Cost-Benefit Analysis of Outsourcing: USA vs India!
Several deals and contracts keep occurring within a company simultaneously. As a result, it becomes difficult for a company to accomplish all these tasks effectively. In such a scenario, the best alternative for a company is to assign the particular tasks to specialists. Outsourcing is a contract-based relationship that exists between the two companies, where one company is responsible for the internal activity inside another company without actually interfering in the day to day operations of the client company.
For instance, a large business firm might need facility management. So, it assigns the task to another company who is ready to provide a facility management team. Since an internal company takes resources from outside to develop its operations, it is also known as “outside resourcing” or “outsourcing”.
In modern business scenarios, there is virtually no scope for a particular business to commit any error. In addition, they are required to keep the cost minimum. For practical purposes, it’s not possible for any particular company to be adept on handling all such tasks and then keep the expenses under check.
In this case, outsourcing comes to the rescue for a business entity. By assigning your routine tasks to a specialist third-party entity, you not only reduce your workload but also make sure that the task will get complete within a given time frame as well as the budget.
Advantages of outsourcing
There are several key benefits with outsourcing that are responsible for its rising popularity. Some benefits of outsourcing are as follows.
- Cost:An employee working in the company needs to be paid for his work regularly, which is comparatively more than the cost of hiring an offshore team. Hence, it offers an overall reduction in budget, which saves a lot of money.
- Staff shortage:The other benefit of outsourcing is that there is no shortage of employees. In a company, an employee may leave after some time. However, when a company outsources a faculty from another company they cannot leave in the middle as a contract or an agreement bound them. So, there is no staff shortage and is a safer option as well.
- Flexibility: Hiring an offshore team gives a lot of flexibility. In fact, it allows you to utilize or remove the resources at any point by giving due notice.
- Skills:Apart than your own staff, you will get access to utilize resources from another company. Hence, the company gets a benefit of productive staff and even a wider range of different skills as well.
- Control: Outsourcing the work or hiring an offshore team for product development allows you to control and monitor all the staff members working on the project. It ensures that the project will be complete within the required time without hampering the quality.
- Overtime:Most employees cannot work for long period of hours like machines because they get exhausted. Hence, having faculty from another company ensure that the work will continue without putting new projects on hold. Therefore, with regular updates, the project will complete on time.
Some facts about the benefits of IT outsourcingare mentioned in the picture below.
Major companies and outsourcing
Several major companies prefer to hire mobile app developers. This allows the companies to enhance their productivity and workforce. Typical examples and facts about the companies are as follows:
- In 2013, Slack hired a design team to make changes in its logo, applications, and websites. Now, the company has more than one million users, and its net worth is around the U.S. $3 billion.
- The company Alibaba, which is just like other shopping websites hired a team to work on its technical aspects. Due to the same, the company now has become globally famous and is growing at an amazing rate.
- The famed company, Microsoft has a team of developers for an operational process that works in the company. Outside faculties occupy more than a hundred positions in the company. Hence, it is one of the largest companies that make extensive use of external resources.
- Initially, designing of Skype was done by a team of Estonian developers. Now, it has been sold to Microsoft for the U.S. $8.5 billion. Now, the team working in Skype are faculty from Microsoft. It not only boosted the production and demand but also raised net worth of the company.
Outsourcing in the United States
Several companies outsource from the western countries. The United States of America is one of the popular western countries to provide an efficient workforce. The country is not only known to give a lot of job opportunities but is also famed for a variety of job options & courses it offers to the young minds. Hence, here you won’t only find professional engineers or doctors, but you will see a lot of freelancers, photographers, web developers, psychologists, and much more. The people working in such companies are passionate about their work as well as dedicated.
The significant outsourcing perks from an American company are that some corporations do not work on contracts or agreements. As a matter of fact, they work on a project basis. So, here the companies and their employees do not bother much about the agreement. Instead, they focus on submitting work on time with consistency, passion, and dedication. Hence, hiring a team from America means working with one of the most efficient and talented staff.
When it comes to working, the United States employees are well-known to submit the work before the deadline. So, the companies needn’t worry about the last moment updates or project completion on time. Hence, the workforce in the United States ensures on-time work. For any changes or project modifications, you just have to drop an email.
Considering all the factors, the workforce in the United States is costly in comparison to other countries. Hence, paying the workforce in the USA would be much higher in comparison to countries like India. However, it is important to remember that outsourcing from the United States means a high-end quality of work and on time submissions.
Outsourcing in India
When it comes to hiring a team of offshore developers, India is one of the most preferable countries. With a productive & efficient workforce, India is much more populated compared to the United States of America.
Any kind of barrier will lead to delayed & unsatisfactory work. Therefore, communication is a significant factor to consider while outsourcing. Undoubtedly, the employees in India communicate effectively with a British English accent. For the same reason, India becomes a suitable option for companies in the United Kingdom and other regions of Europe.
