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  • Asian IT Outsourcing Experience: Risks and Business Benefits

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    For today, outsourcing does not fear irrelevancy: businessmen relish powerful tools to integrate the remote development department processes into the company’s main workflow. In fact, there are no technical impediments towards outsourcing services implementation. However, among somewhat constraining factors are taxes, local legislation, specific organizational processes that may be not very congruent with the whole outsourcing concept.


    2016 Global Outsourcing Survey by Deloitte defines a broad range of reasons why outsourcing is applied so steadily. 


    Furthermore, to prove the popularity of the modern outsourcing, let’s pay attention to some other statistics:


    1. According to the IT Outsourcing Statistics by Computer Economics Inc., big-size companies spend 7.8% of their budget on outsourcing;
    2. Each year 230,000 Americans lose their potential jobs due to the outsourcing popularity;   
    3. The worldwide outsourcing market expanded from $45.6 billion in 2000 to $104.6 billion in 2014, dropping a bit in 2015 ($88.9 billion).


    Without any doubts, while making a decision on employing outsourcing projects businessmen consider the key aspect – the correlation price/quality, trying to gain maximum benefits and address possible risks. Five years ago, when we mentioned “a cheap outsourcing destination”, we mainly meant Indian software developers. However, in the modern reality, developers from this country have started chasing their European colleagues, positioning themselves as top-notch IT experts. As a result, it influenced much the services costs, although the quality is far from outstanding, especially compared to that of European software developers.


    These days, cheap and ultra-cheap outsourcing services are associated with such countries as Vietnam, Malaysia, and Thailand. The economic potential of these regions looks attractive to investors. Moreover, taking into account such factors as relatively low average wages in these Asian countries, high population density, and professionals’ deficiency, this territory becomes a real source of cheap labor.   



    During the last years we have witnessed a broad amount of investors and outsourcers in these countries: some of them make use of outsourcing to conduct help desk and data center operations, others – to found new development centers and open new service delivery hubs.


    To cite some examples, ScienceSoft decided to boost business growth by opening a development department in Vietnam; IBM, in turn, disclosed its new Global Delivery Center in Cyberjaya, Malaysia; Zaptech Solutions, based in the USA, can boast a development center in India.  

    Analyzing the rapid development of the market for outsourced services, and basing on practical experience of large outsourcers who have development centers in Thailand, Vietnam, and Malaysia, it’s possible to define an array of features characteristic to the above-mentioned Asian countries.


    1. Higher education: young specialists’ qualification is not satisfactory so far. That’s why, if you plan to found a development center in one of the Asian emerging countries, be sure to take your best experts in custom software solutions who will have to provide locals with additional technical training.     
    2. Mentality: in general, Asian people are known for avoiding negative sentences (like Muslim peoples) and for the unwillingness to recognize that sometimes they don’t understand a word from the given information. Thus, be prepared for certain misunderstandings.  
    3. Low salary risks: indeed, in Asia you will find suitable employees and will save money on their wages. But here you should be ready for so-called “side effects”, among which is the high level of employee turnover. Asian developers will leave your company as soon as they get a $5-rise in salary from your rivals. Here you can’t establish rules. The emerging labor market is open and competing, so, developers do not stick to company’s values (loyalty, stability, career progress, etc.).
    4. Great infrastructure: if you fail to rent an appropriate office in a business center, feel free to build your own by enticing local specialists. You will certainly appreciate the construction terms.     
    5. Deadlines and responsibility: unfortunately, Asian developers are not quite the same as European and US ones: the main disadvantage is lack of responsibility that consists in ignoring such words as “urgent” and “obligatory”. In this situation a possible solution is to engage a manager from the central office who will easily deal with locals’ peculiarities; in other words, you will need a strict supervisor to keep up the development center. The practice shows that otherwise your employees may manage their personal affairs during the working hours.    




    Outsourcers say that their plans to save 35-40% thanks to low expenses in Asia are rarely fulfilled. But, all in all, a visible 10-15% benefit makes understand that the region has true investment potential. Deloitte’s prognosis is also positive: the audit provider believes that outsourced services will doubtlessly continue adjusting to the requests of software development companies and their clients.    

 1 Comment(s)

  • Nowadays, a lot of people are having difficulties in deciding between Outsourcing vs Inhouse Software Development. It has been seen that, very frequently companies face this problem. At times, depending on a particular situation, it is felt by the company top brass, that it is more beneficial to go for software development outsourcing a particular requirement as compared to inhouse development. At other times, they find that it is better to solve a software development inhouse and they just need to hire software developers with specific skills to complement the existing inhouse personnel. So they go and hire inhouse developer to achieve the target. The decision is taken on a case-to-case basis. To gain further clarity on the issue ‘Outsourcing vs Inhouse Software Development’ you must check out this blog at least once. It will help you get enough ideas about this matter and will help you to make a quick decision.
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