Small-Scale Offshoring

July 25, 2005

............................"Among other things, using an offshore services provider has forced the company to become a more disciplined operation. "The benefit of a small company is that I can just turn around and ask someone a question," Franchina says. "Now, we're going to need a lot more formal documentation, but it's an opportunity to strengthen our practices."
That management discipline is where many offshore projects fail. Many smaller companies are used to operating in an ad hoc style or don't have training in effectively dealing with contracted parties. Rudzinsky says he's learned that a good offshoring partner must "have a strong local presence that can effectively communicate my needs to the offshore team." At the same time, it's wise for smaller companies to try to bring on board more staff experienced in working in collaborative, outsourced environments so that they can directly handle more of those communications. "It's the new model, and not just in software," says Commendo's Gil, whose company was built from the ground up to operate largely as a virtual organization.
And as interest in offshore outsourcing grows among software startups and other small businesses, more service providers are springing up to cash in. There's a void to fill as most of the large, well-known offshore vendors such as Infosys Technologies, Tata Consultancy Services, and Wipro aren't aggressively courting smaller business. "They can barely keep up with demand from the Fortune 500 customers so they don't yet need to tap smaller markets," says Stan Lepeak, managing director at outsourcing advisory firm EquaTerra. ".....................

........"Born from the ashes of a former dot-com, Denver Web-hosting and design-services company Ixion Inc. is one of the new breed catering to the offshore-services needs of the small and midsize business community. It's simply a matter of following the money, Ixion president Daryn Harpaz says. "We have customers contacting us from a number of industries, and they're only interested in offshore services," Harpaz says. "It's in- creasingly on the radar of smaller companies." "..............

.........."Beyond matching buyers and sellers, Elance, which is funded by Kleiner, Perkins and chaired by tech luminary Ray Lane, collects and publishes user feedback on the service providers registered with its site. That's important given the risks of offshore outsourcing for small and midsize businesses. They typically don't have the time or resources to carefully screen vendors and vet contracts, so any advice about a provider before they sign on can be a big help, Cognizant's Gordon notes. "We see big banks and insurance companies that literally take years before signing off on an offshore deal," Gordon says. "That's not going to happen in the small- and midsize-businesses space." ".............

.............On the risk-versus-reward scale, smaller companies increasingly see the value on the reward side. Commendo Software probably wouldn't even exist if it weren't for offshore outsourcing, Gil says. But it does, he says, and "now we're out there creating jobs, we're hiring marketing and back-office people, and we're delivering a product to the market." There's nothing small about that." .......