Six reasons to work with an offshore outsourcing firm

Cost savings and faster time-to-market have historically driven the trend of offshore outsourcing as a means for transferring work to a lower-cost region. But the realities of fierce competition and tough economic times has many U.S. firms taking a fresh look at outsourcing in order to achieve a more

1. Reduced capital costs. Offshore outsourcing offers two types of savings: capital expenditures and revenue expenditures. U.S. companies can save up to 100 percent of their intended capital expenditure (land, facilities, hardware, etc.) by working with an offshore firm. If the U.S. company's workload increases because of sales growth or acquisition, an offshore firm obviates the need to invest in additional capital or ramp up capacity. Similarly, the U.S. company may find that the service bureau's capacity may be a competitive advantage, particularly when dealing with price sensitive customers where the U.S. company can't sell at a loss. If facilities already exist, they can be sold or used for other purposes. In terms of revenue expenditures, U.S. companies can save 50 percent or more, plus the operational and administrative headaches of running the shop.

2. Converting fixed expenses to variable expenses. To the delight of CFOs, most offshore service bureaus work on a 'per unit of work' basis, meaning a U.S. firm can eliminate a fixed expense that is a constant drain on the finances of the company. Fixed expenses can have a major impact on the bottom line, particularly during a recession when income levels are down. With offshore firms, you only pay when work is done.

3. Easy access to skilled labor. The wealth of new technology skills in countries like India is enabling U.S. companies to off-load more sophisticated jobs. At Vital Link, all our operators are graduates who have completed at least five years of college. They stay with us an average of three to four years, viewing their job as the springboard for a career elsewhere. Our senior management is more highly skilled. Partnering with an offshore firm also allows U.S. companies to augment the skills of their in-house staff, meaning they don't have to turn away business their staff can't handle.

4. Cost-effective solution to seasonal or one-time work. Companies such as catalog retailers often experience peaks of 80 percent over normal volumes. By working with an offshore service bureau, these companies don't have to create capacities to handle peak loads, and then support that capacity (and burn through precious capital) the rest of the year. Additionally, what is a holiday season in the U.S. is not a peak time elsewhere.

5. Disaster recovery. In our increasingly uncertain world, an offshore service bureau can provide U.S. companies with additional protection in the event of a catastrophe, as a hot site, or a data storage facility. Also, our production facility is located in Pune, a small town that most likely wouldn't be targeted the way Bombay or another major city might.

6. Time can work in your favor. Service bureaus in India begin work when the U.S. is asleep, meaning your work will be completed when you return the next morning.

The combination of the slow economy, rising internal cost pressures, and the increasing number of U.S. companies outsourcing non-core activities will fuel continued growth in offshore outsourcing over the next several years. As Sun Tzu said in the "The Art of War," "If you don't seek out allies and helpers, then you will be isolated and weak."

A comparative chart on potential cost savings of offshore outsourcing is available at www.vitallinkcorp.com/ta.pdf. Related white papers also are posted on the site.