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Type II: Fully offshore with own representative office (for marketing, requirements engineering, etc.) in client countries. Given representative office in client countries, Type II companies can more effectively get client leads and market their services. Companies operating in this space are medium to large sized, with an employee pool ranging from 50 to several hundred. On top rung in this category are a handful of companies like Indian Satyam and Wipro, employing thousands and generating revenues in millions of US dollars.
Type III: Western companies with their own dedicated development centers located in offshore countries. This arrangement is commonly referred to as hybrid model. Using their offshore centers, Western companies can leverage their local talent in 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.
Type IV: Western companies acting as middlemen for offshore companies. Also known as service brokers, they maintain their own network of offshore firms (mostly Type I). Type IV firms may 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 work performed.
Following is a set of recommendations for using offshore resources -
- Identify potential companies by inquiring in your circle of associates and checking online offshore provider directories. Unless your organization is fairly large, it would be ideal to approach only Type I and III companies. Type II companies mostly work with Fortune 1000 caliber clients.
- After identifying some prospects, learn as much as you can about company. Carefully look through their online case studies and portfolios. If a company looks like a good candidate for partnership, contact them for names, email addresses and, if possible, phone numbers of their existing clients. If their existing clients are established companies themselves, it is a good sign that company you are considering is reliable.
- Once you have made a decision on partnering with an offshore provider, start by giving them small, non-essential projects or pieces of a project. This will allow you to assess relationship without jeopardizing any of your own business in case arrangement does not work way you had envisioned. In which case, try to resolve issues. Any reasonable business owner will endeavor to work with his or her clients towards a mutual resolution of any differences or misconceptions.
- Be sure to have risk management mechanisms in place and sign service level (SLAs) agreements with your offshore partners. As situation requires, non-compete and non-disclosure agreements may also be signed. Before sending off work to an offshore provider, it is well worth time to lay out formal procedures to respond to events like network crashes (at your site or provider’s site) and deadline extensions.
Offshore outsourcing has become an integral part of IT industry. In next few years, its role will only become more important. Gartner Research predicts that 25% of IT jobs will be “offshored” by year 2010. The question organizations will ask is not whether they should outsource, but which offshore outsourcing strategy best fits their needs.
Dep Deol (firstname.lastname@example.org). Dep is an offshore project manager and strategy consultant. He has worked onsite with offshore partners and consulted on projects for using offshore strategies and setting up offshore development centers.
No part of this article should be copied, reprinted or republished without the author’s permission. Please contact the author with any questions regarding the article.