Moreover, employees in India are always available to dedicate their time for work. Hence, if you are a company that is outsourcing from the United States, Europe or any other region, you will easily find the employees willing in India to work according to your time zone. Hence, you can expect the projects to be complete according to your time zone. It is a significant advantage over the United States as the employees there has a considerable time difference with other countries. However, India is around the middle, so it has a suitable time for western countries.
Hiring a workforce from the United States may not be affordable for some companies. Whereas, it is much easier to hire offshore developers from India at affordable costs. It is because the workforce in India does not expect higher salaries or pays. Therefore, hiring a workforce from India is feasible and economical compared to the United States. Hence, hiring Indian human resources can be of great benefit to companies.
Cost comparison between U.S.A. and India
The following table from Time Doctor, DOU, provides an overview of annual salary for a workforce in the United States and India. Hence, it is evident that the United States workforce needs 80,000 U.S. dollars more than India.
| Country | Average Annual Salary |
| USA | $94,000 |
| India | $14,000 |
Cost analysis of U.S.A and India with other countries
According to Time Doctor, DOU, out of the top 10 countries that handle outsourcing related work, Outsourcing workforce from Australia requires the higher pay when compared to the other countries. The United States is the second most paid countries out of the ten. On the other hand, India is in the 9th position being one of the least paid countries. Hence, hiring a workforce in India is much cheaper than the United States.
Even though the employees in the Philippines require the least amount to work. The country doesn’t have proper internet connectivity, communication, and other factors that are essential for outsourcing. Hence, outsourcing work to India is a wise option.
| Position | Country | Average Annual Salary |
| 1 | Australia | $106,000 |
| 2 | USA | $94,000 |
| 3 | Switzerland | $69,741 |
| 4 | Denmark | $58,237 |
| 5 | Germany | $57,581 |
| 6 | UK | $43,682 |
| 7 | Japan | $31,245 |
| 8 | Malaysia | $15,392 |
| 9 | India | $14,000 |
| 10 | Philippines | $7,521 |
Key Factors besides Cost of Outsourcing USA VS India
In addition to the cost, there are several other factors you should consider before outsourcing the work. The major factors that determine the decision to outsource a project are: –
– Time taken to complete a project: – When you assign a project to a third-party entity you specify a particular budget and time frame to complete it. If you will handle a particular task internally, you will be responsible for the cost escalation due to delays. While in case of outsourcing, your project cost would not be affected due to any delays (as you have a contract specifying completion of the task at a given budget). It is important though that you hire a reputed vendor only with a proven track record.
– Quality of work: – You must pay close attention to the quality of work that a particular vendor boasts about. In any scenario, hiring a reputed vendor with a proven track record is desirable as compared to a new vendor without any credentials to show. You need to ensure that the vendor who is working on the project should comply with the quality standards you follow. Otherwise, it might affect your business adversely.
– Ease of communication: – In order to ensure seamless completion of the project, it is imperative to hire dedicated offshore developers with whom you can exchange ideas easily. The major parameters to consider are geographical distance, the language of communication, the difference in time zones, and cultural differences. Companies prefer to outsource work to the vendors that can fulfill these requirements effectively without compromising the quality of work.
Top 5 countries for outsourcing
According to A.T. Kearny Global Services Location Index, the top 5 outsourcing countries are as follows. Hence, outsourcing in India has a wide range of benefits.
| Position | Country | Average Annual Salary |
| 1 | India | $14,000 |
| 2 | China | $25,853 |
| 3 | Malaysia | $15,392 |
| 4 | Indonesia | $6,295 |
| 5 | Brazil | $16,194 |
Why India is a Reliable Destination for IT Outsourcing?
Since last many years, India has emerged as the preferred outsourcing destination for companies in USA, UK, Australia, and various other countries. Several factors are responsible for this development, the major ones being: –
– Ease of communication: Most of the people in India speak & understand English easily. In fact, English is the official language of communication for many sectors in the country. This ensures ease of communication for companies based in the US, UK etc.
– Lower costs: In India, the average wages (in dollars) are much lower than the US. This ensures the completion of the projects at comparatively lower costs and that too without any compromise on quality.
– Well defined laws: – In the last few years, the Indian government has enacted several rules and legislation to safeguard the interests of foreign companies and investors. All business transactions are governed by well-defined laws and regulations. Because of such laws, the chances of frauds are very less.
– Young workforce: – India boasts about it’s youngest workforce in the world at present. Indian youngsters are adept at handling complex IT and service related tasks with ease. This trait of Indians helps the companies in the US to believe in their skills.
Related Blog Post: Outsourcing vs In-House Team: What’s Good for Your Business
Overall, outsourcing has a wide range of benefits such as cost saving, productivity, less shortage, and much more. However, various factors should be determined before outsourcing. In the United States, the workforce is talented, efficient, and dedicated to work. The companies do not work on contracts or agreements, instead, work with consistency. However, the cost to hire a workforce from the United States is the second highest after Australia. In India, the workforce is always available and ready to work.
In India, you will mostly come across engineers and IT professionals as compared to other professions. The workforce in India is most favored in other countries because of their ability to complete complex tasks & expecting a lower pay in return.
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