The enduring value of starting cheap in offshore IT outsourcing

Being the lowest-cost service provider of offshore IT outsourcing pays off in ways that go beyond being — well, the lowest-cost IT service provider. Rock-bottom prices attract new customers, who in turn bring capital that improves the infrastructure and, in time, the quality of the outsourcer’s labor pool. The service provider matures, adding new services, and eventually is no longer the lowest-cost provider. Call it the virtue of starting cheap.

That point was driven home to me in an interview with Gartner analyst Ian Marriott for an upcoming story on offshore IT markets. Take the example of Indonesia, a relatively new entrant to Gartner’s top 30 offshore countries that is rated by Gartner as poor on government support and only fair for its labor pool, but scores an “excellent” on cost.

“That strong cost proposition will be something that draws with it interest from other countries, service providers and also captive centers. Because they’re interested in the cost advantage, [service providers] will make investments. Those investments will bring in project management skills and process maturity, and it will start to raise capability, simply by those investments being made,” Marriott said.

Email me at Linda Tucci, Senior News Writer.