Outsourcing – to be or not to be?

диверсификация diversification, diversity

“Diversify”, present day business gurus say. “Divide et imperia” (“divide and rule”), -
Machiavelli appealed hundreds years ago. What should modern enterprises do in the time of
globalization: should they do everything themselves or buy services from professional
companies? Information technologies and programming. This very sphere is the number one
in the amount of work done by third-party firms and workers.

Though for many companies outsourcing became very habitual thing, for some enterprises
it is still very difficult to decide using services of some third-party company or person.

1. First of all, why is it worth outsourcing?

There are several reasons for using out-side services: someone can do something much
better, than you (we mean company) and it is cheaper to buy these services than to make
everything in the company.

Would Nike be as successful as it is now if it didn’t use cheap labor of Philippine workers?
Would you hire an accountant, create a work place, pay taxes, if your enterprise is not so
big and your accountant works efficiently two days per month? Most likely you would buy
services of accounting firm.

Everything depends on the tasks you need to accomplish. On the scale there will be the
cost, on the other – quality/speed/security.

Let’s consider several situations

Situation 1. You are a big company. Every employee has a computer. You need to
automate work of many divisions. You are worried about security; you want to protect your
information to the maximum.
Solution: First of all, you should worry about security, consequently, the most responsible
people – system administrators should work in your company. They would be responsible
for undisturbed operation of your servers, network, and e-mail. It is enough having in your
company a small IT division which would be engaged in adjustment of computers, printers
and other office equipment. But probably it would be worth using services of local IT
company in case financial arrangements show that it is really profitable.
Is it worth hiring programmers who would be developing software for your company, for
example, for accountants? It is worth, but only if
- you are a software development company;
- you cannot buy ready software;
- you want to sell what your programmers would develop;
- you found a very talented manager who would be able to organize the work of prospective
development division;
- you don’t know what to do with your profit.

Situation 2. You are a software development company. Your software is popular, but the
expenditures for its development are still very high. You want to cut down expenditures,
speed up development of new versions of the product(s). Or you would like to get new
products and increase expenditures not more than by 30% (or less).
Solution: The biggest part of your expenditures is salary and taxes. You can refuse current
“expensive” workers, hire a company with cheaper labor cost, and leave in your company
the most effective managers who would be able to set tasks and control the process of
these tasks implementation.
Situation 3. You are a not very big company, selling your products and services. You need
a web site or a software product, but the project budget is limited. You turn to local
software companies and understand that their services are too expensive for you.
Solution: You can work with other companies (or freelancers), who can sell these services
to you at a low price.

So, you decided to use software outsourcing services, you need to accomplish several tasks
then.

2. How can I choose the developer(s)? Russia, India, China, or Western Europe?

Developers can be situated anywhere: in another city, another region, or another country.
We cannot tell about advantages of any country except Russia.

It is well-known that there are differences between Russian developers and developers from
other countries.

The reason for differences is that historically computer sciences and most of corresponding
educational courses have been mathematical in Russia: More attention is paid to thorough
study of math sciences and less to natural sciences. This particularity derives from the
reason that in the main computer sciences in Russia having been developed by
mathematicians who traditionally give preference to classical fundamental knowledge

In Russian there are several cities in which universities training highly skilled developers
work: Moscow, St. Petersburg, Novosibirsk, Tomsk, etc. Tomsk (where Development for
the Masses is situated) ranks among five of them.

There are 6 universities working in the city, as a result of it young people make up the 5th
part of its population. Almost 20% (120 000) of young population have an academic degree
in system engineering, computer engineering, system design and programming.

Level of Russian developers work payment depends on:

- professional skills level;
- specialization and profession (salary of a tester differs greatly from salary of an architect);
- distance from the capital (Moscow) – the cost of living in other cities is much lower than in
Moscow.

Hour rate varies from $5 to $40 (4 Euro – 35 Euro).

Thus, if you decide to outsource some work to some company, we recommend you to learn
more about the country in which this company works.

3. How can I keep control over the project if the company developing it is situated
too far (for example, in another country)?

This problem can be easily solved by payment system. First of all, divide the entire project
into several phases (especially if the project is big); then agree with developers on terms
and payment for every phase. So, you will be able to avoid any problems: the work will be
paid for only when the work at a certain phase is done. Consequently, the faster they the
work and the better quality of the work done, the better for them and the sooner they will
get payment.

4. What if there will be problems concerning intellectual property?

In any case, the person or company that ordered site design or/and development or
software development gets the intellectual property rights. But you still need to discuss it
with developers beforehand.
5. There can be communication problems, especially if developers speak some
other language.

Of course, there can be such problems. But the thing is that developers rendering
development services for foreign countries know that communication problems can appear
and learn some foreign language. By the way, in such companies necessarily work
professional translators.

However, it is worth noting that communication problems can appear within any company,
within any community, especially if people just do not want to understand each other.

6. Time difference may become a problem.

Sometimes time difference between customer and developers can be very sufficient.
Nevertheless, we believe that time difference can be a great advantage. For example, if
your company develops some project and you decide to outsource some part of work, you
can work with the overseas team in shifts, so that programming goes on 24 hours a day.

7. Is it profitable to turn to third-party developers?

The answer is: yes, it is very profitable. First, using services of third-party developers you
get high return on investment. Second, you can reduce the need to invest capital funds in
non-core business functions, so capital funds more available for core areas.

8. How skilled are the companies acting as third-party developers?

Usually, such companies, especially if they work with foreign companies, have sufficient
experience and skills which allows them to successfully operate on the international market
of programming and Information technologies. You can view portfolio, clients list, find out
the rates and pricing, how the work process is organized. Before signing the contract of
long-term relations with a software development company, give some small project to this
company and check the result. If everything suits you, you can continue the relations.