It is common practice today to seek out reputable companies that can successfully undertake work that is not part of the core competency of the client’s business. This form of outsourcing has become increasingly popular for development relating to information technology, says Greg Vercellotti, executive director at Dariel Solutions.
In fact, according to SouthAfrica.info, as companies worldwide respond to increasing cost and efficiency pressures, South Africa is becoming a favoured international location for business process outsourcing (BPO) and offshoring, but is this true?
“Information technology (IT) outsourcing is indeed a growing business in South Africa. We have a diverse local market, first world know-how and a developing country environment that makes it ideal to test new models and drive innovation,” says Vercellotti.
“IT outsourcing makes up a large portion of the IT services market, and is driven largely by the need to reduce operational costs and support growth strategies for expansion – and this is key for businesses in South Africa.”
Gartner, the international research group, rates South Africa as one of its top 30 software development outsourcing destinations. Advantages of utilising South Africa include the favourable exchange rate, high rates of English fluency and a broad base of management and service provider expertise.
What’s more, according to the paper – South Africa’s BPO Service Advantage – written by Professor Leslie Willcocks, Andrew Craig and Professor Mary Lacity, of the Outsourcing Unit of the Department of Management, London School of Economics and Political Science, there are opportunities for both domestic and global outsourcing in South Africa.
“However, it is noted that offshore outsourcing is more challenging because of time zone differences, the need for more controls, problems transferring knowledge, cultural differences, having to define requirements more rigorously, and difficulties in managing dispersed teams. In addition, the transaction costs of offshore outsourcing can be considerably higher than domestic outsourcing,” the paper posits.
While there are those opposed to outsourcing, there is a majority that lauds its advantages. Disadvantages cited focus mainly around loss of control over the process. This need not be a factor if open lines of communication and active participation by the client are achieved.
Dariel Solutions supports the theory that the customer is part of the creative process. The advantages of ITO are manifold and include access to a pool of high-level intellectual property, reduced staffing costs, access to advanced facilities and capacity on demand.
“Ultimately, the decision to do partial outsourcing, majority outsourcing (over 80% of IT is outsourced) or majority insourcing (over 80% of IT is kept inhouse) is a personal one. Businesses need to carefully outline their goals and relay this information to the IT company they decide to outsource to.
“Choosing a company that has a long-standing record in the South African market as a reputable and reliable provider is very important,” adds Vercellotti.
“It is critical that when choosing an IT outsourcing partner, you familiarise yourself with their business model and modus operandi. By aligning yourself with a company that has common philosophies and goals, you are more likely to create a sustainable relationship that results in mutual benefits and really showcases South Africa as the outsourcing destination of choice,” concludes Vercellotti.