Companies that are highly dependent on information and systems should renovate constantly. There is more and more information to be processed because companies and their environments get more complex. Products are enhanced with more features because of constant innovation. Also the internet society adds an interesting element in this complexity which is the chaining of activities. We depend more than ever on others and the exchange of information is key to keep up with this contest.

Systems take care of this stream of information, but only if they are designed well. Over the years this has resulted in various types of solutions. Companies, especially the larger ones have applied there own resources in building a system. Then other companies took over this specialization and they designed and developed specific packages that were sold to other companies. Outsourcing followed on the trend that companies should focus on their core business. Off-shoring is somewhere in between all these developments. Off-shoring is a process where a demanding company designs it own system, but will use the human resources of others low cost countries when building them.

The advantage of such an initiative is that the system is still build tailored to the specific needs of the company, but at a lower cost. The advantage above buying a standard system is that the competitive advantage can be increased. If all companies use the same kind of system, how can they differentiate from each other?

Disadvantages are that the interactions with a third party are very hard to manage. First of all there is a significant learning curve. Normal communication within a company is challenging, communication with an unknown party, with another cultural background is a challenge of an other dimension. This communication problem can be solved by investing in documentation (specification of the requirements) but this is just one of these things that are boring and tiring and expensive. So the effect of using low cost resources is relative. So you should never do this for a one-time occasion only. Therefore the learning costs are too high.

If you want to go this direction, it should be a strategic choice and not something you want to try for only once. You are best served with a strategic partnership.

2006 Hans Bool