Offshore Outsourcing -- Future By Steve Parker At Isnare.com Ezine Articles

Offshore Outsourcing provides the ability to hold skilled overseas staff at a small part of the labor cost which is exhilarating to several entrepreneurs. The vistas in which Offshoring can be utilized especially in: accounting, advertising, animation, Human Resource Management and Development, health care-related jobs, IT projects, financial investment and consultancy, legal services, and network security.

The concept of Offshore Outsourcing is couple of centuries old when the colonial powers started taking raw materials from their respective colonies and then selling them after processing them into manufactured commodities. In 19th century the Britishers (and other imperialist/colonial powers), because of industrial revolution, rampaged the small-scale and cottage scale industries in India (and other respective colonies) by selling processed goods to the natives having a better quality. Now in 21st century the tables seem to have turned on the colonizers (or neo-colonizers). Taking advantage of the cheap labour in developing countries, many MNCs have set up subsidiaries in India and in other places (like China, Canada, South America, Africa, Israel, Ireland, Russia). In the past decade, US companies alone have invested $7 billion in their subsidiaries in India, picking a net saving of more than $26 billion. Telstra, an Australian telecom company, for instance, saved more than $75 million a year by outsourcing many jobs to Indian enterprises.

Latest modifications in the way U.S. companies are using Offshore Outsourcing Industry have generated heated controversy, which is comprehensible considering that jobs are at hazard in an already tense economy. But whereas it may be human temperament to adhere to the status quo, the software industry will be better off in acclimatizing to these changes and allowing innovation to thrive. Detractors have fated offshore development as everything from shortsighted to un-American--but it may well conclude salvaging the U.S. software industry. For staying competitive in the global market, U.S. software companies must persist in driving innovation. Nevertheless, innovation today is being choked through deficient R&D budgets on the company side and an overspending menace on the customer side. Offshore development can help on both sides. In fact, as pointed out in a recent report by the US Chamber of Commerce, the main cause of increased unemployment in the US, Britain and other developed countries is the enhancement in productivity due to continuing advancements leading to massive unemployment; and, two, that it has not contributed to unemployment, as is sought to be made out.

Here are the reasons:

For a mature software company, expending on proper product innovation is much less than what you might think. It by and large accounts for less than 30 percent of the R&D budget. This small piece of the pie is being further clutched from two directions. First, overall R&D spending by public U.S. software companies is lessening. In fact, in 2002 it fell by 2 percent, after having consistently grown at 15 percent annually since 1998.

Most of these cuts are captivating a bite out of new product development. Second, R&D budgets are being consumed by ever-increasing maintenance-related activities, such as bug-fixing, upgrades and minor enrichments. Maintenance agreements with a huge customer base mount up over the years mandate this support.

With such restricted resources accessible, software companies can't successfully produce real advance. Instead, many of finest and brightest are jammed down in what amounts to software maintenance tasks. The irony is that many of these developers would be happier with--and better suited for--truly pioneering work. But companies have painted themselves into a corner. This is where offshore development can facilitate.

In most cases, a well-executed offshore development program can help release an added 20 percent of the R&D budget for new innovation while continuing to meet the maintenance obligations of mature companies.

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