For several decades, companies have embraced outsourcing to Asia as a proven and cost-effective strategy. While other Asian nations like China and the Philippines are considered, India remains the preferred choice, particularly for software development. Remarkably, half of Fortune 500 companies favor Indian software firms for outsourcing, as the National Association of Software & Service Companies (NASSCOM) reported.
Are you contemplating outsourcing to Asia? In this comprehensive guide, we’ve compiled essential insights on Asian outsourcing, covering its definition, reasons for selecting Asia as an outsourcing hub, diverse outsourcing models, and more. Let’s delve in!
Understanding Outsourcing
involves seeking external expertise to manage specific non-core tasks or functions, enhancing business efficiency. For instance, when a company engages a third-party firm to handle its mobile app development or collaborates with a software development company to access specialized experts, it exemplifies outsourcing.
Why Companies Choose Outsourcing
The global outsourcing market, valued at $92.5 billion, continues to grow as companies harness its benefits:
Cost Savings:
Outsourcing reduces expenses associated with recruitment, infrastructure, and training, leveraging external proficiency cost-effectively.
Scalability:
Companies gain the flexibility to expand or shrink projects promptly in response to changing needs when they opt for outsourcing.
Accelerated Time-to-Market:
Asian outsourcing providers are renowned for swift project delivery, resulting in faster market entry. This also translates to a 40-50% reduction in hiring time, expediting product launches.
Access to Emerging Technologies:
When enterprises aim to adopt cutting-edge technologies like cloud computing and big data, outsourcing proves more economical compared to in-house training.
Enhanced Agility:
Outsourcing empowers companies to adapt swiftly to evolving business requirements.
Types of Outsourcing: Onshore, Nearshore, and Offshore
Outsourcing manifests in three primary variants: onshore, nearshore, and offshore, each with distinct attributes:
Onshore
This approach involves contracting tasks to a third-party vendor within the same country. It offers minimal cultural disparities and streamlined communication but often costs higher.
Nearshore
Tasks are outsourced to a neighboring country with a compatible time zone, reducing cultural differences. However, nearshoring can be costlier than offshore alternatives.
Offshore:
Offshore outsourcing entails delegating tasks to a different country, a prevalent practice in the ITsector due to local talent shortages.
Key Statistics on Outsourcing to Asia
Asia has solidified its position as the foremost outsourcing destination, notwithstanding competition from nations like China and the Philippines. The following statistics underscore its preeminence:
As per the A.T. Kearney 2019 Global Services Location Index, Asia is the world’s premier outsourcing region.
An impressive 80% of European and U.S. outsourcing firms designate Asia as their top outsourcing destination.
Deloitte’s recent survey indicates that 59% of companies outsource to Asia, with an additional 22% planning future engagements.
The Top 5 Advantages of Outsourcing to Asia
Outsourcing to Asia, especially for software development, yields several distinct advantages:
Access to a Vast Talent Pool:
Asia boasts the world’s largest talent reservoir, churning out millions of graduates, engineers, and IT professionals, making it a tech talent epicenter.
World-Class IT Infrastructure:
Asian software development firms have cutting-edge technology and high-speed internet, ensuring top-tier services.
Seamless Communication:
Asia is home to numerous English-speaking nations, endowing developers and engineers with technicalprowess and exceptional communication skills.
Cost Efficiency:
Outsourcing to Asia translates to lower labor costs and reduced infrastructure, office space, andtraining expenditures.
Supportive Government Policies:
Several Asian governments foster IT industry growth through supportive policies, simplifying collaborations between Western companies and Asian IT firms.
