct and indirect benefits.
- Incorporation of quality standards like globally recognized SEI-CMM, P-CMM levels and ISO 9000 Certification by Indian IT companies to ensure quality services for their customers. As on 31st March 2002, India had 42 companies at SEI CMM level 5 assessment and 316 companies who have already acquired quality certifications worldwide.
- Friendly government policies towards offshore outsourcing by offering various tax benefits and sops for IT and ITES industry.
- Address security concerns by introducing IT Act, 2000 that legalizes laws and policies related to data security and data crimes.
- Quality manpower with strong technical skills, good language command and eagerness to accommodate clients.
- Strong education system that emphasizes on mathematics and science along with english language proficiency.
- Decade old experience in offshore and outsourcing justifies why India is considered the best in this business.