Wednesday, May 21, 2008

Software Development Firm Advocate Offshoring for Rapid Growth

Source : Click

Outsourcing "waste of resources" say company whose investment in Offshoring has seen 10x growth in total revenue over recent years. Backbone IT Group say that as well as saving money, establishing offshore operations has opened up new business opportunities and fuelled job growth at home.

An IT company is leading calls for Western firms to abandon plans for overseas outsourcing and instead consider a more lucrative solution: investing in their own offshore operations.

Backbone IT Group, a software development company based in the UK, has bucked the current trend for outsourcing IT by opting instead to set up its own wholly owned offices in China - and is reporting great success. The move has sparked an unprecedented period of growth, with the firm experiencing a 10-fold increase in revenue in just a few years.

Since establishing an office in Nanjing, China in 2004, the company has achieved cost benefits comparable with outsourcing, without the associated problems.

"We would certainly recommend investing in an overseas operation. Our Chinese office has proved an excellent asset to the business," explains Andrew Clarke, co-director at Backbone IT Group.

IT analyst Garner has stated that the spread of outsourcing could lead to a 'borderless state' by 2015, with those companies not taking advantage of low-cost, highly skilled labour in countries such as China and India losing out. According to China's Ministry of Commerce, increased levels of outsourcing contributed to the value of the country's IT industry climbing to 580 billion Yuan ($83 billion) in 2007.

"We have been able to put together a great development team in a market that allows us to keep costs down, while avoiding any potential miscommunication, quality or project management pitfalls," continues Andrew, who runs the company's Nanjing operation.

Many companies taking the foreign outsourcing option have reported unexpectedly high costs and unforeseen delays caused by language and cultural barriers. Extra expenses such as unavoidable overseas travel and the need to employ dedicated engagement managers to act as intermediaries between firms are other factors commonly highlighted as pushing up the initial cost of outsourcing.

In addition to competitive development costs, Backbone IT Group's Chinese presence has also brought the company other unexpected advantages.

"Having our Nanjing office has allowed us to expand and create more jobs at our UK headquarters," says co-director Richard Unwin.

Since establishing a legal base in China, the company has also been able to offer its services to Chinese firms and provide search engine optimization both for Western companies seeking to promote themselves in the Chinese market and Chinese businesses targeting the West.

"Investing in our own Chinese office has given us far greater control of development than we could ever have achieved through outsourcing and has secured jobs both in the UK and China." concludes Richard.