The San Francisco Chronicle recently published an article called “Wise outsourcing has more benefits than just saving money”. The article appeared in their Small Business section (http://allbusiness.sfgate.com), an excellent resource for business owners and CEOs.

The article lays down some of the obvious advantages of outsourcing for SMBs. The main points are:

• A better control on capital costs. True, outsourcing means transforming fixed costs into variable ones, and that’s paramount for small businesses.

• A reduction of labor costs. If you are a business owner, employees mean tax liabilities. As long as cash is a scarce resource, you do not want to run the risk of falling behind with the IRS, EDD and other government agencies. And any entrepreneur would definitely prefer to renegotiate payment terms with an outsourcing provider than with the EDD or IRS, even if the IRS can be accommodating.

• An increase in efficiency. When subcontracting, you can set your expectations by the contract (Service Level Agreement), something you cannot do with employees. Employees are a great resource when employers have already secured a revenue stream that enables proper HR management, not just merely meeting payroll expectations. Managing employees include training, quality work furniture, travel expenses, proper office space, employee events, parking allowance if you are located in a city like San Francisco, and much more, not to mention recruitment fees. When you add up those costs, you realize that securing a regular revenue stream must come first.

• The ability to start projects quickly. With limited resources, you can merely reassign people to new projects, unless slowing down or putting on hold ongoing in-house projects. Working with a third party enables to put your dollars at work almost immediately; and once again with a better control on the deliverables.

• A better risk management. We live in a fast changing world, but when it comes to technology, the speed is even higher. A large enough outsourcing company has the expertise required to help make the right decisions. For instance, starting with the wrong development environment is likely to cost dear, to say the least.

The list lacks one point though, which I find critical, equity control. However, this subject deserves a detailed explanation, and I will elaborate on it in my next post.

But that said, this very good article should help managers that are contemplating outsourcing their IT make the decision to go ahead.

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“Offshoring Secrets” by Utkarsh Rai is a book on the dos and don’ts of setting up an offshore center in India.

There are two categories of books that talk about offshoring; the first one discusses the pros and cons of offshoring (is offshore here to stay; is our world really flattening. etc.), while the second one is filled with how-to guides that share the pitfalls to avoid when going offshore.

There is little doubt that the most successful book in the first category is “The World Is Flat” by Thomas Friedman, an all-time best seller.

Since books in this category focus on the pros and cons of going offshore, they do not touch on the challenges linked to setting up and running an offshore operation.

Therefore, after the decision is made to go offshore, a solid operating guide is needed to avoid the many disasters abundantly relayed by the media. Hence the second category: practical, down-to-earth guides about establishing an offshore presence.

“Offshoring Secrets” definitely belongs in this second category, and assumes that India is the destination of choice, still the most common choice by far.

Unlike many other books in this category that lack the global picture, Utkarsh Rai’s book touches on the major issues that pertain to the set up of the operation, the recruitment, the local management, and the relations between inshore and offshore teams. In addition, case studies are provided at the end of each chapter, which I found a major plus.

Altogether, it is a great book: well written, easy to read, clear and concise. I could not even name a downside!

“Offshoring Secrets” is a goldmine for every person in charge of setting up a local operation. If that is your case, do not hesitate, and add this book to your must-read list.

[Click here to go to the 'Offshoring Secrets' page on Amazon.com].

However, the book assumes that the destination is India, a choice I found even less obvious for a Western company after having read this book.

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