Dear Mentor:

How should I grow my IT outsourcing business?

I congratulate you for the service you are providing. I am a 26 year-old engineering graduate who has done few jobs before starting his own small business. I sincerely believe in achieving success through sustained hard work and patience. In the past year or so, our team has done small projects for overseas clients. These were primarily data processing projects (data entry, making spreadsheets and data conversion etc.). I know a huge market for this kind of work exists for a country like India that has a huge trained manpower at measly rates. Until now we got these projects from some of my friends who were studying or working there. Now realising its potential, I want to do this business in a full-fledged way. I have reasonable resources (10 computers, plenty of space, trained manpower and ability to invest further). Please advice me on how to go about it in a planned way. Which are the companies and sectors I should contact in the USA, Australia, Europe, etc. which can outsource such work? What are the acceptable rates for which I should agree to work? What laws I have to keep in mind when taking huge contracts? To add further to my abilities, I can also handle projects concerning voice transcription from cassettes and audio files. In short, guide me on how to go about it sensibly and logically.

IT Outsourcing, Chandigarh, India

Dear IT Outsourcing:

First, we would like to thank you for your kind words. We would also like to congratulate you on your current success, and encourage you to remain determined to achieve further success in you business.

To provide detailed answers to your questions would require several weeks of effort by several full-time people. Companies around the world spend billions of dollars each year to address the type of business strategy challenges you have outlined. Management consulting firms charge hundreds of thousands, if not millions, of dollars for each engagement to design business strategy. We know this first-hand, because we have led such projects ourselves.

Given this, we are not in a position to provide you with answers, but we can offer an approach for finding the answers. The approach to developing a business strategy is fairly straightforward, albeit challenging and time consuming in execution.

  1. Articulate the business problem succinctly, and outline specific questions that must be answered for the business management.
  2. Identify options (or choices).
  3. Develop objective evaluation criteria, including such items as attractiveness, ability to win, and business constraints of resources and abilities. The criteria must be developed independent of the options to avoid bias of preference for some particular options.
  4. Evaluate options using the objective criteria.
  5. Formulate recommendations or conclusions.
Developing a business strategy is an analytical process, in which the management determines the acceptable level of rigor. So you can go through this process in a few hours or take as long as a few months.

Now let us address some specifics of your inquiry. The outsourcing business in IT (information technology) is indeed huge, and growing at a rapid clip. Countries like India, Ireland, and many others have benefited tremendously from this trend and the situation is likely to continue. A lot of low-end IT services - such as call centers, data entry, etc. - are being outsourced to countries where the required talent pool is more cost-effective. In countries like India, where high-end IT talent is available at a cost-effective level, a lot of software development is also being done.

The sectors most actively involved in outsourcing for IT services in low-cost environment include telecommunications, financial services, and software development.

Your have various choices to consider, some of which may be:

  • Continue getting business through friends and contacts as you are currently doing, and expand
  • Explore opportunities with multinational corporations based in India
  • Expand by becoming a subcontractor for a large IT outsourcing companies in India
  • Deal with overseas companies directly
There is no magic formula for what is the right choice for you. It depends on your experience, capabilities, access, and hard work. Good luck!

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