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Pros and Cons of Outsourcing Projects

Of late, outsourcing projects have caught the imagination of the entire corporate world. Organizations select this route to cut costs, boost bottom line and employ in-house resources to better focus on core activities. Outsourcing is concerned with turning all or parts of an IT activity to an offshore supplier. The project typically is a process whereby an enterprise decides to contract all or some of the firm's IT requirements, people and/or other activities to third-party contractor, who in exchange for an agreed fee, manages these assets over a predetermined time period. Outsourcing projects come in several shapes and sizes. For example, these projects may include feasibility studies, development projects, design projects, payroll processing, implementation projects, upgrade projects, migration projects, facilities management, support service projects and business process outsourcing. Outsourcing projects to localized vendors can end up costing even more, and therefore companies prefer to hire offshore vendors located in developing countries like India, Brazil, Malaysia, Russia, etc. to manage their projects from start to finish, as well provide ongoing maintenance. The advent of the Internet has opened new avenues for freelancers, especially for developers from lower-wage countries. A number of websites have mushroomed across the web for outsourcing development work to such freelancers at rock-bottom prices ranging from US $5 to $15 per hour. The system for arriving at prices is usually accomplished by a reverse auction, wherein several participants bid for a single project. This category of web-based outsourcing by SOHO (Small Office Home Office) businesses can be thought as a poor cousin, of the much more sophisticated model of offshore outsourcing practiced by large corporations. The typical project size is few hundred dollars, easily fulfilled by offshore freelancers or small companies. The primary objective of all outsourcing projects to obtain better quality at lower costs. However, the end results are often substandard, simply because the companies lack a clear well-defined outsourcing strategy. To realize the expected results, the projects need to be implemented correctly. For this reason, multinationals prefer setting up their own subsidiaries in developing countries.