The only question you need to ask your IT outsourcing vendors – Why is your rate so low?

Last week we posted 4 questions every CEO needs to ask his IT outsourcing vendor. But frankly, a CEO needs to ask only one question – why is your rate so low?

Global parity has ensured that low wages is something that you can only dream about. With IT professionals able to pick and choose the work they want, wages are no longer low. How about world-class infrastructure? With certain areas in Bangalore more expensive to rent than New York, don’t expect infrastructure costs to be way less.

So why is his cost low? Ask him to break it up for you – what is your per hour infrastructure cost? What is your hourly rate for HR/network admin/Finance services? What is your mark-up? What are you actually paying your developers? Find out what he is skimping over so he can charge low. Is it the quality of his development team, the security of the network and your IP, or is it employee welfare? If he can substantiate his lower rate (and the value he brings to the table) without affecting the quality of the output, then you have a winner.

A typical outsourcing vendor will squirm at revealing these details. Naturally!  But he needs to  understand that at the end of the day, outsourcing is all about trust. If the CEO (or his team) thinks the vendor is fleecing him, this relationship will turn sour in the long-term.

Transparency is the mark of every good outsourcing relationship. How transparent is your vendor’s costing? Sure, it is all about business and everyone needs to get his share of the pie in a relationship – but do you know what his is?

At Suyati, our Dedicated Global Team (DGT) model ensures a transparent cost model. You know exactly what we pay, what we make, and what we do for the amount we charge you. It does not get more transparent than that. See our transparent cost model in action for our American client.

We’re listening.

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Author : Revathi Krishna Date : 14 Jun 2011