Date: 15.05.2004 :: Page: 2 of 5

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Today, offshore outsourcing is often categorized as:

IT Outsourcing (ITO): some (or all) of the IT functions of a business are outsourced. Commonly used subcategories are:

Software related services: coding, localization, re-engineering, maintenance, testing, application development, shared product development, etc.

IT infrastructure services: maintenance, support, security, etc.

IT enabled services: digitization, CAD/CAM, GIS, animation, transcription, data entry, etc.

Business Process Outsourcing (BPO): outsourcing of a (non-core) business functions, such as accounting, human resource management, customer care, etc.

It is important to understand that (a) there are many more services than the ones listed above, (b)there are overlapping and gray areas in categorizing offshore IT and BPO services and (c) other authors might use different categorization.

Why do we talk about services and not products?

It is our opinion that marketing and selling software products represent smaller opportunities for companies from low cost countries than services. However, we advise our partners and clients to consider to market software products only if the product:

is very specialized and targeted to a niche market (specific demand and few suppliers)

has solid client base and references

is competing (price, features, quality, reliability, etc.) against global market leaders in their own category.

Bringing a product to market recognition globally also requires, product branding experience, distribution and support channels as well as high visibility in the target market(s). This makes the process time consuming and requires extensive resources. A reliable business/channel partner could make the process easier but chances are that the partner would like to brand the product under its own name or would like to gain access to intellectual property protection sensitive parts of the product (such as source code to localize the product). Nevertheless, businesses absolutely confident in their products could try services offered by software publishing houses (such as Avanquest – www.avanquest.com – just to mention one)

It is a TRUST business

Offshore IT outsourcing is a trust business. Manufacturers of industrial products or handicrafts for that matter can show their products to prospective Buyers, whereas the Buyers can objectively test and compare products, they can obtain information on quantities, packaging, labeling etc. Suppliers of outsourced offshore IT services can show very little to Buyers beyond their references and company information. Buyers must trust their partners that they will be able to perform the tasks according to agreed performance levels, on time and within budget. We can imagine how difficult it is for potential Buyers to make strategic decisions on offshore outsourcing (and convince their board of directors or shareholders) while their best guidance is trust. This is one of the reason why businesses choose the road others already tried: go to India and use one of the trusted Suppliers. Quite a number of countries, otherwise offering good offshore IT opportunities, would be considered “off the beaten track” by many businesses in the USA or Europe.

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