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Can Mid-size Companies Benefit from Offshoring?

The big question often presented to IT directors in the mid-size market is "How can mid-size businesses provide enterprise scale technology on a mid-size budget?" Some would have believed that with the introduction of offshoring in the past decade this would have allowed the SMEs to do more with the same budget. However, a recent survey I read online showed that only 1 in 5 of small and medium-sized businesses had an offshoring strategy, versus 95% of FTSE and Fortune 1000 companies. So why have the mid-size companies not fully embraced offshoring?

The challenges:
The primary reason is that mid-size businesses must overcome strategic and operational obstacles. They often don't have the internal talent and expertise to successfully integrate and manage an offshore provider. Secondly, their planning cycles are shorter and often include agile development which historically has not been easy to manage with the offshore model. IT leaders in smaller companies are highly focused on running day to day operations, and perceive an untenable amount of overhead of using offshore suppliers. Furthermore, the media has inadvertently played a role by creating a perception that offshoring is only for large global organisations with budgets for elite consultancies and large scale deals to make the economies of scale work. Finally, the concern about how to select a mid-size offshore provider is enough to scare a midsize IT director away.

The approach:
Before an SME elects to traverse the offshoring path it's imperative to develop a strategy and shortlist appropriate vendors. How do you choose the right partner(s)? So you must decide which criteria is important - for example: price, size of the company cultural fit, technology expertise & industry domain knowledge. After short-listing suitable suppliers, built a strong business case that makes reasonable assumptions about integration and management costs. Select a meaningful, but non-mission critical, project or programme to start. This will allow you to assess your own internal capability to successfully use (and benefit from) the benefits of offshoring - lower costs, an incredibly large talent pool, and global delivery.

Final thoughts:
To ensure a higher degree of success ensure your IT team is trained and give them time to build up the necessary management skills. Develop effective communication channels for all parties involved. Focus on process & learn to improve over time. There is absolutely no reason why a midsized organisation should not realise the same benefits that large organisations have enjoyed for years. With the right approach any mid-size company should achieve reduced IT costs, improved process management and greater business agility through off-shoring.  

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