Outsourcing provides the opportunity for small IT companies to be funded, and ultimately hire Americans. Although, outsourcing in general has been viewed in a negative light lately, because of the millions of manufacturing jobs that have been outsourced, the positive effects of outsourcing are rarely discussed. With the current unemployment problem, it is easy for many to blame outsourcing as one of the culprits; why outsource, when an American is willing to take the job? Nonetheless, outsourcing by small companies is at times necessary for the company to stay afloat and survive, especially in IT and during recessions. The salaries of the most skillful software developers in the United States are much higher than a similarly skillful developer in Latin America or Eastern Europe. Within the United States, it is difficult to get a hold of the most skillful developers, since many of them are already working for large companies, such as Google and Apple. Small businesses and startups are forced to look outside of the U.S. to find skillful and experienced developers that fit their budget.

Small companies and startups often rely on outsourcing, to assure that skillful developers will work on their projects for a lower cost than in the United States. The reason for doing this is that they can get more work done for the project with a smaller budget; otherwise, a small company or startup may not have the sufficient funds to carry out their day to day operations, much less finish projects. These small companies and startups may outsource some work to foreign companies or workers, but by doing so, they also provide the opportunity for Americans to work. If a small company is forced to do every part of a project within the United States, they may not have the funds necessary to survive; employing some Americans is better than employing none. Small companies would still have to hire people within the United States, in order to carry out necessary daily operations.

Outsourcing allows startups and small businesses the opportunity to grow, which can eventually lead them to hire more Americans. For these companies and people in favor of them, outsourcing should not be looked as a job destroyer for Americans, but more of a creator of job openings. Small businesses outsource, not necessarily to maximize profit, but to stay in business and innovate. Small businesses in IT need to use their budget as efficiently as possible, especially in a climate where it is difficult to get loans. This means hiring the most skillful developers for the lowest reasonable wages. What this allows, is a small business to budget for the future, and to continually innovate; innovation leads to success, which leads to growth and the eventual hiring of more Americans. The ultimate goal of a company that outsources some of their work is success. Outsourcing provides startups and small businesses with an efficient way of becoming successful with their budget and few resources they may have.

Companies that are considering outsourcing typically have multiple reasons to do so. Alisa Henley, from Examiner.com, listed a few good reasons that a company may consider outsourcing; among them are reduced costs, improved business focus, unfulfilled needs, risk management, and better employees.[1] Although I believe the best employees are those that understand your company’s goals and culture, directly hiring a skillful American employee, permanently, in IT is expensive; a “better employee” in IT, for smaller companies, is a skillful developer that the company can afford to pay and assure that the project will be finished. The current economic climate does not allow companies to take great risks when hiring, and expenditures are kept as low as possible to allow the company to remain afloat. Current economic uncertainty is assuring that outsourcing will remain a viable option for most companies, regardless of size, as Stephanie Overby stated for CIO.com, “More than 40 percent of corporate IT leaders said that a double-dip recession would lead to increased outsourcing in their organizations, according to an October survey conducted by outsourcing analyst firm HfS Research. Another 46 percent said a second downturn would result in layoffs.”[2] For a small business that is attempting to finish their product and grow, outsourcing is the only viable option that will lead to success.

The majority of working Americans are employed by small businesses. With the current trend of the United States moving towards a service based economy, of which IT is part of, it is critical that not only small IT businesses remain afloat, but that they are created. Outsourcing allows for this to occur, which as a result, also leads to American’s being hired to handle vital roles within the company. If it were not for outsourcing, many companies would have not been founded or would have ceased to exist. Outsourcing indirectly leads to jobs being created within the United States, which is vital for Americans in this economic climate.

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India has been one of the top destinations in the world for IT outsourcing, due to their focus on the IT industry, massive labor force, and low wages. This has been a huge enticement for U.S. companies to outsource much of their work to India. Although, the costs of outsourcing to India has been considered to be relatively low, this may no longer be a fact, but a myth based on India’s low costs from years ago. For smaller scale projects, there may remain some cost advantages to outsourcing to India, but at a much smaller scale than years ago. In many circumstances, there is no longer an advantage of outsourcing to India.

During the last several years, the trend of outsourcing to India has been that of rising costs, with no signs of the trend slowing down or reversing. Indian firms themselves have noted the trend, and have begun outsourcing as well, in order to maximize their profit. In 2007, the Associated Free Press (AFP) highlighted how Indian firms were outsourcing from India to other locations, such as Mexico.[1] The rising wages of Indian workers have caused many American and European firms to rethink their strategies. According to the AFP, salaries of software professionals rose 18.7 percent in 2007, while the rupee has gained almost 10 percent [in 2007] to near 10-year highs against the dollar.[2] Since Indian firms have to pay more in wages to their workers, they also have to charge clients more for their services. The cost-benefit advantages of outsourcing to India will continue to decrease, especially taking into account the current economic situation in Europe and the U.S.

