The Silicon Valley and Offshore Outsourcing: how companies are profiting

The Silicon Valley and Offshore Outsourcing: how companies are profiting

Introduction

Silicon Valley (San Francisco), the land of promising tech startups and established tech giants has evolved to be the central hub for all kinds of technological innovations that have changed the face of software development. Companies in Silicon Valley are keen on offshore outsourcing because they have discovered multiple ways that can contribute to their profitability. These companies have discovered the benefits of leveraging the benefits of both worlds – the advantages of being in Silicon Valley, utilising the infrastructure available there, and sending out specific tasks or even entire projects to other countries. These advantages render an intricate relationship between Silicon Valley and offshore outsourcing, and companies profit a lot from this arrangement, mostly in terms of monetary advantages.  

What made companies turn to offshore outsourcing?

Quality is a major factor in why companies outsource. On the other hand, some companies argue that doing the software development in-house is the most effective way to get quality products within the desired time frame (mostly, a project done quickly). And many big companies have realised that outsourcing well will lead to high-quality products at low cost. 

The market for software development in San Francisco is also very huge. We are not getting into numbers here because they change by the minute. Nevertheless, the number of active tech startups is several times higher in the Bay Area when compared to the rest of the US. Apart from the handsome salary that they receive, they get plenty of attractive perks, equity packages, and several other benefits to make sure they stay happy and productive. Despite all this, finding and retaining skilled workers is not easy in the city, and San Francisco companies are always struggling to find top talent because the market saturation is high. The top salaries that the companies pay in the city have indeed attracted the cream of tech talent, but it has also led to the high cost of living in the Bay Area. 

San Francisco is undoubtedly one of the top cities in the country when it comes to the cost of living. And tech startups bear the brunt because they have to pay for the software developers and rent office space for monstrous amounts. This is why they have started looking out for people with talent, but where they don’t have to pay huge salaries. The competition in the San Francisco tech vault has forced most of the companies to delegate some, or all parts of their project to renowned software development companies in other countries. Companies who take on such projects know how to deliver the best, keep their ‘employers’ in the loop, and bring them up to speed with each phase of the project. 

Examining the diverse factors that lead to the benefits of Offshore Outsourcing

Many reasons make offshore outsourcing the best option for companies. Check them out:

Vast pool of talent

Once you decide to outsource, the options for finding the right talent for the project are quite high. You can hire from diverse skill sets and expertise. So if there is a skill gap in your team in Silicon Valley, you can easily cover that with the specialised knowledge that the new ‘offshore’ developers have regarding emerging technologies. This means you don’t have to hire them for the long term, just during the project. 

Focus on Core competencies

If you are looking for core competencies on a particular project, you don’t have to spend time, money, and resources to find the right team with these skills. You can focus on the core aspects of your business like product development, market expansion, etc. while the technical aspects will be managed by experts. You can focus on core competencies and take it to your advantage.

Flexible talent team

You can collect and disperse the team at will. When the team is flexible, they will work according to their schedule but produce the results just the way you specified to them. They can also adjust the work hours to work according to your schedule even if they are located halfway across the world, and would be available for calls and meetings to discuss the project. 

Streamline business operations

Companies in the Valley can not only focus on their core competencies, but they can streamline operations, downsize their workforce, and reduce overhead expenses as well. They save money by hiring experts from halfway across the world and setting benchmarks. 

Scale at will

Companies can easily scale up or down at will. They can disperse the development teams at the end of their project, and rehire them, according to the needs of the project, without worrying about significant fixed costs. The process of interviewing candidates, hiring them as staff, paying them benefits and perks add to the cost incurred in retaining employees, and it is possible to eliminate all this with outsourcing.

Examples of companies in the Silicon Valley that outsourced successfully

Many huge multinationals have successfully outsourced their projects to other countries and continue to do so. India, Ukraine, Russia, South Africa, and Indonesia are some of the companies that stay in the top slot in offshore outsourcing. 

• Microsoft signed a contract with Infosys for software app development, technical assistance, database administration, etc.
• Google outsourced to Cognizant (founded in India, with its headquarters in New Jersey) and the companies delivered more than 1000 Adwords support positions through their specialised skills
• Amazon outsourced to South Africa and easily managed its call centre services. They outsourced their research and development to Ukraine.
• Ford Motor Company – Ford outsourced multiple services to India, including software development, IT services, customer support, back-office operations, etc. 
• WhatsApp – In the initial stages of WhatsApp, it was the Russian coders that managed the core app development and backend.

Offshore companies consider factors such as core competencies, quick access to talent, skills availability, qualified workforce, and cost savings before they decide to outsource. They benefit from delegating short-term projects requiring immediate attention without going through the hassle of extensive in-house training. Companies enjoy the competitive advantage of focussing on their core skills while delegating other tasks to experts and thereby staying ahead of the game. 

Conclusion

If you are looking at the future of offshore outsourcing, then it is poised for growth in Silicon Valley, and everywhere in the world of course. With the demand for specialised skills and knowledge of cyber security and artificial intelligence, companies are always on the lookout for niche expertise at economical rates. Post Covid 19, the idea of distributed teams took strength and accelerated the adoption of the already growing trend of offshore outsourcing. With the widespread acceptance, and usage of virtual workspaces, remote collaboration tools, and agile methodologies, geographical barriers are no longer a barrier, and teams can communicate seamlessly with each other, just as if they were in the same office space. 

Interesting Links:

Why do Silicon Valley Software companies outsource?

The Pros and Cons of Outsourcing for Silicon Valley Startups

Pictures: Canva

The author: Sascha Thattil works at Software-Developer-India.com which is a part of the YUHIRO Group. YUHIRO is a German-Indian enterprise which provides programmers to IT companies, agencies and IT departments.