Every other day I’m getting a ‘partnership offer’ from another ‘outsourcing company’ which started their operations (or I shall say ending).
The shortest example of an unsolicited junk that I have to clean out from my inbox daily:
We are a company in China, and we could provide you with any web related services for only $12 per hour, either PHP, ASP, Net programming or any flash development, web site designing, etc. You can have a whole group of experts, AND you don’t need to pay until the project is completed (only available for those projects are below $2000).
Not only the those ‘marketers’ are not able to understand that they are emailing to the VP of outsourcing company (why would we need to outsource the work when it’s outsourced to us), their spam emails are not wanted (I never subscribed to their mailings) and no one is interested in their cheap and unreliable services.
Anyway this post is not a rant about confusing marketing techniques but about the fact that people cannot think deeper than just following their desire to replicate the success of established big vendors. This so called ‘companies’ fail to recognize that offshore outsourcing market is over-saturated already. There will not be another Wipro, Infosys or Satyam or as a more local example there won’t be another MoveYourWeb, Itransition or Aitoc. Big fish which is swimming in this pond is able to keep with market saturation and keep well. They are able to employ administrative personnel needed for effective functioning of the company (executives, marketing, sales, hr, attorneys, office managers, system and networks admins, representatives). They are able to compete on price easily because there is no need to earn high profits on every employee to maintain the functioning of the company. They are able to provide solid offices and work space to the employees and motivate those. They have millions of other advantages that the similar small company doesn’t have.
Don’t take me wrong – there are and will be successful outsourcing companies starting (few -providing services, many – developing proprietary product) but founding another outsourcing service provider trying to emulate the model of an established successful company located next block is just a FAILURE. A lot of times this new ‘CEOs’ of such ‘companies’ think: ‘We know everything about technology and outsourcing. We’ve been working in outsourcing company for years. Why not to start our own company. We will compete for the customer by lowering prices, offering a additional compensation advantage to employees and claiming that we have a more personalized clients approach and earn some decent buck for it, right?’ WRONG. Optimizing competitive advantages by 10% will not do the trick of competing with big names established long ago! That is simply not enough to brake though. You will end up in spending years of your life, face debt, bad image and other bad karmas. The business model should be different to compete and succeed.
Types of offshore outsourcing companies that can get successful:
- Companies providing UNIQUE set of services. Take a look at this company providing online tutoring services. Finding the unique niche which is not saturated is the key for companies giving a stake on this business model.
- Companies leveraging relatively cheap offshore resources to develop unique web properties. Those are generally called Product companies. This is a concept of the future, the only downsize aspect of this is that you will need funding to support the operations. But that’s the different story.
- Companies which act as an office of established software companies or big outsourcing houses employing AT LEAST 100 full-time people in other countries. Partners that have small ventures don’t qualify (you don’t want to become the company with the 1 customer). In 99.95% of cases this is the dead road since the ‘partner’ will not be able to grow the company big due to the same reasons mentioned plus additional like multi-focus on different businesses that are being run (in 90% the ‘partner’ will be just trying out this outsourcing venture). Only big established companies. Full stop.
- Companies located in rising outsourcing destinations. Vietnam, Egypt, Argentina and others – outsourcing is just starting there that’s why you can compete on price on the global market and grow because there is not much fight on the local labor markets yet. The disadvantage is lack of strong experience and sometimes communication of the employees so that’s valid to specific types of outsourcing only.
So you are located in a third world country and willing to start your own company or already running it (small one). Does the business model qualify as one of described in 4 types? NO? Then keep building the career at the company you work for, gaining additional experience and skills, leveraging the expertise you have for your success, the success of the company you work for and the ultimate success of the customer. You future is stable and planned and stable in this case. In case the answer is YES – you are at a spot where it might be worth trying. Go for it if you are really confident about it! Just remember that in case everything goes wrong sending out the cry for help if the form of SPAM emails begging for a project will not be the way out.