Finance:Midsourcing
Midsourcing refers to the practice of hiring a local contract engineering service firm to provide management of outsourced/offshored labor for software, hardware, and IT engineering. Midsourcing is a recent modification to the outsourcing model which aims to minimize possible quality problems by providing management liaison services between the customer and the offshore firm.
The midsourcing company offers quality control management and language/communication translation services to the local company, thereby avoiding the most common criticism of outsourcing. Midsourcing is a middle ground between outsourcing and insourcing for high tech companies. It aims to make the cost benefits of outsourced/offshored labor available to smaller, more technically advanced companies and projects.
The purpose of midsourcing is to provide high quality software and hardware engineering to companies at prices that are comparable to the cost of outsourcing/offshoring, while eliminating the problems most commonly associated with outsourcing. Midsourcing is a modification to the trend in high technology of outsourcing jobs directly to lower cost labor markets in places like the Indian subcontinent, China , and Eastern Europe. By acting as a middle layer between the customer (usually in the U.S.) and the offshore firm, the midsourcing company offers quality control and management oversight of the offshored project, and closes gaps in translation and communication. As a liaison between the original development team and the offshore labor, the midsourcing firm reduces the challenges and risks that have arisen with outsourcing. Whether for reasons of language and communication problems or poor management and oversight, not being able to meet the high engineering standards of customers has threatened the viability of outsourcing/offshoring as a cost-savng measure for many high tech firms.
As the practice of outsourcing and offshoring developed and matured during the late '90s and early 2000s, several problems with the model became clear. Most significantly, compromises in engineering quality became real stumbling blocks for companies looking to outsourcing for complex design and development work. The time and labor cost that is required for U.S. firms to manage outsourced projects has also often been overlooked or underestimated. Local management and technical development resources must be dedicated to an outsourced project in order to define requirements, manage changes, provide translation services, and oversee testing and quality control. Since in many cases the customer cannot afford the time or cost of dedicating its own management and development resources to effectively manage the outsourced team, the midsourcing firm takes on those tasks, shepherding the project from the planning stages through development to testing and deployment.
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