What if you were able to boost the productivity of your IT department and get products on the market faster, while cutting your costs dramatically?  Many companies have been able to accomplish these goals by global sourcing a component of their IT services.  This topic has generated a lot of heated debates, but the bottom-line is that businesses are able to benefit substantially by using global sourcing providers.  Today, most of the Fortune 500 companies are outsourcing at least one of the daily business operations to global sourcing partners.

Some of the major benefits of global sourcing are listed below.

Expanded hours of operation. Most businesses put a major emphasis on a project’s budget, which is important.  However, it is just as crucial to focus on the time it takes to get the project done.  When working with a global sourcing provider, you are able to have an IT department that runs 24 hours a day.  As the workday for your U.S. employees comes to an end, the vendor’s employees will just be starting their day.  For IT managers, this schedule is extremely productive.  They can review a project, make suggestions and send it to the global sourcing partner.  When the IT manager returns to work the next day, the revisions have been made and the development process is able to continue.

Access to qualified IT personnel. According to a Duke University study, businesses are looking for offshore employees because there has been a steady decline the number of engineering and science graduates in the United States.  It is estimated that countries such as India and China graduate 12 times more engineers than the United States.  Many of these graduates are fluent in English, which makes them attractive to U.S. employers.

Ability for rapid scaling of operations. A global sourcing provider can be used to grow or downsize an IT department very quickly.  Global sourcing also gives the outsourcing company the ability to easily add or subtract a new type of software.

Better reach in the global market. By mere geography alone, global sourcing helps companies looking to expand globally.  Global sourcing allows businesses to reach international customers and provide improved service and problem solving.  Having different locations gives the outsourcing company more flexibility in making sure that the business continues even in the case of a disaster.

Accelerate technical implementations. When your company is looking to create a new system or business process, it can be done fairly quickly with a global sourcing partner.  Many vendors already have the necessary hardware and software in place, which makes it easier to turn ideas into actual products.

Provide seasonal workforce flexibility. Workload can fluctuate depending on the amount of projects currently being handled by your IT department.  A global sourcing partner can be used on an “as needed basis,” meaning they complete projects during the busiest times for your company.  By using a seasonal workforce provided by a global sourcing partner, your company can avoid the hassle of hiring temporary IT employees.

Cost reduction. The salaries paid to employees in many other countries are considerably lower than the amount that U.S. employees are paid.  In some countries, the average amount that an IT employee earns is less than 30% of a U.S. employee’s salary.

Global sourcing greatly reduces the cost of production and operations, as it decreases the amount paid on overhead.   As costs go down, the financial position of the company strengthens, which in turn frees up more money that can be used for core business services and new development.

Global sourcing is a resource worth considering for most IT departments.  A&E Consulting can help you choose the right global sourcing partner and will assist you in establishing the business relationship.  In addition, we will manage the first outsourced project to make the transition as smooth as possible.

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There are numerous terms related to outsourcing and the way people use the terminology varies among location and industry.  It is common for outsourcing terms to be interchanged and there are no set definitions.  An overall understanding of what the words mean though, can help when talking about the subject of outsourcing.

Most executives know that outsourcing is defined as delegating business functions to a supplier or external partner.  What many individuals do not realize is that there are different types of outsourcing, including IT outsourcing, (ITO) and Business Process Outsourcing, (BPO).  With ITO, some or all of the IT services are sent to another provider.  The outsourced function can be software development or IT infrastructure services.  BPO refers to the delegation of non-core IT intensive business processes, such as supply management, data entry and customer service.

There are many terms used to describe the geographical proximity of the outsourcing provider to the customer.  Onshore outsourcing means that a company is sending work to a provider located in the same country.  In the United States, that would basically mean a company contracts with a U.S. supplier for business services.  Near shore outsourcing refers to contracting with a company located in a nearby or bordering country.  Usually near shore means that the outsourcing provider is a short travel distance and may even be in the same time zone.  For the United States, Canada or Mexico would be considered a near shore location.  Global sourcing, also known as offshore outsourcing, offshoring, describes the process of delegating functions to a provider located in a distant location, several time zones away.   India, China and the Philippines are all considered to be offshore locations for U.S. based companies.

It is important to also be well-versed on the key players of the outsourcing relationship.  The company looking to outsource work is referred to as the buyer, outsourcer or customer.  The firm that accepts the outsourced work is called the supplier, service provider, outsource service provider, vendor or resource.

Companies looking to outsource should consider sending work to more than one service provider, which is known as multi-sourcing.  When the outsourcer utilizes the services of more than one provider in different geographical locations, this is known as an outsourcing portfolio.

A&E Consulting can bring you up to date on the newest terms in outsourcing.  We can assist you in choosing the right global sourcing provider and establishing the business relationship.  In addition, we will manage the first outsourced project to make the transition as smooth as possible.

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There is a lot of speculation as to what the coming months will bring for the global sourcing industry.  According to Gartner, a research analyst firm, spending on offshore IT services is expected to grow 40 percent in the United States and 60 percent in Europe in 2008.  The big question is what new trends will occur among global sourcing?

More companies will begin to send work to countries other than India. For the past several years, India has been the leading provider of global sourcing.  While this country is expected to remain in the lead, there are more challengers in the industry.  The IT market in India has been impacted by wage inflation, shrinking pool of talented professionals and infrastructure issues.  It is likely that global sourcing providers in Latin America, China, South Africa and Eastern Europe will attract more IT business.

Global sourcing providers will consolidate. Competition in the outsourcing market has become fierce. The leading IT service providers are expected to consolidate by purchasing smaller competitors in the industry.  There is speculation that the number of mergers and acquisitions will continue to go up and there will consequently be a smaller amount of suppliers for buyers to choose from.

Remote infrastructure management (RIM) outsourcing will grow. RIM refers to managing servers, applications, networks and databases.  This market is estimated to grow 60 to 70 percent in 2008.  RIM outsourcing is considered to be an asset-light deal and provides a lower cost infrastructure for the outsourcing company.  Traditional infrastructure outsourcing will start to decline as RIM outsourcing grows.

There will be a greater demand for high quality work and more services. The focus has been on cost reduction, but more outsourcing companies will be putting an emphasis on high quality work and additional services.  Outsourcing companies will be looking for better talent, expertise and flexibility from the global sourcing providers.  There will be a bigger demand for higher-value work including process improvement and application portfolio rationalization.

Green outsourcing will become more popular. Environmental concerns are growing and corporations are requiring that suppliers adopt green policies.  The Brown Wilson Group conducted an independent study of 20,000 outsourcing users. According to the survey results, 43 percent of outsourcing companies said that green factors would be important when choosing a supplier for the first time.  More than 94 percent of executives that were surveyed stated that they plan to add green clauses in their renegotiation processes.  This spotlight on environmental concerns could force global sourcing providers to develop eco-friendly processes and policies.

A&E Consulting will make global sourcing work for you.  We will assist you in choosing the right global sourcing partner and establishing the business relationship.  In addition, we will manage the first outsourced project to make the transition as smooth as possible.

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