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%.[1] 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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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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The iPad revolutionized the tablet computer and has begun a new era of mobile devices. A decade ago, most people used a desktop computer to browse the web, use applications such as word, or to email and instant message people. By the mid-2000s, a noticeable shift had began, with laptop computers starting to outsell desktops[1]. During the same time, when laptops began to take over desktops, Apple released the first iPhone and shortly after launched its App Store. Although the iPhone was too small to be used as a computer, this was a significant step towards developing a tablet that would rival laptops. Now we have the iPad, and a vast array of Android tablets, including Amazon’s Kindle Fire. Developers will have to adapt to these changes that are taking place, and begin focusing more resources on mobile devices.

Apple continues to lead the industry with the iPad, while Google continues to improve Android. In addition, Amazon’s Kindle Fire is a very capable device for the price. The competition from the three companies will lead to a decade of innovations for mobile devices and for the computer industry overall. With such rapid development cycles for iOS and Android, developers have to constantly be aware of new releases, in order to make sure that their applications work properly with each update. This means that the development of any mobile application never ceases; developers must be aware that with any major update of an OS, an application has to be thoroughly checked and updated as needed. The current rivalry between Apple and Google will lead to a healthy competition between both companies, but it will also increase competition between developers, in which the ones that excel will stand out.

Two decades ago, people did not have a choice of operating system for their computers. During the 90′s, Microsoft’s Windows virtually had no competition; if you disliked Windows, you had no alternative, since Mac was incompatible with many applications. The lack of competition during that era led to people buying a PC with Windows because they had to, not because they wanted to. During the decade of the 90′s, developers had no incentive to develop applications for operating systems other than Windows. Today, the competition between Apple, Google, and Amazon will lead to many innovative features this decade, and rapid improvements to their respective operating systems. Apple will continue to be innovative to keep Google and Amazon from catching up, while Google and Amazon will continue to innovate with the hopes of someday catching up to Apple. This also means that developers have to be very innovative themselves. Smaller companies may not be able to lure very good, innovative developers, but they can outsource to companies that do have such developers.

As consumer demand leads to tablets taking over laptops, more developers will also begin to focus on tablets, which may not necessarily be a good thing for those looking to outsource. Tablets will not completely kill off the market for laptops, but laptops will go the way of desktops within this decade. By 2014, 180 million tablets are expected to be sold worldwide, 40 million short of the 220 million laptops expected to be sold the same year.[2] Before the end of the decade, tablets will overtake laptops as consumers’  favorite type of computer. This rapid change in consumer demand means that developers have to rapidly begin focusing on mobile devices instead of laptops and PC’s. Experienced iOS and Android developers will be in greater demand with each passing year. This can lead to the creation of new outsourcing companies that focus on iOS and Android, but not necessarily good outsourcing companies. The demand for tablets may perhaps outpace the speed in which good iOS and Android developers can develop apps for these devices.

Developers will have to keep up with demand and develop good and innovative apps that the public wants. Nonetheless, this rapid change in consumer demands may also cause a disaster for those looking to outsource; the vetting process to separate good outsourcing companies from those that are mediocre at best, will get more difficult as demand increases. Some companies will hire inexperienced developers to be able to make a quick buck. However, if a company or person has already found a good outsourcing company that they are satisfied with, they should stick with them for future projects; it will prevent future headaches and result in a better application, since both companies will be aware of what they want from each other. Ultimately, the rapid changes in consumer demand will work out for the best; from the consumer side, tablets are much more mobile than a laptop, more energy efficient, and much easier to use. From a developers perspective, the demand for tablets will mean that they will be in greater demand, which means that good developers and good outsourcing companies will have a bright future.

[1]http://www.nytimes.com/2003/07/03/technology/03TBRF1.html?ex=1118030400&en=cb60405e864fa27a&ei=5070

[2] http://www.pcmag.com/article2/0,2817,2380162,00.asp#fbid=wLYH8nU8gw9

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The development of apps for Android tablets should now be taken as seriously as development for the iPad. It is a reality that many applications on Android do not run as smoothly as they do on iOS. Much of this has to do with the fact that Android is very fragmented, along with the use of subpar hardware on many of the devices used. Unlike iOS, Android is found in a vast array of different devices, both high end and low end. Android app developers have been able to get away with developing good apps, but in some cases, with slow response times and bugs. Developers will no longer be able to do this, since Amazon’s Kindle Fire has been selling well, and in the short term, it will begin dominating the Android tablet market. Developing for Android should no longer be an afterthought, and should be taken as seriously as developing for the iPad.

