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

Nov 26, 2008

There's been a lot of talk lately about what outsourcing involves, for companies who use this method as a means to cut costs over some branches, or try to improve quality or production over other branches. While there is a constant contradiction through a lot of surveys conducted among outsourcing companies, with results showing different opinions on the same basis, outsourcing has nevertheless some truth about it, when it comes to really point out its meaning for the outsourcing seeker and provider.

Starting with the United States, the rest of the world too is aware of the financial crisis. In Eastern Europe, the financial crisis has more subtle effects, due to the still developing economy status that the majority of countries in this area have. In Romania, the financial crisis reflects mostly at the local banks level, but the issue is unrelated with state affairs, as even Romanian President, Traian Basescu, has declared. The motive is that the loans that banks have taken are from their mother branches in Western Europe, and so do not affect the local economy. As risk assessment goes, Romania meets the majority, if not all, of the conditions of a secure offshore outsourcing destination. Here are the facts that underline this:

     1. The cultural and language barrier is at its lowest level in Eastern European countries, especially Romania. This is one of the incentives brought forward by outsourcing locations, and Romania can provide the outsourcing company with a large pool of skilled human resources, that have a common background among European nations. For the outsourcing company that tries to increase operational efficiency, a country such as Romania is the appropriate place to offshore production. Understanding, trust and reliability are traits belonging to Romanian programmers, which have also been recognized by the Ministry of Labor, Family and Equal Opportunities as well as representatives from management consulting firm A.T. Kearney.

   2. The software sector in Romania has received an infusion of 30 billion euro as non-refundable funds from EU for the period of 2007-2013, thus transforming the software outsourcing business into a national priority, in the circumstances provided by the world financial crisis. This translates into stability for the outsourcing company who offshores its internal IT affairs in Romania.

   3. The local software outsourcing market in Romania can offer protection to Western outsourcing companies looking to bypass the effects of the financial crisis. Not knowing what to expect from an outsourcing location can be a troublesome aspect that has cost outsourcing firms more than they had expected, as the downward trend in India is showing. By contrast, companies that decide to outsource their activities to Romania will benefit from a key advantage, which is the higher degree of reliability that such a nearshore European location can provide, and the increased financial security offered by the Romanian democratic state apparatus, which is part of the European Union, and therefore, subject itself to EU financial conditions and supervision.

   4. In Romania, policy makers and civil society alike are keen on maintaining a high level of transparency throughout business sectors. The world financial crisis reflected at some levels is treated in this transparent manner in order to avoid the same circumstances in which the financial crisis actually started. So each outsourcing company investing here has the ease of control that's missing from most distant area outsourcing locations, like Asia.

Among world outsourcing cities, Bucharest, Romania, is an emerging city in the areas of product development, testing, and business analytics, while it is already among the global established locations for human resources, according to a listing made by Global Services. This shows that Bucharest is on the upward outsourcing economy curve, attracting several large companies wishing to elude as much as possible the effects of the financial crisis. Among these, the US company Xerox (while already harboring here call centers) is planning to seriously enter the outsourcing market by transferring the manual invoice processing operations. Xerox Romania estimates for this year more than $74 million in investments. Also, Lenovo from China, the world's fourth largest computer producer, declared that they are taken into account the possibility to assembly facilities in Central and Eastern Europe and Romania is a potential target.


Other articles in this series:

Outsourcing the right way: How can software outsourcing help you reduce your costs during the financial crisis?
Outsourcing the right way: Building trust and predictability by software outsourcing