Have you ever wondered why several American companies seem to head the Indian side when they need to outsource a project? Several businesses from the US, the UK, Canada, Australia, and South Africa are turning to India when they need external project support to leverage a mixture of skill and cost-effectiveness that appear hard to match elsewhere. But what’s the secret behind this strategic move?
The rise of India as a preferred outsourcing destination is no accident. It’s proof of the country’s ability to deliver exceptional work quality.
What is Outsourcing?
Outsourcing refers to delegating specific business functions, tasks, or processes to external service providers rather than handling them internally. Most people utilize this approach for tasks considered non-essential or peripheral to the core business operations.
For instance, outsourcing may occur when a company chooses to have an entire mobile app development project, or just segments, completed by an external specialist firm.
Companies opt to outsource for various strategic reasons, and the global outsourcing market, valued at $92.5 billion, indicates its growing popularity. Some of the primary motivations for companies to outsource include:
- Cost Efficiency: Outsourcing allows companies to cut expenses associated with hiring, infrastructure, and training by utilizing the specialized services of external providers who often operate at a lower cost.
- Scalability: It allows companies to swiftly adjust their workforce size and operations in response to fluctuating project needs, thus offering remarkable scalability.
- Accelerated Time-to-Market: Firms that outsource, particularly to countries like India, benefit from quicker project completion times, which speeds up the product’s entry into the market. Outsourcing can also significantly reduce the hiring time by 40-50%, contributing to a quicker launch.
- Technological Advancement: Outsourcing is a preferred strategy when companies seek to implement cutting-edge technologies like cloud computing and big data analytics without the significant investment required for training an existing in-house team.
- Business Agility: The practice enhances a company’s agility, enabling it to respond with more flexibility to evolving market conditions and business needs.
Models of Outsourcing
We can divide outsourcing into several models based on the location of the third-party service provider: onshore, nearshore, and offshore. Here’s an explanation of each type:
- Onshoring: This model involves delegating business activities to a third party in the same country of operation. Onshoring offers the advantage of minimal cultural and communication barriers, but it typically comes with higher costs and a more limited talent pool compared to other forms of outsourcing.
- Nearshoring: This Nearshoring approach refers to outsourcing work to service providers in geographically close countries, often within the same or similar time zones. Nearshoring strikes a balance by reducing cultural and communication challenges while often offering cost savings compared to onshoring, though it may still be more expensive than offshoring.
- Offshoring: Offshoring is when a company subcontracts processes to a distant country. This can involve setting up a subsidiary in that country or partnering with a local third-party provider. The main benefits include significant cost savings and access to a broader talent pool. In the IT industry, this practice is widespread due to the scarcity of IT professionals domestically. Many US companies outsource jobs overseas, with statistics indicating that about 300,000 jobs are sent abroad each year, especially as industries face challenges in filling specialized roles domestically.
Why is India such a hot spot for US clients looking to outsource?
Why does the USA look towards India? For starters, the value proposition is incredibly compelling. Regarding software development and IT services, India has created a reputation as a hub of innovation and expertise. American companies, in pursuit of excellence and efficiency, find a partner or co-founder in India that aligns with their strategic goals while offering economic advantages that are hard to overlook. Here are the advantages of outsourcing to India.
For most companies, the goal is to create top-notch applications without breaking the bank. Hiring developers in countries like the US or Canada is costly. But in India, thanks to the favorable currency exchange rates and economic landscape, you can access the same talent level for a fraction of the price.
Deep Reservoir of Talent:
India is like Silicon Valley for software development outsourcing. Outsourcing to India allows American firms to tap into a reservoir of seasoned expertise, particularly in software development. Indian developers are not just coders; they’re skillful at managing the entire lifecycle of a project with a level of professionalism in both management and design that complements their technical services.
India is home to some of the world’s most competent and tech-savvy web developers. This massive experience and expertise means that India’s workforce is ready to deliver with precision and skill when it comes to intricate software needs.
Effortless Communication that Clicks:
Communicating with a software development company in India is straightforward for clients in the USA. Indian developers use multiple communication tools such as Skype, Slack, and others, ensuring that discussions flow seamlessly. This clarity and ease of interaction trim down misunderstandings and turbo-charge project efficiency or productivity. The client enjoys enhanced returns on investment.
Support Around the Clock:
An application that runs smoothly and keeps users happy requires regular updates and maintenance. Recognizing this need, numerous Indian outsourcing companies provide comprehensive after-sales support and ongoing maintenance services.
Quality that Stands Out:
By choosing to outsource to Indian developers, American software development companies gain access to a workforce that excels in coding, project management, and design. Indian professionals bring their A-game to every aspect of development, ensuring that the services provided are of the highest quality, even in the age of remote working.
Flexibility in Operations:
Many wonder if Indian companies can align with their preferred time zones. Indian firms are known for their adaptability, often adjusting their work hours to sync with the time zones of their international clients.
Finding a company that blends well with your time zone is vital, as it’s not just about the convenience of overlapping hours but also ensuring that this flexibility doesn’t come at the expense of quality. The right Indian partner will offer the adaptability you need and a commitment to delivering top-notch work.
The substantial time zone difference — often around 12 hours — between India and the US can be a strategic advantage for American companies. With a team in India, work can continue even after the US-based office has closed for the day.
This around-the-clock workflow can dramatically reduce project turnaround times and enhance productivity. Additionally, it provides a competitive edge, as American companies can accelerate their project timelines and potentially bring products and services to market faster.
