ATCG Cost Advantage over Competitors
Recently many enterprises have tried to accomplish the task of making the offshore IT operations become onshore outsourcing; due to well publicized offshore outsourcing challenges, a narrowing labor cost gap, lack of offshore performance, and political considerations. The most salient reason for the shift from offshore to onshore outsourcing is the fact that the proclaimed cost effectiveness of offshore operations does not materialize. There are many contributing factors to the loss of the cost effectiveness of offshore endeavors and the comeback of onshore outsourcing. The following are the most well-known factors:
- Time difference: The so called 24 hour work cycle can be a double edged sword. If the offshore is half way around the world, the actual hours of the day that a client can actually collaborate interactively are very limited. Nothing can substitute for conversing in real-time when a client needs to.
- Communication: Just because the offshore team speaks and reads English does not mean the communication will be seamless. A single “Yes” answer may not really mean “yes”, as it may simply indicate an acknowledgement of what was said, not actually an affirmative answer to the action or result required.
- Cultural barrier: The culture of the offshore teams in a foreign environment can be quite different. It plays an important role in work ethics and habits, style of communication, what constitutes acceptable quality of work and many other important aspects of working as a team.
- Dependability of IT job market: It is a widely known fact that the offshore IT job market is plagued with high turnover. Some sources believe that the rate can range from 20 to 50 percent. A person or the entire team that is working today may not be the person or team that will be working tomorrow. There is apparently a lack of dependability of IT personnel.
- Hidden costs: In spite of the distances between the parties, communication still must happen. That will mean telephone calls, telephone conferences, Web-based meetings, and possibly video conferences. All of this is an additional cost to your project. If the project has someone on premise from offshore team as a point of contact, the cost will even skyrocket.
- Contingency management: It is sometimes unavoidable that a project may have some urgent issues need to be resolved. The distance and time difference with the offshore team make it extremely difficult, if not impossible, to manage the contingencies arising from the execution of an IT project.
This document offers an analysis on a hypothetical project, considering the factors mentioned above, assuming everything else is the same and using "Efficiency Factor" to try to illustrate the ACTG cost advantage as compaired to that of offshore outsourcing companies. To download the document, click the button below.