Situation: A company wants to reduce their cost of engineering. They are considering outsource options, both domestic and overseas, as well as remote offices in lower cost regions domestically. How can you best reduce costs?
Advice from the CEOs:
- An emphasis on cost may be misplaced. Consider instead of where you can offer the best value to your customers or clients. Focus on and compete in best part of your market – the place where you possess the strongest advantage; then worry about cost.
- Outsource companies can be dangerous partners. Assume you only profit from the first job that you give them and that they may be your competitor the next time around.
- We’ve learned from the last decade of experience in Asia that cost advantages are often temporary. Salaries for top talent in India and China now approach those in the US. This experience is likely to be repeated in Southeast Asia.
- Focus on high dollar services and opportunities.
- There are limitations to offshore talent – especially in complex, multi-step development projects. Keep high dollar projects in-house because they justify higher prices and margins.
- When you outsource, negotiate retainer contracts with additional charges for work above and beyond the scope specified in the retainer.
- What do you want to be? Consider your options:
- Become a project management company and outsource development.
- Be a development company and just look for cost effective sources of labor.
- Start your own outsource company – a split-off staffed by your own employees – and feed them work.
- Before you invest substantial time or money, do a test.