Benefits of Outsourcing

<< | \\ | >> BENEFITS OF OUTSOURCING

How do your peers perceive the Benefits of Outsourcing? Click here for Ranking Graph>

BARRIERS

GUIDE

RUSSIAN DECIDATED CENTER (RDC)

RDC is a facility of dedicated resources (Infrastructure & IT professionals) that act as a virtual extension to your present IT setup >

Current Excess RDC Capacity: 50 seats, incl. FTP, vpn-link, support hot-line, storage servers, intensive project supervision, reporting >>

Your back room is somebody else's Front Room

"Don’t own a cafeteria: Let a food company do it. Don’t run a print shop: Let a printing company do that. It’s understanding where your real value added is and putting your best people and resources behind that.

Back rooms by definition will never be able to attract your best. We converted ours into someone else’s front room and insisted on their best. This is what outsourcing is all about."

- Jack Welch, ex-CEO of GE

Value Proposition for Corporations

	Cost management Realization of cost savings through economies of scale and consolidations Personnel cost savings through low offshore salary rates ../ US Salaries ../ India> ../ Russia> Technical cost savings Acquisition of cash through liquidation of computers and the decrease in depreciation expense Convert costs centre within company to profit centre within vendor’s operation
	Focus on core activities Refocus organization Reengineer processes Accommodate business need to downsize. Outsourcing non-core business functions frees internal resources to focus on business-critical tasks
	Improved operational quality Address system integration issues Access to improved backup and disaster recovery facilities Increased expertise - benefit from the core business expertise of specialized partners (customers can choose an offshore facility that is specialized in a particular vertical market segment) Incremental increases in data processing resources rather than a step function We have adopted third-party quality standards (CMM, ISO) which, in many instances, are more rigorous than those of our clients
	Improved productivity Realization or economies of scope (efficiencies driven by variety, not volume) Increased flexibility Improved time-to-market The integration of on- and offshore software development teams across time zones leads to 24/7 output and faster time-to-deployment
	De-risk business Increased access to diverse technologies Access to technology without capital investment. Access to major and immediate changes Distributed and thus lowered risk of running an IT operation Reduce technical obsolescence risk Stabilize Information System costs Provide alternatives Facilitation in cases of leveraged buyouts. Readily proliferated with acquisitions.

Personnel Cost Benefits:

Employment costs per U.S. junior - middle level engineer (including operational overheads and employee benefits package including health insurance, 401k etc. Typically, a W2 salary of 60K results in a loaded cost of about 100k) amounts to $100,000.00 per annum. (Source: Russian Outsourcing Forum (ROSS) Saint-Petersburg in 2002.)

../ back to cost management

Cost Savings by Outsourcing to India:

A McKinsey study shows that, when processes are outsourced to India, companies not only get the advantage of low cost but also experience improvement in productivity and Quality. (Source: NASSCOM Mckinsey Study 2002 and, Gartner)

../ back to cost management

Cost savings by Outsourcing to Russia:

Cost per RDC programmer >

(including salary, RDC facilities and infrastructure)

1. Junior Developer   - $ 9,000 p.a.
2. Developer             - $12,000 p.a.
3. Architect               - $13,000 - $15,000 p.a.
4. Project Manager    - $15,000 - $17,000 p.a.

./ back to cost management

Also see:
Benko, C. (1992) If information systems outsourcing is the solution, What is the problem?, Journal of Systems Management, Nov., p.32-35.

The establishment of offshore operations can also position you to create new markets for your products. According to Software Development, Vol 11, # 11, Sunjay Sarathay, director of Sun's Developer Program Office, pointed out that Indian developers are the number two group after the U.S. in registered users with the program or Sun's tools.

INSIGHTS >>

QUICK LINKS << | >>

Numerous articles and presentations on outsourcing>

\\
Business Re-engineering
Business Process Outsourcing ( BPO)
Application Outsourcing
IT Infrastructure Outsourcing (ITO)
Global IT Delivery
Global Trends
Benefits of Outsourcing
Barriers of Offshore Cooperation
Brief Guide to Outsourcing
Take a Survey

TAKE ACTION .