Step-by-Step of Outsourcing from USA to India
Outsourcing work from the USA to India involves a systematic approach. Here is a step-by-step procedure to ensure a smooth and legally compliant outsourcing process, along with some considerations regarding costs:
Step 1: Understand Legal Framework and Trade Agreements
Before outsourcing, understand the US laws and international trade agreements concerning outsourcing. Consult the Department of Commerce or a legal expert specializing in international trade to grasp the legalities, such as permitted services for outsourcing, trade partnerships, and specific regulations that might affect your business plans. This step is critical to avoid legal drawbacks and ensure that the outsourcing process aligns with U.S. and Indian regulations.
Step 2: Identify Services or Products for Outsourcing
Determine the aspects of your business you wish to outsource. Not all services or products may be suitable for outsourcing. Analyze your business model to identify tasks that can be effectively completed abroad, such as customer support, back-office functions, IT support, or software development, without the need for physical presence.
Step 3: Conduct thorough Feasibility Studies and Market Research
Carry out a comprehensive study to understand the viability of outsourcing to India for your specific services or products. This research should include cost analysis, understanding the Indian market, identifying potential outsourcing hubs within India, and assessing the quality of work. A well-conducted study will inform you about potential cost savings and help identify the best regions in India for your outsourcing needs.
Step 4: Request and Collect Proposals
Advertise your outsourcing requirements or a Request for Proposal (RFP) to invite proposals from Indian companies. You can do this through business portals, outsourcing platforms, or contacting business chambers in India. Collecting multiple proposals allows you to compare and choose the best partner based on quality and cost-effectiveness.
Step 5: Screen and Shortlist Potential Partners
Review the received proposals carefully. If necessary, set up a selection committee to evaluate and shortlist the most promising companies. Invite the top 5 contenders to do their presentation. Consider company reputation, past work, technical expertise, and financial stability. Importantly, consider to check the b2b reviews sites like clutch and designrush.
Step 6: Visit Potential Partners in India
Once you have a shortlist, plan a site visit to India to inspect the facilities of the potential outsourcing partners. This will give you a better understanding of their operational capabilities and company culture. It’s also an opportunity to discuss and negotiate terms in person. You also get to understand local business practices and ensure the company meets your standards and requirements.
Step 7: Train Your Indian Counterparts or the Key Personnel
Once you select a service provider and finalize the contract, initiate a training program for the core team (team leaders or managers) that will handle your outsourced work. They should understand your company’s values, quality expectations, and business processes. They, in turn, can train the local staff, ensuring your standards are met. Effective training is essential for maintaining service quality and can involve on-site sessions, virtual training modules, or a combination of both.
Step 8: Establish Strong Communication Channels
Set up regular communication protocols with your Indian partner. The initial phases will require daily updates. Over time, as the partnership solidifies, you can adjust the frequency of these communications. Utilize tools such as video conferencing, email updates, project management software, and regular visits to ensure clarity and address issues promptly.
The cost of outsourcing to India varies significantly depending on the nature of the work, the expertise required, the work volume, and the expected level of service. For instance, IT services like web development outsourcing cost anywhere from $15 to $50 per hour, while call center operations might be billed on a per-call or per-minute basis. Manufacturing can have a wide range due to material and labor costs. Always request detailed quotes and consider long-term cost-effectiveness, not just the initial expense.
Remember to factor in such costs like
- Legal and consultancy fees for researching and ensuring compliance with outsourcing laws (due diligence).
- The cost of issuing and advertising RFPs may involve marketing or agency fees.
- Travel expenses for site inspections.
- Training costs for developing materials and conducting sessions.
- Ongoing communication and project management costs.
Tasks you can outsource to India
Outsourcing from the USA to India incorporates multiple jobs, leveraging India’s skilled workforce, competitive costs, and technological capabilities. Such may include:
Digital marketing services are widely outsourced to India, utilizing local expertise in SEO, content marketing, social media management, and online advertising campaigns.
Software and Application Development:
India’s significant pool of software developers such as Aalpha Information Systems provides services in developing custom software solutions, mobile applications, and enterprise software.
Outsourcing accounting tasks, such as bookkeeping, tax preparation, and financial analysis, takes advantage of India’s trained financial professionals.
- Textile and Manufacturing:
- Clothes Manufacturing: India’s rich textile industry makes it a popular choice for clothing design, production, and export.
- Footwear Manufacturing: Skilled labor and cost-effective materials contribute to India’s role as a prime location for producing various footwear types.
Data Management Services:
- Data Entry and Data Mining: Businesses often outsource routine data entry tasks or require specialized data mining services to extract insights from large datasets.
India, being a hub for generic drug production, attracts outsourcing for manufacturing various pharmaceutical products.
- Computer Components/Parts: Production and assembly of computer parts capitalize on India’s technological manufacturing capabilities.
Herbal and Natural Products:
- Herbal Products Manufacturing: The country’s biodiversity and expertise in herbal remedies support the manufacturing of a wide range of natural products.
Office and Educational Supplies:
- Stationery Production: India is a cost-effective location for producing paper-based stationery goods for global distribution.
- Children’s Toys Production: Outsourcing to India for creating and manufacturing toys benefits from lower production costs and scalability.
Industrial and Chemical Sector:
- Chemical Production: India’s industrial sector is equipped for the production of various chemicals, often at lower costs than in the USA.
- Diamond Cutting and Polishing: The country’s historic expertise in diamond processing makes it a top destination for these services.
- Hair Extensions Production: India is known for sourcing and crafting high-quality hair extensions and wigs for the global beauty market.
- Hookah Production: With a tradition in hookah crafting, India produces a range of hookah-related products for export.
Businesses should ensure their outsourcing partners in India adhere to quality standards and ethical practices, especially in manufacturing sectors.
Tapping into India’s market means going for seasoned experts. This is why businesses across the globe, and especially in the USA, find themselves calling up developers from India – for quality and affordable work.
Looking for right team of experts to turn your idea into reality? Connect with offshore development company : Aalpha information systems.