Advantages of outsourcing: Outsourcing to India is being considered by several overseas corporations recently. Here we discuss some advantages as well as some disadvantages of outsourcing to India.
The products and services are usually significantly cheaper in India compared to US or Europe. While the man power in India is definitely cheap compared to US or any other developed nations, manufacturing or service costs are not necessarily so cheap.
In India, a company typically spends on a skilled employee (with at least 2 years of relevant job experience) about US $400 -$1000 per month depending on the skill level . This is definitely cheaper compared to same level employee in a developed country by at least a factor of 2-4. On the other hand, the infrastructure and fuel expenses are relatively more in India. Various costs are typically as below:
1. Gas (Petrol as it is called in India): A gallon of gas (Petrol) which is equivalent to 3.785 liters costs about US$ 3.5 in India. This is quite high when compared to US. Similarly, Telecom charges are still high compared to US. A long distance call (>300 miles) costs about 10 cents per minute or even more for longer distance.
2. Internet Access: The Internet access charges, though became very competitive, still no where near US. A dial-up Internet still costs about 75 cents per hour or about US$ 5 per 10 hours. DSL (Broadband) access costs about Rs.1000 (~$25 per GB of traffic!) per GB of traffic. (Rs. 45= 1 US$).
3. Other infrastructure facility expenses such as electricity, and water are also relatively higher. Power failures occur frequently in India and therefore, it is essential to use backup generator.
Co-ordination of work from long-distance: It depends on the communication and transportation facilities available with the outsourced company. Typically the following facilities are available in several big cities (Known as Class A cities) in India:
1. Telephone (Both land and mobile), Fax
2. Internet (Both dial-up, and Broadband) access
3. Road, Rail, Air
At the minimum, ensure that the company has appropriate telephone and Internet access facilities.
Man-power skills: Ensure that the company has appropriate infrastructure facilities such as office, machines, skilled manpower, and communication & transportation facilities. One important thing to keep in mind while issuing a contract to an overseas company is to be clear about the deliverables. If it involves a large contract, it may be worthwhile to issue a trial order and verify whether the performance is acceptable.
Advantage of outsourcing to India:
1. Cheaper man-power
2. Cheaper office space (One square foot costs less than $1 per month).
3. Highly skilled work force (For example, Bangalore is said to have more number of IT engineers than Silicon valley).
1. Higher fuel, and electricity costs
2. Higher telecom and Internet access charges
3. Public infrastructure not up to the mark when compared to developed nations, and the companies need to make their own arrangements (such as back-up power generator etc.)
When to outsource:
The job is man-power intensive, and require skilled work such as software development.
There is no requirement for a permanent position.
Your company wants to cut down the costs of development, and the business environment is very competitive.
Project schedules are tight, and require immediate results.
Outsourcing fits into the business model of your company.
Disclaimer: The above are the opinions of the author and anandsoft.com assumes no responsibility for the accuracy or correctness of the above. Any comments may please be forwarded to info(at)anandsoft.com.
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