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Aghreni Technologies Global Cost Models

Mon, 17 Nov 2008 21:04:30 -0600

Global Outsourcing Cost Models

Clients and Outsourcing companies may use several engagement models both for delivery of the outsourced work and thereby arrive at the costing for the model. Choosing of the model depends on several factors both from the client perspective, the nature of work/project involved, risks to be shared and as well the capabilities/competencies of the outsourcing company.

Staffing/Contracting

The easiest model to understand is the Staffing or Contracting of resources by the outsourced company to the Client company. The driver for this model is that the client may not have the sufficient resources for the project or competent resources and would like to lease the resources for a period of time from the outsourcing company. The outsourcing company provides resources on an hourly rate or a monthly rate for the duration of the project or as need basis. The requirements for the resource, usage and the work involved can be outlined in a detailed requirement document by the client. The outsourcing may prepare a contract for providing resources with necessary skill sets and experience capturing various clauses and conditions, financial terms and termination etc.

Client may interview resources being hired from the outsourcing company and check if they are satisfied with the experience, skill sets and competencies for the work, before approving them to start on the work. Outsourcing Company usually prepares a daily/weekly time sheet for the resource utilization and gets it approved by the Client manager. The outsourcing may bill the client for the services on the set billing period in the contract. Time spent per week or month has to be established with the client prior to the beginning of the project and also working extra hours is billable to client or not. Typically 160 to 176 hours per month or 40 hours per week is considered as the time spent on work.

The resource has to fill up the time sheet every week at the end of the week and get the approval from the client manager and send it across to his company for processing.

Client may periodically review the progress and productivity of the outsourcing company resources and may request a replacement if the work is unsatisfactory.

Usually the outsourcing company resources work at the client site. And hence the costing model would assume that client would provide the necessary infrastructure for the resources to work at their site. The infrastructure would include access to the work place, cafeteria and such facilities as deemed acceptable. The client would also provide a desktop/laptop, network access and access to any project related servers/workstations, an email address etc.

The advantage with this model is that the project control is always with the client, the outsourced resources work under direct supervision of the client at client site and hence closer monitoring of the work and productivity of the resources. Clients can add on resources easily and as well ramp down quickly by releasing the resources back to outsourcer, thereby maintaining higher business agility and cost control.

The model even though a tactical advantage, but may not be strategic to the client to build long term competencies, and capabilities.

Cost and Materials

Cost and Materials is also referred to as Time and Materials, a popularly used model for IT application development and maintenance projects that usually span a long time (typically 1 year plus). Outsourcers bid for the project from the client based on project requirements, amount of work involved (both enhancements and number of support issues to be resolved per month) and coverage hours.

Usually the work gets executed at the Outsourcing company premises. Client or client project team would be responsible for providing requirements for the project affront, oversee project execution and review project deliverables during the project schedule. Hence a greater definition of project requirements, project execution methodology, Project deliverables verification and validation, Project oversight and tracking, communication and escalation have been clearly defined in the contract and agreed upon.

Outsourcing company may agree upon a monthly rate (or an hourly rate) for the resources engaged on the project based on experience and skill sets or use a blend rate (one rate) for all the resources engaged on the project. If a blend rate is used, the outsourcing company may use some standard model of what kind of resources it has to engage on the project and decide on the team decomposition. Clients also have to understand the team decomposition and mix of right resources needed for the project.

Any materials used for the project outside of standard materials will be expensed to the Client. Standard materials are desktop/laptop, generally used software like office automation and operating system etc that are already included in the rate contract. Non standard and project specific hardware and software can be discussed as exempt items with client and expenses for procuring and using them can be billed to Client.

Client or Client teams would need strong project management and project execution methodologies to monitor and track the outsourcing teams for work deliverables on schedule, quality and productivity. The client teams have to continuously engage the outsourcing team on any change in plans, deliverables, requirement changes etc. Else the resources would be waiting for work and will be non-productive. Dependencies have to be tightly managed as there will no resources waiting for their work to begin.

