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The Business Benefits Of Going Offshore
by The Scalers Offshore Development Teams In India Offshoring allows companies to access talented engineers at a lower cost than at home. Great! But what are the actual business benefits of doing that? Financially. Operationally. What do companies gain by investing in an offshore team?What is offshoring, really?
When discussing offshoring, most people dive too quickly into specifics: you can build a bigger software team! You can save money! It's safer than outsourcing!All true, but we should slow down. What is offshoring? Fundamentally, it's a way to increase a business's output and improve their technical expertise, without undue stress, hassle, or cost.
So if it's the same process, then what are the real business benefits of offshoring? And which industries benefit most?
1. Higher profit margin
Say you establish a 5-person development team in Bangalore, along with your 5-person team at home in New York. Now let's look at two comparisons: first, a pure salary comparison between India and the USA, and then the total cost of doing business offshore versus in-house.- Salaries only - If you hire the same team in Bangalore (same ranks, experience, and quality) then the salary difference will be substantial. Comfortably 3-4 times cheaper, but the comparison is too simple.
- Total cost - For our average client, the total cost of doing business here (including premises, administrative staff, legal work, payroll, developer salaries, insurance - the works) typically comes in at 50% the cost of your at-home developers' salaries.
Why are these salaries so different?
Pound for pound, Indian workers are always cheaper than their British or American equivalents. But that's been the case for decades; longer than decades.So why do we all-of-a-sudden want to cash in on Indian labor?
- The quality of Indian workers has improved. Specifically in IT, engineers across India are getting the same education, training, and practical experience as Westerners. They're incredibly capable, and that's attractive to businesses.
- Lower cost of living = lower salaries, period. It's basic economics. Until India's economy grows significantly compared to the west, the Rupee will be worth less than the Dollar. Therefore, salaries will remain smaller in India - regardless of the quality of service.
- Engineering scarcity in the west - This is something we can't afford to forget. In isolation, quality Indian engineers cost more than they used to. However, in Europe, the UK, and the US, engineers are very hard to find and extremely expensive.
2. Access to niche or rare talent
In the USA alone, 250,000 software engineering jobs are currently unfilled and increasing. There simply aren't enough new developers to fill the gaps.Colleges are pushing IT and engineering hard, but there's an inevitable delay before those graduates trickle into the industry. To make things harder, the number and variety of tech companies are also increasing. Good candidates can pick and choose their employers.
Hence the holy grail of incentives: crazy wages.
A problem of availability
Today, the main reason companies are looking to build offshore teams and engage Indian developers doesn't cost - it’s availability.India produces 1.5 million engineering graduates every year, a good proportion of which are in software. Thanks to the high training pedigree (including niche specializations) and extensive English language training, these engineers roll out of university ready to work.
English is the language of the industry. Indian engineers can't just communicate generally, but also be extremely clear and concise in a highly technical environment.
Even if you ignore the lower rates, there are some niche skillsets that are just plain-old hard to find. It wouldn't be unreasonable to work with an abroad contractor to get those skills. Not at all.
Also Read: What Makes Bangalore The Ideal IT Offshoring Destination?
3. The opportunity to scale up sustainably
Scaling up a company is never as easy as it sounds. Taking on new employees (especially skilled, i.e. expensive ones) is a huge investment and presents a significant financial risk.- If those employees decide to leave early (very common in this work era) you could be overburdened with work. The quality drops, clients go elsewhere, and the whole business is in trouble. Worst case, but it does happen!
- But what if everyone stays, but you can't drum up as many new clients as you expected? You're left with spare resources on the payroll, twiddling thumbs and burning up cash. Again, a nasty situation - and an unsustainable one.
Simplified scaling
First, the cost of recruiting and paying staff is lower. Thanks to the reduced payroll, a business could shoulder down periods more easily with an offshore team. At the same time, expanding your offshore team can be done much faster than in-house. We have brought multiple groups of engineers to our clients' teams in as little as 4 weeks. Vetted, tested, and ready for work.Second, since the offshore team will have ample, inexpensive office space, there’s no concern over moving to a larger property.
Click here to know more about the benefits of the offshore team.
4. The administrative burden is not increased
On its own, this is not a good enough reason to build an offshore team. "Things won't get any worse" is not an incentive - but stick with us.Given the first 3 points on our list, this is an important topic. Expanding any team is usually a big logistical effort. With offshoring, the administration, payroll, recruitment (except final decisions), accommodation, insurance, and so much more are all taken care of by us.
As an offshoring partner, our role is to make this as effective as possible for you, while also limiting stress and inconvenience wherever possible. Building a similar team at home would be much more resource-intensive.
At the end of the day, offshoring with the help of an experienced, versatile partner makes all the difference. It allows companies to leverage all the benefits of offshoring without compromise.
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About The Scalers 
Offshore Development Teams In India
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Created on Mar 15th 2021 03:29. Viewed 534 times.
At the end of the day, offshoring with the help of an experienced, versatile partner makes all the difference. It allows companies to leverage all the benefits of offshoring without compromise.
Mar 18th 2021 14:19