As a company, it is natural to think about the areas or functions in which you can save money and outsourcing is one option to do so. One would like to offshore to get increased cost savings, less head count, or enhanced quality in processes. Expansion to some other regions would also pose terms and conditions related to ownership while choice of offshore partners and nearshore ISVs can lead to difference in cost savings and efficiency. Your choice matters in this regard.
It is important to have a clear scope of the project, a thorough gap analysis, and a sound business case before thinking about the right engagement model for accomplishing objectives. There are five business models that work with regards to ISVs who are efficient enough with diverse software solutions:
1. Global Delivery Model
The global delivery model is a trademark offering of MNCs who can combine onsite, offsite onshore, and offshore development resources based on the development phases of a project.
The objective of this model is to distribute and manage engagements and the right set of resources across multiple demographics and locations so that the ISV can respond to client requirements without any delay. If there are problems in operations in any of the places, they can shift the project tasks to other locations without any disruption to the project plan.
The global delivery model allows ISVs to distribute and manage engagements across multiple locations. This model helps in facilitating faster time-to-market requests by dividing tasks between the facilities. Additionally, it saves the client from investing in a team of employees for the tasks. One can scale the team up and down as required.
2. Hybrid Delivery Model
The hybrid outsourcing model is based on both onsite and offshore services for delivering projects in reduced costs. Midsize service providers who are situated offshore are comfortable with this delivery model.
A local team stationed onsite would manage the project’s program management and handle client-facing issues related to the project including primary requirements gathering and UI development. The onsite team has to interact with subject matter experts and software architects and even collaborate with the offshore software developers in the phases of coding, testing, and bug fixing.
This model has been the most efficient model in terms of resource utilization and cost optimization. Nearly one-fourth operations of the project are handled onsite while the rest is sent offshore, based on the critical nature of the project. The 24-hour work cycles gives teams with multiple skill sets and locations the ability to scale the team and resources based on requirements.
One of the major benefits of this model is the direct interaction with onsite team and the cost-effective benefits of offshoring. The optimization of cross-cultural communication and the administrative costs are still some sort of hindrance to success but they can be worked on, diligently.
3. Global Shared Services Model
These are captive centers or offshore insourcing where the internal service operations of the client are turned into mega-service centers and as independent businesses. These centers have their own budget and revenue generation accountability. These centers have the benefit of having guaranteed markets for services along with a strong management hierarchy. The problems of control and politics are easily solved in the model.
4. Build-Operate-Transfer Model
Some companies reject the outsourcing model while commencing on their own foreign subsidiaries. There are several issues to begin with legal, taxes and local hiring being major problems. Failures of captive subsidiaries has led to the emergence of build-operate-transfer (BOT) model wherein a firm contracts with offshore partner for building an offshore development center and operating it for a stipulated time period. Vendors take care of administrative and legal issues and even provides professional support staff along with several operating licenses based on functions.
A comprehensive set of operational management services are provided by the vendor so that clients are geared to focus their management efforts on core business rather than unfamiliar operational issues. Clients have the option for bringing in the operations after a fixed period.
5. Offshore Multisourcing: Hub-and-Spoke Model
Multisourcing involves multiple offshore suppliers to reduce the monopoly of a single supplier thus leading to the best-of-breed strategy. Businesses actually get some offshore partners to work with where they train them and then lead the offshore team back to their status quo.
Companies are opting for this model for a risk-averse approach to outsourcing but this model works when they themselves have the internal ability to manage and even integrate providers for working on a single solution.
The maturity of the client organization is very important in this regard. When working with such providers, there may be a phase where the contracts are renegotiated and assigned to a single dominant provider.
Charles Taylor is an avid business writer and technology evangelist with nearly eight years of rich experience in writing for diverse domains and industries. He is fond of exploring the upcoming updates and news on the business development, engineering development, design, aerospace big data analytics in avionics. He explores the ideas and follow aviation consulting services to derive insight to present in a good way. A spiritualist by heart, Charles is a cinephile, well versed with film criticism, metaphysics, and philosophy. He has also dabbled in the arts, notably photography, multi-cuisine food preparation, film direction, dance and poetry.