Nearshoring, Offshoring & Remote
IT & Project Managing Models
The market sentiment changes rapidly – businesses not only need to expand quickly but also respond to changes rapidly. Additionally, in today’s high-pressure environment customers are more focused on optimizing vendor management process and improving operational flexibility. Outsourcing has earned a bad rep over the years and is often unfairly associated with cheap labour and poor delivery. Truth be told, most companies ‘outsource’ in one way or another – from the more obvious overseas call centre, to the contracting of a graphic designer or web development agency.
Historically, the outsourcing industry has seen considerable growth from the information technology (IT) sector. This gave rise to business process outsourcing and now knowledge process outsourcing. Can project management services be outsourced? Surprisingly, this concept is still in its infancy. Judging from the growth in outsourcing of other business processes there seems to be very good opportunity for project management outsourcing.
A majority of processes project management outsourcing that could be outsourced are those for project control. The concept could be understood in terms of various structures, roles, and models. Although it has some advantages there are some challenges as well. For example, an organization interested in maintaining its focus on its core competency could benefit from it. At the same time there could loss of control or threat of loss of sensitive data.
Some organizations have successfully outsourced their project control functions to outside vendors. The main challenges in the growth of project management outsourcing is in accepting project control as a separate function and in delegating this to other departments or vendors. Although some sectors have a separate structure of project controls in place this is not prevalent in many organizations.
The last decade has seen a phenomenal increase in outsourcing of services and has changed the way business is done. Cost pressures and improvement of quality have been the main drivers for the growth in this sector. Finding its footing first in software development it has slowly spread to other operational areas like IT-enabled services with a major part in support services like call centers and help desks. This further gave an impetus for business process outsourcing (BPO) as a viable proposition in non-IT areas—e.g., routine and non-core operations in accounting and financial services, human resources administration, etc.
Moving from BPOs to KPOs
Success of BPOs prompted many organizations to experiment with other non-traditional areas for outsourcing. These included those that constituted not just routine operational functions but also those that required specialized knowledge and skills. The latter came to be known by the term knowledge process outsourcing (KPO). Some of the examples of these areas include the following:
- Intellectual Property Related Services
- Equity, Financial & Insurance Research
- Business Research & Analytics
- Legal Process Outsourcing
- Engineering & Design Services
- Remote Education & Publishing
- Clinical Research & Pharma & Biotech Services
- Market Research & Sales Process Outsourcing
There are various outsourcing solutions that help with offshoring solutions can help provide the flexible, cost-effective and high quality services in order to operate efficiently. Nearshoring practices can improve operational efficiency, increasing speed to market new products / services and make your operations more agile.
Finding highly skilled yet low-cost talent is one of the greatest challenges facing many technology companies in the western world today. Generally speaking, when the skills required can’t be found domestically at a price that is conducive to meaningful growth, companies generally have two options – nearshoring or offshoring.
Put simply, offshoring can often mean that the company can move its production and business processes to somewhere that is very cheap but very far away. Nearshoring, on the other hand, usually means that the same thing can be achieved in a location that is quite cheap, but relatively close.
Nearshoring on the Rise
Indeed, nearshoring is on the rise, especially to the realms of Eastern Europe. In a case study published in an article by ComputerWeekly, a London based minicab company named Addison Lee decided to move its IT work to Russia – a choice the company made over India after carrying out some research.
After concluding that the rates of UK computer programmers were too high, the minicab firm decided to find a team that could carry out the work somewhere abroad.
“We picked a team in Russia and a team in India and sent each a week’s worth of source code that needed to be written in a new language as a test,” said Peter Ingrim, IT director at Addison Lee.
“The guys in India said yes to everything, copied the mistakes we had deliberately put in there, and didn’t ask us anything about the business – it was all very systematic. The team in Russia looked at our proposition, asked if it was functional, noticed the mistakes and asked us why we did things in this way.”
