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To summarize:
Trends
• Large numbers of companies have cut in-house spending, but have increased offshore
spending.
• The number of firms utilizing offshore providers has increased dramatically each year.
Why the Demand?
• Low cost—savings of greater than 25% and high return on investment (ROI).
• High quality.
• Speed to market.
• Reliability.
Issues with Using Offshore Providers
Periodically, terrorism impacts outsourcing regions, especially in India, where hostilities between
Pakistan and India can erupt. The province of Kashmir provides a lightning rod for violence in cities
such as Mumbai and Delhi. In 2005, there was a coup in Nepal, which has a small but substantial
number of outsourcing providers. Communications, including the Internet, were cut off for several
days. Also, the 9/11 terrorist attack has created challenges for offshore outsourcing, as representatives
and temporary workers from offshore companies frequently cannot obtain visas for work in the United
States.
Infrastructure issues can wreak havoc offshore. Whereas here in the United States power is
generally not lost except during natural disasters, in Asia and the Caribbean inconsistent power is a
way of life. Consequently, many of the offshore providers in India have their own generating sources
to protect their infrastructures. Telephone service, even today, can also be inconsistent at times. In
some countries, potable water supplies may frequently be turned off. In addition, developing countries
do not necessarily have the necessary building codes and, therefore, physical infrastructures to
withstand natural disasters. While the United States can withstand some significant disruptions caused
by major floods and earthquakes, the devastation caused by disasters in developing countries is much
worse, with many of the outsourcing companies lacking the necessary redundancies of facilities and
staff.
There are a number of challenges associated with communication. Time zone differences, for
example, while a boon for some projects, can be obstacles for others. Some of the larger outsourcing
companies such as Wipro and Infosys provide on-site liaison personnel to assist in the communication
issues. However, cultural differences can still drive the organization to distraction, and language
differences even within the same country only complicate matters. There are 26 languages spoken in
India, and each of the states within India has different laws and regulations. That said, India has been
very successful in providing a plethora of outsourced services, including information technology,
accounting, human resources management, and legal research.
Companies must also cope with the stigma of exploiting workers in the third world. Over the past
30 years sweatshop stories, many true, have circulated about children and women being forced to