As many of you may well be aware, Amazon has its own Android market, the Amazon Appstore for Android. The approval process for Amazon’s Appstore for the Kindle Fire is stricter than that of Google’s Market;

Our goal is for customers to have a good experience with every app they buy from the Amazon Appstore. As a result, we will be testing the apps you submit prior to making them available in our store to verify that each app works as outlined in your product description, does not impair the functionality of the mobile device or put customer data at risk once installed, and complies with the terms of the Appstore Distribution Agreement and our Content Guidelines. (https://developer.amazon.com/help/faq.html)

It is important that prior to submitting an app for approval, that a developer thoroughly test the application on a Kindle Fire and makes sure that it runs as smoothly as possible. Amazon expects a flawless user experience, to entice users to buy apps, books, and other media often.

According to Business Insider, Amazon is losing $50[1] on each tablet it sells, which means it plans to recoup its loses through the Appstore. Amazon has a huge customer base, which should be taken advantage of by developers. Nevertheless, apps should not be rushed and submitted for approval, since it will make rejection more likely. As I mentioned in last week’s post, if a company does not have the knowledge or experience necessary to develop an app, outsourcing should seriously be considered. Outsourcing the development of a Kindle Fire app to a company knowledgeable and experienced in developing for Android, will increase the chances of an app being approved.

The Kindle Fire may not be an iPad killer, but it may very well become the standard by which all other Android tablets will be measured up to, regardless of what version of Android they are running. This is why it is important to be mindful of your capabilities as a developer for Android, and if necessary, outsource the development of an app to reduce the chances of getting rejected by Amazon.

[1] http://articles.businessinsider.com/2011-09-28/tech/30211775_1_amazon-apps-analyst-gene-munster

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In today’s era of applications for mobile devices, competition is harsh, and not forgiving for apps that do not live up to their potential. It does not matter if a newly released application is innovative and the first of its class, since competition can develop quickly, and improve on the ideas of others. It is important that those newly released applications work flawlessly and are user friendly. Having developers that are experienced in developing for iOS and Android is a must, in order to release an application that will meet the demands of the consumer.

For a small business and many startups, outsourcing the development of an application should always be considered. The reason behind this is that small businesses and startups typically do not have the resources, nor the experience, to successfully develop a mobile application. Evidence for this can be found in the App Store or Android Market; apps that are not user friendly, or contain bugs, typically have poor reviews and are immediately deleted from the user’s device. Once this happens, the customer is permanently lost. This can be easily avoided, by outsourcing the development of an application to a company that focuses on mobile app development.

A successful outsourcing company, with expertise on mobile app development, can provide you with the knowledge and feedback necessary to allow the application to have a greater chance of success. Communication in this case is key, and Agile methodology is a must. For companies that plan to build more than one app, outsourcing can be particularly useful, even if future apps will be developed completely in house. The process and knowledge gained by initially outsourcing a project can cause an in house developer to look out for things they did not look for before, and to be more mindful of what the consumer wants.

For any company planning on developing their first mobile application, outsourcing the project to a company that has expertise on mobile app development should at the very least be considered. The knowledge, feedback, and experience gained from such a project are of great value, and may become very useful for future projects.

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I just finished Robert Kennedy’s ”The Services Shift”, a book on the globalization of services, with an emphasis on Information Technology.

Kennedy is a Professor at Michigan’s Ross School of Business. He also runs the William Davidson Institute — a fairly prominent think-tank that focuses on business and policy issues in developing countries.

This book is a goldmine:

• IT managers will find very detailed and clear information on what, when, where and how to offshore
• Outsourcing vendors will find relevant and not-so-well-known information on industry trends.

But hold on, there is more. Because the book goes far beyond the technicalities of services offshoring, literally everybody would benefit tremendously from reading its sections 1, 2, 6, and 7.

In fact, if you think the book is of no concern to you, consider one mind-blowing statistics shown in it: in the USA, services represent a staggering 83% of the country’s GDP.

The author managed to stay away from politics and partisanship. The book carries nothing like Lou Dobbs’ low-level propaganda or Thomas Friedman’s provocative views.

Kennedy sticks to the facts, and demonstrates brilliantly why the globalization of services is an unstoppable trend, at least for any foreseeable future.

Consider “The Services Shift” a wake up call. A new economy has emerged, and it is a global one. Liking or disliking this global order we have created is everyone’s prerogative, ignoring it is just not possible anymore, whatever our role in our society is.

The price to pay for the US to retain global leadership is to acknowledge this situation, accelerate innovation, create disruptive business models, and more importantly prepare our children to live in a world that will be changing at an always faster pace.

I will definitely elaborate on some parts of this book in future posts. In the meantime, do yourself a favor: read it!

Purchase the book on Amazon.com

Remi
www.vsisoft.com

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