Addison Lee and the Russian team now have a great working relationship, and have gone to collaborate on further projects.
The unique skill sets that can be found in the region is not something that has gone unnoticed in the business world of outsourcing providers. The talent emerging from Russia, Poland and the Ukraine in particular is starting to mount a serious challenge to places like India where offshoring has traditionally occurred.
Further Benefits of Nearshoring: Data Security
When a company deals with customer records, invoice details and other sensitive information, it must consider the data security that the offshore team can provide. Countries within the EU all abide by the same data protection legislation, so in many ways this is a safe bet as the EU is expected to remove data location protection within the EU.
Data security can’t be guaranteed to the same extent in places like India and the Philippines as it can in the alternative nearshoring options, and if there is ever a breach, then the costs incurred – to reputation as well as to the balance sheet – can soon wipe out any extra savings that were initially made by offshoring to these more faraway places.
Advantages of Offshoring
There are still advantages of offshoring your workload to places like India, however. Since companies have already been doing it for years, the experience in these regions sometimes can far outweigh that of European counterparts.
Contractual sophistication is of course a very important factor when making the decision to either offshore or nearshore. A lot of Indian companies have become very sophisticated in such matters, and very ‘international’ to boot, whereas in Eastern Europe some IT companies are still finding their feet. In the end it will come down to what can be negotiated and getting the balance right. There’s no point in going for the cheapest option if the skills aren’t there and data security is questionable at best.
On the other hand, some companies in Russia, Poland or the Ukraine might expect more money, but if they haven’t been in existence long enough to secure a firm reputation, then the risk is also high. Communication is key, and of course it will always depend on the type of IT work that is required that will go a long way in determining precisely what your options are.
Outsourcing Vs. Remote Team
Outsourcing is normally a strategic decision by one company to turn to the skills and expertise of another in order to complete a business task. Usually, this decision is made because the outsourcing company doesn’t have the resources in-house to compete the task itself.
There are of course a certain amount of risks involved with traditional outsourcing models. Mainly, these risks come down to loss of control over who is working on the project. This is especially risky when a company gets involved with offshore outsourcing. A few years ago it was quite common for web development and other IT agencies to start a cooperation with an offshore third party, only to find a few months down the line that the specific programmer that was initially hired had now been moved to another project, and a new remote worker had been discreetly put in his or her place. Needless to say it created a lot of distrust between outsourcing buyers and providers, and companies began to wonder if offshore outsourcing especially could ever be considered as a viable business option at all.
This is where the concept of remote teams and remote in-sourcing came in. The need to make outsourcing practices better was there, and so emerged a model where close cooperation between a client’s in-house employees and the remote team (or individual) was enabled, guaranteeing project control as well as cost-efficiency.
Remote in-sourcing enables custom remote teams to be built for a client, with full transparency at the forefront so everybody knows exactly who is working on which parts of which projects at any given time – but importantly the ‘remote factor’ means that costs can always be kept to a minimum. Thus talent can be kept high and custom-built teams can be forged to match the clients’ needs, all the while ensuring that the project is as cost-efficient as possible.
Clearly, then, this model of outsourcing is far superior to its predecessors, and it of course delivers more risk management and control than what has come before. The remote team is always created based on the client’s needs and requirements and offers the best model of compatibility with the clients’ project goals. It also guarantees that security risks are minimized as the same people will always be working on the same projects, which of course reduces re-training costs to boot.
Whether you’re outsourcing or in-sourcing, nearshoring or offshoring, there are many challenges that you have to consider. One thing to bear in mind – India largely remains the default country to which companies turn to take advantage of large pools of skilled labour at a low cost.
However, with the rise of nearshoring to the closer lands of Eastern Europe, which offer a more sophisticated skill set, companies in India have indeed started to make moves towards shifting the perceptions that they simply offer the cheapest resources, and so we can indeed expect a much more competitive global outsourcing business environment with on-demand expertise and resources along with staff flexibility.