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Small Businesses are Riding the Offshoring Wave too

Thu, Dec 11, 2008

Offshoring

If you think it’s just big American businesses that are riding the offshoring wave, think again!

Smaller companies are increasingly interested in big-business concepts such as ‘time to market, agile platforms, and high-velocity turnaround’, says Larry Gordon, VP at Cognizant. ‘Offshoring gives them the means to get there,’ he says.

We learnt from The Wall Street Journal that small entrepreneurs are reaping the benefits of offshoring to increase sales revenue and expand operations. Mr.&Mrs. Rajeev Thadani of Claimpower Inc., Fairlawn NJ outsourced their medical insurance claims filing work to India five years ago. This move has helped them build a team of 35 employees in India and allowed them to take steps to dramatically expand their operations in the USA.

Also, in order to reduce employee costs, small accounting firms are taking advantage of ‘wage arbitrage’ and sending accounting work offshore. As reported by Fortune, the business of a 50-employee accounting company, Xpitax based in Braintree, MA, has been soaring ever since it outsourced tax returns filing to accountants in India. Xpitax pays $110/day to its Indian colleagues ‘“ they had been paying $110/hour to American CPAs. Similarly, 90-employee company Subrogation Partners LLC, CT outsourced paper processing tasks to India & China with the help of Sumpraxis LLC, Fla. Subrogation has halved its labor cost by outsourcing. You can read all about this at Wall Street Journal (subscription required).

Tribeca Oven, a bakery products 150-employee company in New Jersey, has decided to outsource the improvisation of its ERP system to an Indian software company to better control its business operations and that too at 1/5 the cost.

This makes me wonder ‘“ with their foray in offshoring, will these small companies steal the attention of service providers who have been chasing the big businesses? Will these companies create an explosion of job opportunities in the developing countries?

I think in the next four years small businesses will hog the offshoring arena and collectively out perform the volume of business outsourced by the Fortune 500 companies. We may also see the emergence of small outsourcing companies with specialized skills who will challenge the leaders of outsourcing like Infosys and TCS. Now am I riding the optimism wave?!

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