| European companies are finding financial benefits to | | | | operational efficiency and organizational issues. This |
| outsourcing and are doing it more and more. The | | | | path is sometimes appropriate for large and |
| primary difference between American and European | | | | multinational companies prepared to take these risks |
| outsourcing is nearness. When an American company | | | | and familiar and ready for the personnel and staffing |
| does offshore outsourcing, very little consideration is | | | | issues. |
| ever given to nearness of the vendor company. | | | | A growing strategy is that of "dedicated development |
| Technological developments have made this statistic | | | | centers" (DDCs) which is less costly than the captive |
| negligible. | | | | operations strategy, but works well in a long-term |
| So why do European companies look for outsourcing | | | | relationship approach. DDC involves having full-time |
| destinations closer to home? For one, they see | | | | developers working exclusively on client projects for a |
| benefits in having the people to service their | | | | prolonged period of time. Although technically these |
| customers be personally familiar with their culture. | | | | people work for the vendor company, it is like having a |
| They find comfort in the vendor company being in the | | | | virtual extension of the client office in the nearshore |
| same time zone. But perhaps the biggest consideration | | | | country. |
| is language. This is something the American | | | | DDCs can be further categorized. A dedicated team |
| outsourcing companies don't have to worry too much | | | | model, for example, is very common. In this model the |
| about, because the English is spoken widely throughout | | | | vendor provides the facilities and allocates the team, |
| the world. In addition, vendor companies wishing to | | | | but the client has full operational control. |
| secure American business have their own English | | | | The term "tailored DDC" is used to describe a facility |
| training processes for employees. | | | | tailored to the custom business model, with specific |
| One of the biggest areas of European "nearshore" | | | | technology needs and perhaps special organizational |
| outsourcing is the IT function. These can be classified | | | | structure. These can be product development centers, |
| into three types of outsourcing: project based, | | | | research and development centers, software |
| dedicated center and captive operations. | | | | maintenance and support centers, application |
| The most common is project-based outsourcing. This | | | | reengineering centers, quality assurance centers, etc. |
| is where the vendor company is hired to run or assist | | | | A joint venture DDC is often a transitional stage |
| in completing a specific, usually long-term project. | | | | working towards a captive operations style of |
| When the project and all follow-up work are complete, | | | | outsourcing. Both vendor and customer support it. |
| the relationship between the hiring company and | | | | They share the risks and responsibilities. |
| nearshore outsourcing destination company is over. | | | | The "build-operate-transfer" option is similar to the joint |
| The "captive operations" type of outsourcing is where | | | | venture DDC. In this case it is designed, specifically, to |
| the company sets up its own office in the nearshore | | | | be turned into a captive operation. The vendor sets up |
| location, usually an Eastern European country. There | | | | the business infrastructure, hires personnel and |
| they hire native workers, but still management from | | | | establishes and runs the center for a predetermined |
| their own country. This is possibly the most risky | | | | length of time. Afterwards this facility is turned over |
| strategy in terms of investment capital required, | | | | completely to the client. |