A study by Compuware Corp. and IDC Canada revealed that American companies are more likely to send outsourcing work to Canada rather than offshore when it costs 65 per
cent or lower than using a U.S. provider.
At the same time the study, entitled “”Global Sourcing Trends Necessitate Considerations of Nearshore Sourcing in Canada,”” found that cost is not the most critical reason to choose an outside service provider.
When respondents looked at 10 factors for selecting a service provider, more than 46 per cent of 127 U.S. IT executives cited the availability of experienced professionals was the most important, followed by the access to specific technical skills.
Cost ranked third, and the high quality of English language competency came in fourth. Shared business culture and access to a local expert were also cited as significant criteria.
Gaining access to “”experienced professionals and specific technical skills might cost more to develop an application for a business solution, but the business savings of the implemented solution would have a payback that in the long run was a cost-cutting measure for the business,”” said Steve Oehler, director of the Compuware NearShore Development Center in Montreal, via e-mail.
U.S. companies that may consider nearshore projects have a low tolerance for risks, often require that the vendor team and the company’s project team have the same business hours and have projects that are long-term commitments, Oehler said .
The appeal of Canada as a nearshore provider of IT services for U.S. companies is its perception as a “”stable source of a wide variety of high-quality resources,”” said Jason Bremner, director of outsourcing services at IDC Canada in Toronto.
“”It’s similar in . . . not just social culture but business culture to the United States. There is some opportunity to potentially lower some costs in various services.””
At the same time, Canada does not come with the risks associated with other offshore service providers, Bremner said. For instance, overseas markets may present currency exchange fluctuations, questions about the legal jurisdiction governing the business relationship, political risks in unstable regions and flawed technological infrastructures, he said.
Five per cent of respondents said they would not consider outsourcing to a nearshore provider, and eight per cent would not farm out work to an offshore supplier. Executives cited challenges like security, accessibility and proximity.
In these cases, companies may consider their IT business a core competency and therefore keep all work internal, explained Oehler. He said some projects may be sensitive in nature, and contain proprietary business rules or business data that the company does not want to disclose. Or some may have legal or contractual agreements that govern where work may be performed.
The poll also showed companies are again initiating IT projects. Although only one-eighth had planned no projects, 80 per cent of those surveyed are considering or plan to use external providers for their projects. Only 50 per cent have used them in the past.
The Compuware NearShore Development Center in Montreal, which has handled hundreds of outsourcing projects, has been in business since 1996.
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