Setting up operations in India (Part 2): IT outsourcing as long term alternative

For small and medium-sized companies, setting up an operation in India can be a long and rocky road. Because it is hard to predict whether this investment of time and money as well as the administrative efforts are worthwhile, most small and medium-sized enterprises decide to partner with an IT outsourcing vendor instead.

Indeed, IT outsourcing can be a suitable long-term alternative for SMEs to opening and running an operation in India. This is especially the case, if costs for the necessary facilities and equipment would tie up most of the company’s liquid assets. Of course, the long-term savings with IT-Outsourcing are less (because of the vendors margin), but they are also achieved at significantly lower risks and investment. Furthermore, by not tying up the assets for the long term, the company retains the ability to stay flexible as business circumstances change.

 There is a good reason to outsource – the availability of  a new generation of outsourcing models that focuses on the clients’ needs more than ever. Today clients can enjoy benefits which are comparable with those of having an own operation in India. Amongst others, the new outsourcing models are characterized by the following criteria:

  • Full cost control. Due to a transparent cost structure and a detailed listing of those, the company retains control of the costing structure.
  • Needs-based hiring. Unlike with traditional IT outsourcing, where the services are limited to the skills of the vendor’s staff, employees are hired based on the client’s needs.
  • Involvement in the hiring process. The clients can be involved in the hiring process of “their” employees,  f.e. by conducting the final round of interviews with potential candidates.

Thus, the new models not only give full cost control, but also ensure that employees match 100% to the client’s needs (professionally and personally)-a perfect base for a trustful, long-term and therefore mutually beneficial cooperation.

Overall, as IT outsourcing to a reliable vendor ensures long-term productivity benefits with lower risks of investment, it is a good approach for all small and medium size companies who decide not to set up operations in India. But IT outsourcing can also be a good approach for those companies who are undecided about whether or not to set up their own operation in India. We will focus on the potential of IT outsourcing as intermediate stage in our next blog.

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Author : Jenny Date : 27 Jun 2011