Outsourcing

What is outsourcing ?

Ronald Coase gave us the first lucid explanation of transaction costs in a 1937 article titled "The Nature of the Firm." His discovery was so important that he was awarded a Nobel Prize over 50 years later.

Coase concluded that firms are created because the additional cost of organizing them is cheaper than the transaction costs involved when individuals conduct business with each other using the market. Firms should conduct internally only those activities that cannot be performed more cheaply in the market or by another firm. Thus a firm will expand precisely to the point where "the costs of organizing an extra transaction within the firm becomes equal to the costs of carrying out the same transaction by means of an exchange on the open market."

Firms will outsource and morph into new configurations and relationships with other firms to lower transaction costs. Those which cling to the industrial models of the past will find hard sledding in the marketplace of the future.

Facts about outsourcing...

Worldwide spending on information technology (IT) outsourcing exceeded $65 billion in 2001 and is expected to reach $100 billion by 2005 (IDC). Two major consumers of outsourcing services are the USA and Western Europe respectively.

In this connection Gartner Group and others record a growing readiness among this clientele to outsource their software development in Central and Eastern Europe, where Romania, second largest country after Poland, is becoming a major player.

"Romania is under becoming the new Eldorado of Europe and I hope that those are not still decided to work with this country, they will do it tomorrow", said Mr. Manuel J. Gomez, the President of the French-Romanian Chamber of Commerce and Industries (CCIFR), during the seminary "Romania, country of the new technologies", organized by CCIFR in Paris, December 3, 2002..

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MAIN REASONS for outsourcing in Romania

• Qualified human resources
• Company productivity comparable to that in developed countries
• Advanced technology
• Low cost of work force
• High mobility and flexibility or work force
• Presence on the market of European and US IT companies
• A well-developed educational system which produces each year 5,000 IT graduates and 2,000 graduates in associated fields
• An industry developed around excellence centres of Bucharest, Iasi, Cluj and Timisoara
• A solid software industry which employs over 25,000 people
• A motivated workforce with entrepreneurial capabilities
• Romanian skilled workforce working within various multinational companies
• Strategic locations for EU contractors
• Workforce with good knowledge of English, French, Italian, Spanish and German
• An intrinsec cultural and linguistic ability to supply services powered by IT technologies such as call centres.

What are the advantages of outsourcing ?

The main advantages of information system outsourcing by involving Romanian offshore software development companies are:

• Availability of resources
• Costs
• Tipical Facilities
• Technical excellence
• European culture
• Location

Availability of resources

First of all, Romania has a substantial reserve of software development resources waiting to be tapped. Its institutes of higher learning and universities continue to turn out 5,000 of graduates in IT every year, which considerably enlarge the shared resources area you can find

Costs

Although we recommend looking beyond the low cost of Romanian IT resources to the additional arguments in their favour, cost factors are undeniably a key consideration in any company's decisions around outsourcing. Costs for software development depend on a set of factors: needed skills, project size, various fixed overheads whether included in the base price or not, the specific type of contract under negotiation (development or maintenance) and other factors.
Hourly rates may vary from as low as €15 to €40. Testers and quality assurance personnel typically cost 20-30% less, and project managers 50-100% more.

Tipical Facilities

With major software development centres, Romania has adequate Internet and telecommunications infrastructures. The Romanian Government has granted a lot of important fiscal advantages for the software companies, in order to allow them a rapid development.

Technical excellence

The romanian programmers possess all the needed up-to-date technical skills, as well as those needed for legacy migration.

European culture

Today's young and middle age managers and specialists who work in hi-tech companies have the same or higher level of education, English language skills and motivation as their European colleagues. The future integration of the country in the EU (2007) will strongly emphasize the links with the Western Europe.

Location

It takes 2-3 hours to fly from Paris, Berlin or Milan to reach Romania. The software developers normally compensate for the time difference with their European and even American clientele by adjusting their working schedules so as to have maximal overlapping hours for mutual contact.

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Email us: office@atypiq.ro