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GUIDE TO GLOBAL OUTSOURCING RATES

At the end of the millennia when corporations across the globe were in a panic state because of the Y2K issue to circa 2021, outsourcing has come a full circle. When software outsourcing first started taking shape in the early 1990’s it was still for mundane work.

This changed with the dot com boom as all of the sudden American enterprises were in rush to catch the go online bandwagon and not many software developers were available in the United States to help them fulfill their objectives.

GE was one of the first ones to start looking at India as an outsourcing destination and the sleepy town of Gurgaon was soon transformed to look like a Manhattan Skyscraper. Following the success of GE’s experiment and the role that likes of, Satyam, TCS, Wipro, and Infosys played in helping corporations seamlessly transition their operations post Y2K, large multinationals started getting the confidence to set shop in India.

Soon nearly every major corporation of Globe ranging from Citibank, United Healthcare Group, Cummins, British Telecom was outsourcing things like Infrastructure Management, SAP Support, Application Development, etc. With the massive adoption of outsourcing soon it was the turn of even smaller firms to look at outsourcing to save costs and accelerate the time to market.

Even though India has been a major outsourcing destination soon enough other geographies started emerging as alternatives. Corporations like Luxsoft in Russia, Pactera in China, FPT Software in Vietnam, EPAM in Ukraine and Belarus, Globant in South America were soon catching up with India-based operators.

Add to the mix of these corporations soon US, European and Japan-based corporation like IBM, NTT AND Capgemini started leveraging the global delivery model.

What Drives Outsourcing.

When asked the question of what drives outsourcing many people would say cost, lets take a slightly different view. As the flow of capital is driven by where the return on investment is highest, so is outsourcing is driven by ROI and not in the traditional sense of cost-saving.

If by leveraging a global resource pool a corporation can streamline its business to offer better products and services then it will leverage outsourcing.

Let us get into the brass tacks of what drives outsourcing-

  • ROI-Ability to deliver return on investment on time. Corporations are no longer looking at outsourcing from a cost-saving perspective, as some say what gives more bang for the money. If a corporation is able to hire hard to find resources in a country like Ukraine to develop an embedded chip they will look that destination
  • Outcome-Driven- Igate had a long time back embarked upon an outcome-based pricing model highlighting that the ability to support business-outcome is what really drives business.
  • Automation- With the rapidly evolving landscape in Robotic Process Automation and AI outsourcing is about how service providers can enable corporations not to automate business processes rather than just offering resources for hire. All the major Business Process Outsourcing providers ranging from Genpact to HGS now embed automation into their service delivery.

 

How To Decide Which Outsourcing Firm To Choose From

Every outsourcing decision is driven by multiple factors, and a corporation might not only want to work with a market leader for its requirement.  Some corporations might not need hundreds of developers for their project needs but might want to work with a boutique firm that has experience of working in its domain.

A corporation can consider experienced, niche, and emerging entities. Remember, the most optimal choice for a corporation can be a service provider that has:

  1. Experience in the domain in which the project needs to be undertaken.
  2. Track record of completing projects in a related industry with other corporations.
  3. Similar Cultural alignment, communication, and project management style.
  4. Geography of operation and budget are also critical criteria to evaluate when considering a service provider.

 

Bottom Line

Working with an outsourcing provider can result in both cost-saving as well as accelerate time to market. Imagine a software developer working in California his hourly cost can easily run into hundreds of Dollars in a day where a similar skill set resource operating out of India or Ukraine can cost half that amount.

But as some critics of outsourcing point out what a corporation saves in hourly rates they might have to compromise on quality and to a certain extent that holds valid. Just look at the Hackerrank evaluation of software developers across the globe.

China with its 100 Score Index ranks top when it comes to quality of developers with Russia ranked a close second. But will this ranking be enough to tilt a company to outsource to these destinations, China with its Intellectual Property Nightmare and Russia with its security and economic restriction scenario might not be the best bet.

Another factor that affects this is the understanding of the business context which would rank much higher for nearshore or onshore outsourcing. Remember salary levels even within the United States wary, the recent decision of software product companies to move to Texas and Illinois is an example of that.

It is important to understand other factors involved while considering outsourcing for example employee morale, existing employees may feel threatened if services are outsourced. In these scenarios, it is important to highlight to employees that outsourcing is about embracing the global culture and accelerate time to market.

Let’s now look at rates that are prevalent across major cities in major software development centers, This pricing is derived from publicly available numbers from sites like Clutch.co, Indeed, and Techfetch.com

 

Next Steps

Outsourcing software development is here to stay as it corporations access to a large talent pool and to embrace a global economy, question is how buyers and providers collaborate to form a winning partnership?

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