Outsourcing the right way: How can software outsourcing help you reduce your costs during the financial crisis?

Nov 26, 2008

The global financial crisis translates at the outsourcing BPO and IT level into an increased demand for providers, while simultaneously lowering expenditures for rationalizing margin efficiency and productivity. In the short term, outsourcing destinations might face a deceleration in demand, but on the long term, throughout the period of the economical crisis, software outsourcing will nevertheless increase because, after the initial impact that large Western companies have faced, they will be left with few local options for repairing the damages done by the financial crisis, and for lowering costs while maintaining productivity and profit.

A lot of effort was put into research for proving the rational efficiency of outsourcing to countries with developing economies. While there is a constant turn on to invest money in such economies where costs are by far lower than in industrialized nations, reality shows some threats that have to be taken into account. The state government, local corruption, public awareness, civil society are factors that can influence one's business, especially foreign businesses. This is why any outsourcing destination must be treated in an unique way, taking into account the historical background and cultural level.

In Romania, unlike large Asian destinations (China, India), the desire to stimulate development and competition and separate from planned economy is at its highest levels. Growing up from a communist environment, Romanian economy thrives along with the youth avid of learning and changing their lives. Part of the European Union from very recent, Romania offers countless opportunities of development. The difference between Romanian business environment and Indian one, for example, is the higher understanding of Western necessities and ideas. The close cultural background requires a lower financial infusion in terms of transactions and implementation. If a British or French company sets up an offshore branch in one of the Romanian outsourcing sectors, the transaction costs are much lower than in any other Asian or Pacific destination, where initial training and development would require huge amounts of resources, continued by regular infusions throughout the period of the transaction.

As an example, the software outsourcing sector in Romania has brought along with the financial crisis a public and civic awareness that provides the outsourcing seeker with the necessary business framework. Romanian programmers are very skilled (as shown by the worldwide negative publicity), but want nonetheless to improve themselves and show that their intellect and ambition can prove much more than dozens of obedient third-world employees. The average salary level of programmers is still quite low in comparison with Western countries, with more than 60% lower, and even with other Eastern European countries such as Poland, or Hungary.

For temporary software outsourcing projects Romanian firms provide all conditions for implementation. At SBP Romania, the software development and consulting services that the company provides cover the entire product life-cycle: software architecture and design, implementation, quality assurance, technical documentation, testing and support. In this way, outsourcing partners receive a full software solution package with low costs and high quality ensured. This is an advantage reaching 50% of the cost saving level for software projects. For long term IT outsourcing services, transaction costs like training, implementation and maintaining turn-over rates are supported by the outsourcing destination, whereas in an in-house development team, such costs would be covered by the actual company.

Along with the return of the large masses of work force from abroad in 2009, 2010, large companies will find in Romania a vast pool of skilled resources, that will turn in a year or two any medium productivity branch in a large one, as the study from Global Services demonstrates that Bucharest is among emerging offshore outsourcing cities for product development. For companies looking to transfer a large productivity branch here, initial investments are necessary, but with the skill and current infrastructure, costs are expected to decline up to 50% of the normal costs that would be needed in local facilities.

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