Calculating Offshore Return on Investment

Aug. 23, 2010 - PRLog -- Return on Investment is calculated in different ways and to see that you need to know what you are investing into a relationship. You should also understand that there is an ROI on both side of the fence for the customer as well as the vendor.

The biggest mistake many make is they equate the investment only to the money spend or an hourly burn out. But in an offshore engagement it is slightly different. For a customer while the money paid to the vendor is a direct investment, the time spend in building a relationship is also equally important and this is more relevant in long term relationships where the time spend will be reaped in having a more sturdy working model and it gets stronger as time goes by.

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For a vendor, apart from the time spend on the project, they also invest time into a relationship through various other training and anticipated infrastructure investments into a long term relation. If it was an ROI on the dollars spend you only need to see the productivity for a set dollar payout and equate that to the cost you will incur for same productivity onsite.

But with long term relation you will have to look at how well the vendor can be a part of your organization and how well the vendor’s top management brings their commitment to your engagement and this will happen only if the business value for the vendor is profitable and the business value for the customer is market readiness.

No ROI for a customer is complete if you can’t be Market Ready and No ROI makes sense for the vendor if the engagement is not profitable. And the interesting part of off shoring is that if either party wants this can be a win game for all. There is no win-lose relation in successful offshore outsourcing.

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Time, Money, missed opportunities, credibility; everything is at stake, just like anything else in your business decision going wrong. The difference is that here you get to blame on a vendor. But then blaming does not help and also once relationships strain, reverting to earlier situation turns out to be more costly and the moment an offshore engagement burns out, many assimilated knowledge slips through the cracks and is irrecoverably lost.

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