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?? Let's find out.
What is Offshore Outsourcing Model? - An Eye Opener
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.
Gartner, one of the world's largest research and analysis organization, has predicted
that total global offshore spending on outsourcing IT Services will reach $50 billion
by 2007. The report has also mentioned that emerging countries like India, China,
Brazil and Russia possess required capabilities in terms of labour, technology and
infrastructure to undertake IT related outsourcing activities successfully.
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. (Source - Ventoro Research Report)
- Quality Product Delivery by offshore companies
using their expertise, extensive domain knowledge and implementation of Matured
Execution Models in their processes. (Source: NASSCOM)
- 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
- 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? - Implementation
As mentioned above, Offshore Outsourcing Model is based on "Hire rather than own
" concept. In other words, businesses prefer to outsource/transfer
their non-core activities to offshore companies who are experts in their working
By doing this, businesses get expert services at low cost as compared to the domestic
market. Besides, businesses also get more time to concentrate on their growth plans
that they might have 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. (Source: NASSCOM)
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 17
Million people available in IT industry by 2008. (Source: NASSCOM)
- 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. (Source: NASSCOM)
- 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 31 st March 2002, India had 42 companies at
SEI CMM Level 5 assessment and 316 companies who have already acquired quality certifications
- 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.
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