Thursday, February 09, 2006

Offshore Outsourcing and Real Cost of the overall process

Offshore Outsourcing process is done for the purpose of cost savings as it is considered that sanding work overseas would charge you less than the onshore vendors or service providers. Companies are savings around 30% to 50% cost by this way of the business process. But do they consider all the costs while calculating the profit? It is true that one can earn profit by this way, but first of all you should analyze all the factors associated with it. There are some forgotten costs also which companies are missing out while calculating the profit. These are the costs that also affect the overall profit a lot but somehow are missed by the company while calculating the final profit. Some of the costs are either omitted or applied to mutually exclusive situation. These are the costs which should be taken under the consideration while calculating the profit as it also charges the company in Offshore Outsourcing. Some of them are as below.

Offshore Outsourcing

Selection cost of Service Provider

In Offshore Outsourcing perfect selection of the vendor in one of the most important task and it requires some serious efforts behind it. Selection of a vendor, evaluation of his job work and his skills costs companies few amount. So this aspect should be taken into the calculation at the end.

Cost of Traveling

In Offshore Outsourcing traveling expenses here is taken in the sense of before the deal is signed. It might be possible that traveling to the service providers is required before or at the time of signing the contract. So the traveling cost of the deal before the project is finalized should also be taken under the consideration in Offshore Outsourcing.

Cost of Communication

In Offshore Outsourcing cost of the communication is also neglected in many cases. It has happened in many cases that the direct or indirect communication with the vendors ends up with some high costing figures. So these communication costs also play an important role in profit calculation.

Cost of Transfer of the Work

Education cost to the vendor regarding the new or editing of an old work is also there in such overseas deals. Sometimes client’s employees have to move to the service providers to teach them about the technology or about the company. So these costs should be also taken in to the calculation in Offshore Outsourcing.

Failure Cost

During the project it also might be possible that some work fails and are reworked. So the time duration and cost of it are also important here in such cases. Company may loose some potential clients because of the minor mistake of the vendor.

These are few of the costs that should also be treated as the real cost of the overall project and must be taken under the calculation while finding out the profit of the overall deal. Ignoring these costs would not give the proper idea about the overall profit from the deal of the Offshore Outsourcing.