Domestic IT Outsourcing – Why keep it domestic?

In our previous post on this series, we answered many of the common questions about what domestic IT outsourcing is. Now we’re going to have a look at how domestic IT outsourcing addresses many of the issues encountered when outsourcing IT projects to foreign countries. Though it is inexpensive to hire contractors in countries like India, China and Malaysia, the logistics of managing such a relationship often results in hidden costs that are not present in domestic IT outsourcing.

Legal issues
First, and perhaps most importantly, dealing with contractors in foreign countries is inherently risky due to the lack of legal jurisdiction. Though both parties may sign contracts and agreements explicitly protecting each others rights, each country has it’s own rules for how the terms of these agreements should be interpreted and enforced. Add to this the potential misunderstanding of the agreement due to language barriers (see below), and what essentially results is a document that represent a gentleman’s handshake… nothing more. If a company feels they have been wronged or that the contractor violated the agreement, options for legal recourse are severely limited when dealing with contractors in foreign countries.

Language barriers
As demonstrated above, when dealing with contractors who do not speak the native language of the company, the project and its associated communications are at risk of being misunderstood or misrepresented. Companies that outsource to contractors in other countries that speak their same language are not as impacted by this, but there are cultural nuances to language that might still be misunderstood. Keeping IT projects within a company’s own country will provide peace of mind that the company can effectively communicate detailed and complex project specifications without confusion stemming from language barriers.

Currency conversions
The world is getting smaller, digital currencies abound, and the task of computing currency exchanges within a constantly fluctuating monetary exchange system is largely handled automatically. However, issues still persist when moving money from one currency into the next. First of all, whatever currency exchange service is utilized, there will almost certainly be a fee taken by the bank for the service of performing the exchange. If a company pays this fee, it’s less money that could be spent paying a contractor for IT services. If a contractors pay this fee, the company is effectively paying less than full price for contractors and thus not receiving the higher quality (higher paid) contractor that would be receive by keeping contractors domestic. Additionally, when speaking with a contractor, confusion will arise over invoices and the amounts in various currencies. Even if one currency is selected for discussion purposes, the party who is more familiar with the other currency will find it difficult to do the conversion and follow the conversation at the same time. One other issue is the time it takes to send/receive money in other currencies. This delay could stall projects unnecessarily.

Time zone issues
Issues with time zone differences are similar to currency differences in many ways. Both can be mostly overcome through the use of software, but both still present issues inherent to the relationship with contractors in foreign countries. The case could be made that time zone issues exist even when IT projects are outsourced domestically. For example, companies in New York will have to offset their time calculations by three hours when dealing with contractors in Los Angeles. However, there are two reasons this is still preferable to dealing with contractors in other times zones around the world. Obviously, the fewer time zones one has to traverse the easier things will be. This is not only true in terms of computing time zone differences, but also in finding agreeable time slots for meetings. For example, it’s common for contractors in Los Angeles to wake up earlier than the rest of the country in order to attend that 10AM EDT meeting hosted in New York. There is another reason dealing with contractors within a company’s own country (and preferably own time zone) is better. Contractors with IT professionals in time zones that are too distant from their own presents a new set of problems. When a company’s night is a contractor’s day, it’s nearly impossible to get both parties on a consistent meeting schedule. Furthermore, the contractor will rarely be available on an as-needed/on-call basis. None of these issues exist when dealing with contractors who live and work within your own country and preferably a company’s own time zone. For more on the importance on timezones, check out the third installation in this series.

It’s not necessary
Now, given all these reasons to keep outsourced IT within a company’s own country, one might ask why companies bother to outsource IT to foreign countries in the first place. Of course, the answer most of the time is due to reduced costs. It is certainly affordable to hire IT professionals in some other high-tech, low-cost-of-living countries such as those mentioned above. However, what might not be so obvious is that there are high-tech areas in low-population (read: affordable) regions within your own country. For example, in the United States, pockets of well-educated and low/medium-income populations exist in what are known as “college towns”. Graduates of colleges and universities within these towns produce skilled IT professionals that, for various reason, opt not to migrate to the big city. They instead operate as individual contractors or within small IT firms. These contractors are just as skilled and experienced as their city-dwelling counterparts… if not more so due to the more varied professional experience freelancers typically possess. Yet, they live in areas of the country where the cost of living is low… similar to IT professionals in foreign countries. And this is the best of all worlds. Your company gets experienced IT professionals with a diverse skill set, located within your own time zone, speaking your own language, dealing in your own currency, and participating in your own legal system. All this comes at the same price as outsourcing your projects to foreign countries, but without all the headaches.

Posted on January 15, 2015 and filed under Domestic IT Outsourcing.