Time for SMEs to Jump on the Offshore Bandwagon?


    The "offshore" wave that started in a real sense towards the end of the 20th century has now become a globally accepted reality. The question now is not whether but how to incorporate global sourcing (a wider cousin of offshore sourcing) in your business model. This is especially true of large MNCs having global presence. However, for some strange reason, global sourcing and offshore sourcing have remained restricted in large measure to the "Fortune" listed companies though the spread has grown to Fortune 1000 now. The small and medium enterprise (SME) sector has largely remained away from the offshore/global sourcing activity so far.

    Now that the first (low-cost labor business) and second (cost-focused technology services) waves of offshore/global sourcing have stabilized significantly, it is a good time for SMEs to consider adopting this model. Rather, with their large competitors adopting this model in a big way, it has become imperative for the SME sector to go the offshoring way, as a matter of survival. While SMEs may argue that the cost benefits that accrue to larger corporations by virtue of their huge volumes may not be so great for SMEs due to their relatively tiny volumes of work, there are other strategic and tactical benefits of offshoring that they must consider. A detailed discussion on the various strategic and tactical benefits of outsourcing and offshoring can be found in "Outsourcing for Strategic & Tactical Objectives" at the following URL:

    The above Web page also has some other thought papers to help decision makers understand the concept better and also the process. "Demystifying Global Sourcing" helps navigate through the maze of confusing jargon around the concept, while "Guidelines for Planning on Offshore Outsourcing" helps understand the process well. As mentioned earlier, the concept of offshore/global sourcing has matured significantly and SMEs can leap-frog the learning curve followed by the early adopters, bringing about a strategic shift in business through "transformational outsourcing" that looks beyond offshore cost leverage. "Increasing Shareholder Value Through Transformational Outsourcing" describes the strategic benefits of going down this path while "Transformational Offshoring: Why & How?" helps build realistic expectations and also shows the way to achieve these.

    While the offshore sourcing wave started predominantly as a cost saving measure, SMEs can take a certain level of offshore leveraged cost savings for granted while focusing on harnessing the immense talent pool for activities such as R&D, product co-development, product testing, analytics and back-office work, business processes and also in some cases, everything other than their core business. Large global MNCs have gone down that path successfully. The hurdles they faced and the way these were overcome is a good source of learning for these followers to help them move forward much faster.

    It is not an option anymore but an imperative for SMEs in mature economies to start global sourcing to survive and thrive in the increasingly integrated and highly competitive global markets. Do it now before it’s too late.

    — Ravi