| The concept of offshore outsourcing is considered as | | | | be handles well. The transition costs may be shared |
| a powerful cost cutting strategy by business | | | | by both the outsourcing partners in order to bring down |
| enterprises. The IT outsourcing service providers | | | | the expense. |
| located in offshore countries like India claim to process | | | | Cost of Lay Offs |
| IT works at a fraction of rates of what it costs in the | | | | For firms that plan to lay off their employees and |
| United States. | | | | transfer the work to offshore providers, it may come |
| While it does result in save an enormous amount of | | | | a s a surprise that there are costs involved in that too. |
| money, it is important to analyze all the fact figures | | | | You may need to pay severance and retention |
| before calculating the total cost of offshore | | | | bonuses to employees. It is best to talk to your staff, |
| outsourcing. And this includes calculation of hidden | | | | communicate with them and tell them about your vision |
| costs as well. There can be areas where you would | | | | for outsourcing. If possible, you may divert the staff for |
| need to invest more than you estimate or there may | | | | other processes so that there is no dissatisfaction and |
| be situations where poor productivity and quality of | | | | bad blood. |
| deliverables can weigh down the potential savings. | | | | |
| Here are some cost points that you need to evaluate. | | | | Cost for overcoming Cultural Barricades |
| Cost of Vendor Selection | | | | One of the major challenges in outsourcing endeavors |
| Most clients don't realize the costs associated with | | | | is that of cultural differences. Though offshore vendors |
| selecting service providers for their projects. This | | | | might have highly skilled and professional staff, |
| costs include documentation requirements, sending of | | | | communication may pose as a problem in the |
| RFPs, response evaluation and subsequent contract | | | | endeavors. You may either have to spend money on |
| negotiation. And there can also be legal costs | | | | training employees or you may have to face the brunt |
| associated with the process. The selection of the | | | | of mounting costs as a result of low productivity. This |
| vendor is an important step that determines the | | | | is why it is always advised to hire a professional |
| success of the project. Therefore, keep aside a | | | | offshore outsourcing company that has enough |
| budget of 1% to 10% for vendor selection and the initial | | | | experience in the industry and don't have |
| travel expenses. | | | | communication problems. |
| Cost of Hand Over | | | | Cost of Contract Management |
| Every outsourcing deal goes through a transition period | | | | Another major cost point is that of managing the |
| where the clients hand over the concerned work to | | | | offshore contract. The costs arise from invoice works, |
| the service provider. This is a rather expensive stage | | | | auditing, checks for charges and time records and so |
| in the course of the project because knowledge | | | | on. This is something that happens on a persistent |
| transfer involves a lot of time and coordination. Also, | | | | level. And without continuous scrutiny, the outsourcing |
| this is the phase when you need to overcome the | | | | project may just fail in efficiency. That is why it is |
| cultural differences between the two parties. This is a | | | | important to invest in the diligent management of the |
| very important to strengthen the outsourcing | | | | project. |
| relationship and thereby ensure that the project would | | | | |