IT Outsourcing

In the spring of 2004 my company spun off of Solectron. At that time, we considered IT Outsourcing as we were being courted by Satyam. We are a global high tech manufacturer with facilities in Malaysia, Puerto Rico, Dominican Republic, and Scotland in addition to our headquarters in Silicon Valley. Because we had facilities in low cost regions of the world, it was less expensive for us to build our own SAP Applications team in Penang, Malaysia than outsource to and Indian outsourcing company.

At the time the, we could hire 3 people in Penang for the cost of 1 in California. The global economy has since changed. Now the cost ratio is closer to 2 to 1. This makes the cost of outsourcing close to a wash.

If cost is no longer a factor in the outsourcing decision, we have to consider other factors. These factors include ease of communication and scalability.

When we were a part of Solectron, we had a team in Bangalore. We found it very difficult to work with this team from a pure time zone perspective. We also had a team in Munich. The time zone was not the issue for the German team. The time difference was only 3.5 hours from Germany to India. For the Munich team, language or rather accents created a communication problem. Eventhough they were only 3.5 hours appart, they never picked up the phone and talked to eachother because they could not understand eachother. In California, the time zone was the problem. Every time the team in Bangalore had a question, we would lose a day of development. This cause a degredation in the "quality of life" for the employees in both California and India. Team members had to work their normal business day to support the site plus work odd hours to talk to Both of these are examples of communication issues with offshore outsourcing. Therefore, communication issues land on the "con" side of the evaluation.

Scalability, however lands on the "pro" side. When outsourcing, the assumption is that if you need to scale up quickly, you can. During a down turn, if you need to scale down, you can do so without impacting your own employees.