Is the True Measure of Outsourcing’s Value Really About Productivity?

When companies outsource work to another country there is an implicit understanding that total delivery costs will be lower than they are in the host country. But a much more interesting question is: What is the value of my spend? Or, in other words, what is the nearshore or offshore provider yielding in work produced over a specified period?

For companies, especially those that are relying on outsourcing providers to supply IT services like software development and testing, it’s a crucial question. This was one of the key topics that came up in a call I had today with Jeremy Beck, VP of Business Development at Scio Consulting, a specialty product development and IT services firm, specializing in software-as-a-service applications,  with an development facility in Morelia, Mexico. (Based on Jeremy’s description, Morelia definitely qualifies as an up-and-coming Nearshore secondary city).

Becks says more customers are asking questions about the gains they may make in productivity both in the in-house vs. nearshore vs. offshore scenario and the nearshore vs. offshore scenario. The benefits of real-time collaboration, based on time zone similarities is a big deal for companies that want to drive faster collaboration and achieve a faster result, whether it’s a new online e-commerce application or code developed using Agile. “Our client, especially those with experience in India,  see the value of real-time collaboration thru Nearshoring,” says Beck.

So how do companies get better focused on the productivity question? Developing a measurable benchmark understanding of your in-house capabilities is a good place to start. As you begin to explore your nearshore vs. offshore options, it’s worth the time to develop a set of requirements that make it clear to your provider that you not only expect the work to be produced, but you will require time and productivity measurements to be part of the delivery model. The other, often overlooked part, of the productivity equation is to identify the time saved and re-allocated among in-house IT workers who, as a result of outsourcing, are able to focus on functions more core to business outcomes.

Productivity gains can come in many flavors, depending on your business, but as the Neashore market matures it’s increasingly important for customers to know how much they should get for their spend.