For the typical American company planning to outsource to India, the cost-benefit advantage of outsourcing to India may soon disappear. Sramana Mitra, from Forbes Magazine, pointed out that the cost advantage of offshoring to India used to be 1:6, by 2008 it was 1:3. Mitra also expected the cost advantage of outsourcing to India to be completely eroded by 2015.[3] This has set a reality that India is no longer competitive as they once used to be in IT. In fact, outsourcing to India is now more expensive than outsourcing to regions such as Eastern Europe or Latin America, and the costs are comparable to doing a project in-house. The competitiveness of Eastern Europe, coupled with the rising costs in India, has led companies, such as IBM, to open facilities in Romania.[4]

Many larger companies have taken note of the rising costs of outsourcing to India, and have begun requesting for rates to be dropped as much as 15%.[5] American companies that have not noticed the rapid rising expenses of outsourcing to India, soon will. Some Indian firms are attempting to take advantage of their low cost reputation, charging many times more than should be typical for a project, with the hope that the client will not look elsewhere. There are circumstances in which a very large corporation has the need to outsource, and I have noticed how some Indian firms charge as much as eight to ten times more than an American company would charge for the same project. If a company is careless as to why, and to whom they are outsourcing in India, they may end up paying a very steep price in doing so.

The varying economic situations around the world have led to many countries being competitive in IT, including the United States. Due to stagnant wages and job competitiveness, outsourcing to American companies is not as expensive as many think. Combine American companies’ modern day lower cost of outsourcing, with the lack of having to deal with a drastically different culture, the advantages of outsourcing within the country become apparent. There no longer remains an outsourcing destination that stands out when compared to other regions in the world. India has been dethroned as the top country to outsource IT to; many regions in the world are now competitive, and those thinking of outsourcing should plan very carefully of how, and to whom, they will outsource.

[1]http://afp.google.com/article/ALeqM5hhMB4FZqzg6WngihhgmGEZ_E-eRQ

[2] http://afp.google.com/article/ALeqM5hhMB4FZqzg6WngihhgmGEZ_E-eRQ

[3] http://www.forbes.com/2008/02/29/mitra-india-outsourcing-tech-enter-cx_sm_0229outsource.html

[4] http://www.itresources-romania.ro/*newsID_44-article_newsDetails

[5] http://www.sourcingbrazil.com/big-u-s-outsourcing-clients-to-big-indian-it-providers-lower-your-rates/

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Outsourcing to any given country provides advantages and disadvantages, and Romania is no exemption. Outsourcing IT to Romania provides clear-cut examples of the advantages; a hard working labor pool whose wages are much lower than those doing a similar job in the U.S. As some of the advantages of outsourcing to Romania are clear, so is one major disadvantage; time difference. The time difference between Romania and the United States’ east coast is seven hours. Nonetheless, my belief is that the advantages of outsourcing to Romania outweigh any disadvantage that may be found.

One of the main concerns of a company that chooses to outsource a project is cost. Romania is the European Union member with the lowest wages. In fact, when Romania began focusing in outsourcing at the beginning of the last decade, the cost of outsourcing there when compared to India was lower.[1] This provided Europe with a good alternative to India, since the cost was lower and time difference was minimal. But this advantage also provided U.S. companies with a good alternative to India. Currently, Romania’s wages remain at a fraction of those found in the United States. A software developer currently earns under $16,000 on average per year. Cost may be the main factor that many companies consider when outsourcing, but it is not the only advantage that Romania provides to those who outsource there.

Romania has a good upper education system that stresses importance on IT, with the realization that outsourcing is an important sector of the economy. This realization has helped tear down a language barrier in the country, where people knowledgeable in languages such as English, French, and Italian, among others, are not hard to find.[2] The lack of a language barrier makes it attractive for American companies to outsource to Romania. The importance that Romania has stressed on IT and outsourcing has led Romania’s current generation to be highly skilled and motivated. This has led companies such as HP to expand their operations in the country. Hewlett-Packard announced earlier this year the hiring of an additional 600 people to their operations in Romania, bringing the total to 3,700 employees.

Romania’s focus on attracting IT outsourcing has also led them to have a large segment of the population specialize in IT. According to the executive director at the Association of Software Developers, Valerica Dragomir, Romania has the largest population of high-quality IT specialist in Eastern Europe.[3] The skillfulness of Romanian workers is an advantage that should be carefully considered when planning to outsource. While some nations claim to have almost unlimited IT resources, the quality of work is mediocre at best, since many focus on the numbers instead of quality. In Romania the quality of work is taken very seriously, since they realize that if the work is done poorly, that leaves a negative impression and a loss of customers.

Despite the time difference inconvenience for American companies to outsource to Romania, the country provides magnificent advantages that should be considered when outsourcing. The combination of low-wages, very skillful IT talent, and the lack of a language barrier make Romania very competitive in the world of IT outsourcing. When considering outsourcing for the first time, Romania should always be considered. If time difference is not a significant disadvantage, Romania should be near the top of anyone’s list for best places to outsource. If time difference is important, but not significant, the time difference disadvantage can be reduced with good local management. The skillful nature of Romania’s developers almost guarantees complete satisfaction to those who decide to outsource there.

[1]http://news.cnet.com/2100-1011_3-5074725.html

[2] http://www.globalservicesmedia.com/Destinations/Europe/Romania-Rises-as-Outsourcing-Target/25/19/0/GS10030268118

[3] http://www.globalservicesmedia.com/Destinations/Europe/Romania-Rises-as-Outsourcing-Target/25/19/0/GS10030268118

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