Is it true that ITPA will generate cost saving for IT Outsourcing Service Providers? Some people commented that outsourced to countries with lower labor cost can deliver the IT services cheaper than rolling out ITPA – what is your opinion / experience on this?
Hi Fung,
We have to perform a comprehensive cost-efficiency analysis including overall cost savings, quality, performance, and other hidden costs for service transfer, uncertainty, cultural barrier.
In my opinion, labor cost hardly is the major reason for outsourcing nowadays but rather favorable currency rates and tax savings.
I believe that technology process automation is a strong cost savings mechanism for IT outsourcing providers. This provides an easy and common baseline to be customised if required for customers. This also allows measurement of performance and opportunities to showcase progress/improvements. Having said that IT outsourcing models are many. One of which is offshoring to a different country for cost-savings purposes. This could include resources - labour, land, IT setup etc. The hidden costs can be many as stated earlier. The total savings from the outsourcing effort can be quantified by a holistic measurement. Automation could be one factor which enables savings in the long run for the client/outsourcing company.
In IT as said by precedes cost includes land, setup and labour cost. in any product Labour cost is the major factor that affects the total cost of it and same applies to IT also. If the company which want IT process automation and have IT related staff then out sourcing will not be preferable and true in opposite case. So IT process automation will be obviously cost saving for out sourcing providers.
I agree that labour costs can be dramatically reduced with outsourcing. Unfortunately, this is the (easy) way widely adopted, without taking into account the quality of other aspects about the results. In this sense, at the same time, nowadays we have tools that permits to audit and control the workflow accurately, and these drawbacks are also solved or mitigated continuously.
Do consider the following scenario. The way things are going, moving always to cheaper(labor cost wise) countries, we will end-up with closing down companies in native countries and loss of jobs in that country. Furthermore, no one is concerned whether in that "cheaper" country employees are treated fairly and have the same rights as those who lost their jobs because of globalization. Technology should be an enabler of well-being universally, and not use it as an excuse to just transfer the problem elsewhere. My comment has multiple recipients. let's pause a while and think what will happen if our now "cheaper" country later on becomes "expensive".
Thank you
In addition to the answers above, i think the scale of organization( small, medium and large) as well as the offered package of the organization to IT people, all these factors will determine the cost. Ex. Most of the telecom companies choose outsourcing because their package is high for IT people.
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