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Blog for August 2010

Choosing an Outsourcing Destination: Philippines Versus India
Author: Andy Schachtel
Date Posted: Tuesday, August 10, 2010 05:05:03 AM | Comments (0)

India was one of the first countries to develop a thriving offshore outsourcing industry and still attracts over 30% of the offshore outsourcing market. India was so successful, in fact, that it came to symbolize all that was right and wrong with the industry as a whole. Recently, the Philippines has made significant inroads in the market, with 6.1 billion in sales in 2008, trailing only Canada and India. There are a growing number of choices now for companies looking to cut costs by outsourcing business processes to offshore locations; and the choice of a location is one of the most important aspects of the decision-making process. Having outsourced in both countries, I’d like to share my first-hand experiences with other entrepreneurs to help them make more informed decisions.

When I first considered outsourcing, I was running a Netherland-based start-up focused on mobile phone applications. One of the most serious challenges we faced was finding developers with the proper experience in our local market. So we tried everything, including job sites, networking, and expensive recruiters but we just could not fill our openings. Then, one of our business partners mentioned that they had been working with a small firm in India and were having great success with their outsourcing, so I thought that perhaps this was the answer to our problems. And in many respects it was, but our outsourcing journey had actually just begun.

We did have some success with our Indian outsourcing effort. The company we chose came highly recommended by someone we trusted and we were not disappointed. They were honest and diligent and they were able to recruit some talented developers. The problems we eventually encountered had more to do with the nature of our development and larger issues facing the Indian outsourcing market in general than with our outsourcing partner. Our applications were related to social media and, as a small company, we needed significant input from our development team on issues such as user interface and features. In the end, while the coding was solid, the cultural differences made it difficult for us to get what we needed from our team. They simply didn’t use social networking the same way that our target audience did and, while we took responsibility for product design, we felt like we were missing vital collaborative energy. The other problem we faced was high turnover. The labor market in India was so overheated that employees could not be counted on to remain long, which really undermined the continuity of our project.

Finally, these issues caused us to assess other options, including Eastern Europe and the Philippines. We decided that communication issues would make things difficult for us in Romania or Hungary so we began looking more closely at the Philippines. Again we worked through acquaintances and we were able to find reputable local partners to begin our project. We again found a rich pool of specialized developers, though not as many as in India. But while there were fewer numbers of developers, there was also less competition for their services. Once we got a team up and running we found more stability in the Philippines than we had in India.

We found our Philippine outsourced team to be much more westernized than our team in India. They were also malleable in terms of assimilating our corporate culture, but we had to be quite clear about our expectations and we had to provide close supervision over the team in order for them to internalize our goals and processes. Our Indian team was less flexible and our staff there tended to have less variation in their approach to their work.

In the end we decided to make a long-term commitment to the Philippines and we closed our Indian operations, but this was a decision based on the unique needs of our business. For other applications and for other types of businesses India might make the better choice. The key is to find a partner you trust and be thorough in vetting your new staff. Make sure that not only can they carry out the processes you require, but also that they can fit properly within your organization and reinforce your unique approach and vision.





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