Outsourcing to Asia vs. In-House Development
The choice between outsourcing to Asia and maintaining an in-house team hinges on various factors. Here’s a concise comparison:
| Factors | In-House Development | Outsourcing Development to Asia |
|---|---|---|
| Cost | High (recruitment, salary, infrastructure, etc.) | Low (affordable resources, no infrastructure investment) |
| Time to Market | Slow (months for hiring) | Fast (instant access to experts) |
| Scalability | Challenging | Easy |
| Tech Expertise | Limited | Access to emerging technologies |
| Staff Turnover | High | Low |
| Communication | Seamless communication | Possible time zone and language barriers |
Companies can outsource a wide array of tasks and functions to Asian vendors, provided data transfer is feasible. Commonly outsourced services encompass:
- IT services
- Accounting
- Mobile app development
- Web development
- Software testing
- Enterprise solutions
- Digital marketing
- Product development
- Website or app testing
- Application maintenance and support
- Database management
- Infrastructure management
- Disaster recovery
- Data Center management
- Data cloud storage
- Web security
Top 3 Challenges with Outsourcing to Asia
Despite its manifold advantages, outsourcing to Asia presents some challenges:
Time Zone Difference:
Managing projects across different time zones may result in communication gaps and project delays.
Quality Assurance:
Concerns regarding the quality of work when outsourcing to Asia can arise. However, most Asian companies permit clients to interview and assess developers to ensure alignment with their standards.
Intellectual Property Protection:
Safeguarding intellectual property remains a priority for Western companies. Partnering with Asian software development firms that adhere to robust data protection policies, including non-disclosure agreements (NDAs), mitigates this risk.
Exploring Common IT Outsourcing Models
When consulting Asian IT firms for development needs, clients encounter various engagement models:
Fixed-Price:
This model defines project scope, budget, and timeline explicitly, ideal for smaller projects with well-defined requirements.
Time & Material:
Under this model, clients pay for time and resources deployed on the project, suitable for long-term projects with evolving requirements.
Hire Dedicated Resources:
Clients can hire Asian developers on a full-time, part-time, or monthly basis, exclusively focusing on their projects. Clients maintain complete control over resources and project management. You have the flexibility to engage a single developer or assemble a proficient offshore development team comprising various technical experts. This team can include UI/UX specialists, developers, quality assurance engineers, business analysts, project managers, and more.
Build, Operate, and Transfer (BOT):
BOT involves collaboration with an Asian development partner to establish and manage an offshore software development team in Asia. Clients eventually assume complete control of team operations.
Delta Tech’s Value Proposition
Delta Tech is a global leader providing IT services and solutions to clients worldwide. Our roster of 250+ skilled professionals excels across various domains, offering flexible engagement models, comprehensive administrative support, and robust data protection policies.
In summary, outsourcing to Asia presents many advantages that can propel your business to new heights. By surmounting common challenges and partnering with the right outsourcing firm, such asDelta Tech, achieving success becomes attainable.
A successful outsourcing engagement hinges on a well-structured governance model. Key elements to consider include:
Non-disclosure Agreement (NDA):
Ensure confidentiality of sensitive data and ideas, especially for product development projects.
Clearly Defined SOW and SLAs:
Establish a precise Statement of Work (SOW) and Service Level Agreements (SLAs) at the project’s outset.
Dedicated Project Manager:
Appoint a dedicated project manager as a single point of contact for seamless delivery, ensuring timelines and quality standards are met.
Transition Process:
Prioritize the transition process, which may involve changing service providers or resources. Due diligence, documentation, and knowledge transfer are essential.
Effective Communication:
Maintain regular communication between onshore and offshore teams through email, phone, Skype, in-person visits, and agile processes like daily scrums to foster collaboration.
Management Connect:
Encourage senior management participation from both sides in monthly or bi-weekly review meetings to address issues proactively.
Partnership Alignment:
Align partnership, business, and product roadmaps to work cohesively toward common goals.
Team Building
View the outsourced team as an extension of the onshore team. Focus on building a skilled and
culturally aware team through training and workshops.
Technical Upgradation:
Invest in ongoing technical training to enhance team capabilities and product quality.
Choosing the right outsourcing partner and assessing them based on these parameters is critical for a successful outsourcing engagement, offering benefits like cost reduction, expanded staffing, and accelerated time to market.
