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Why Offshore Outsourcing May Pave Way For The Next Google

Corporations like IBM and GE led the charge to India and beyond. But cheaper bandwidth and new technologies mean small businesses can now get in on the savings offered by offshore outsourcing--a welcome development for the entrepreneurial minded.
Corporations like IBM and GE led the charge to India and beyond. But cheaper bandwidth and new technologies mean small businesses can now get in on the savings offered by offshore outsourcing--a welcome development for the entrepreneurial minded.But before hopping on the next plane to Bangalore in search of a vendor, there's a few points that smaller companies should keep in mind.

For starters, they may want to work with smaller outsourcers. A second-tier vendor is more likely to return calls in a hurry to smaller customers if something goes awry. In other words, you don't want to be a "small fish in a big pond," notes Sumpraxis outsourcing adviser Lotta Collard in a new white paper on outsourcing and small business.

Secondly, Collard suggests small businesses find an offshore vendor that specializes in their industry. Procuring domain expertise is a big plus in outsourcing relationships of all sizes, but it's even more important for smaller companies that don't have a lot of time or manpower to "train" their vendor in their business processes, or industry rules and regulations, etc.

Collard further suggests that small businesses outsource to locations that also play host to larger, multinational companies. Makes sense: Such places are bound to have well-developed IT and telecom infrastructures that may be partly subsidized by the big players. That's a coattail on which smaller companies can take a ride.

Collard recommends identifying a pilot project for offshoring, staffed with 10 to 15 full-time-equivalent workers operating from overseas. Give it about six months for evaluation purposes, Collard says. Also, don't shy away from hiring a consultant to get things off on the right foot, if necessary.

I would add one of my own suggestions here, based on the numerous conversations I've had with CIOs and outsourcing experts over the past couple of years. India offers the best bang for the buck when it comes to outsourcing, but it also presents the biggest logistical challenges compared with other possible destinations.

Most significantly, there's that distance of several thousand miles and at least 10 time zones between the country and any point in the United States. Since smaller companies tend to have limited travel budgets, "offshoring" to Canada or Mexico might be a better option--at least until a company becomes familiar with the process.

There are challenges, but, given the potential for savings, I believe it's a pretty safe bet that small businesses will drive the next wave of offshore outsourcing. Already, there are a number of Web sites popping up designed to match offshore service providers--or even individual programmers--with small companies looking for overseas help.

Some observers argue that this trend may explain the so-called jobless recovery, but the upside is that the availability of cheap tech labor and business services from abroad allows for the formation of new companies that, in the absence of offshore resources, would never get off the ground. Fact is, many of Silicon Valley's top VCs won't even look at a business plan these days unless it features an offshore component.

You can be sure that there's a small business in startup mode right now somewhere in the United States that, with the help of offshore labor, will eventually rank up there with Google and Microsoft and ultimately hire thousands of Americans. There's nothing small about that.