Outsourcing long-term projects can be a tedious process, and companies should be very careful to who and where they outsource. When outsourcing multiple long-term projects, a country’s inflation rate where the outsourcing will take place should be carefully analyzed. Companies that are outsourcing need to keep in mind that it is better to work with one outsourcing company than to constantly be switching partners; if outsourcing to a country with a high inflation rate, small businesses eventually will want to outsource somewhere else, since the original location may turn to be too expensive for a limited budget.
India has traditionally been one of the top destinations for IT outsourcing, due to their reputation and low cost. However, India is no longer as low cost as they have been in the past. Throughout many months during the last several years, India’s inflation rate has been in the double digits, and for 2010 it was at 12%. Other locations, such as Argentina, are also suffering from high inflation rates. For companies with limited budgets that are planning to outsource multiple projects, these countries should be avoided, unless the inflation rate drops. Stability should be important, but it may prove difficult to achieve if outsourcing to a high inflation location.
Inflation rates may not cause problems with short-term projects, but it may cause other types of issues. Searching to whom and where to outsource is a hassle of its own, which may take time and attention away from working on a project, valuable time many businesses may not have. It may be enticing to outsource a small project to a country with a high inflation rate, such as Argentina, as they have very knowledgeable developers, but one should keep in mind that if any further projects will be outsourced in the future to the same company, the prices would probably be higher. This will lead a company back to searching for another location to outsource, spending time and effort searching for and getting to know how the outsourcing company works.
Making a decision to outsource is a difficult one, in which the company outsourcing has to consider the length of the project, if it is a one-time thing, or if they will outsource multiple projects. If it is the latter two, outsourcing to countries with high inflation should be avoided. The focus of a company should be on the projects they plan to work on and productivity, not constantly looking for outsourcing partners due to rising costs due to inflation.
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