If the client and outsourcing teams are working in geographical locations, an overlap in time for several hours has to be maintained for the teams to interact on project discussions. Else very good communication processes has to be setup in place and clear documentation and expectation has to be setup.

The advantages with this model are the resources are locked for the duration of the project and hence competencies and skills can be built over the time. Additional resources can be brought over time or decreased over time to adjust to the changing demands of the projects. Good working relations can develop over time between outsourcing and client teams with good interaction and communication. With good project management and processes, this model can deliver better results. Management by metrics during all phases of development, maintenance and support can provide better insights to client management to understand the costs and returns of using this model.

The disadvantage of this model is that requires a good understanding of the management and delivery of the projects and a tighter monitoring of the outsourcing company resources. Most of the project and business risks still lie with the client.

Cost and Materials with a Cap

This costing model for outsourcing is an extension of the Cost and Materials model, but with an upper limit or cap on the costs of resources and materials. This is to prevent an escalation in the overall costs of the outsourced project. It would be useful to put such restraints on the costs as it helps to oversee the project execution within budgeted costs without any cost escalations.

It is advised that the costs of resources and other materials are to be tracked on a regular basis, usually aligning with the billing cycle, on how the project being progressing vis-à-vis the costs and if they are on track against plan.

This model would be useful when there is a risk that the project costs may shoot up overtime for need of more resources and materials.

Resource Usage

This is an extension of the Time and Resource model. The resources allocated to the project (people, equipment, network, phones, etc.) are monitored and their usage is measured. The rates for each resource per hour or other suitable basis are setup and the usage is billed at the end of the month. Clients would be charged a setup fee for initial setup costs for provisioning the services of any resource.

The benefits would be that clients need to pay only for the proportionate use of the resources and pay as the resources are used.

Fixed Price

Fixed price model would be ideal for projects that have a clear scope of requirements and the execution methodology. Both Client and Outsourcing vendor have a good understanding of the requirements of the project, execution methodology, resources required for the project, timelines, risks in the project, dependencies etc. Hence the outsourcing vendor can bid on the project by providing sufficient details on how the project be executed, detail the deliverables in the project, provide timelines, set intermediate milestones and provide a costing model.

Client can request proposals from different vendors for the same project and may evaluate based on several factors before choosing the vendors to whom they can shortlist and enter into detailed negotiation on reducing timelines or costs etc. After the negotiations, Client can award the project to the vendor.

The Fixed price projects have to be executed lot more professionally as the project risks are owned by the outsourcer. Overall project monitoring including schedule control, quality of deliverables and cost control are prime importance in executing fixed price projects.

Period status reports, interaction with Client, managing dependencies and follow up are very essential.

Vendor may setup payment terms with the client at periodic intervals or on delivery of intermediate deliverables. A percentage of the total cost is paid at each interval or upon delivery of intermediate deliverables or milestone events in the project life cycle.

This model is advantageous to both the Client and Outsourcing vendor as there is a motivation for both of them to perform to the success of the project. From Client perspective, it calls for a good definition of the project requirements, periodic monitoring and course correction if any requirement changes, managing dependencies in the project, reviewing and accepting deliverables. From outsourcing vendor perspective, the project has to be better managed for schedule, cost and quality and to client expectations and satisfaction. Project risks have to be better managed. Good communication and escalation mechanisms have to be setup.

Any requirement that is stated in the project if changed or additional requirements has to be managed through a change control process that is defined between the client and the vendor at the beginning of the project and managed as such. Client may ask for analyzing the change and request for a proposal or a contract for change in project terms (schedule, costs, etc.). Upon approval by client, vendor will start executing such changes.

This model is well suited for matured organizations that have executed such projects in the past and have better processes and practices for managing projects.

Revenue Sharing

This is a model for much matured businesses where the outsourcing vendor is also an expert in the Client’s business and may partner with Client in jointly developing a product or a solution. The revenues generated by the product or solution in its life term may be shared by both the vendor and the Client on agreed terms set forth in the contract.

The Client and Vendor both understand the opportunities, market for the product/solution to be developed. The percentage of revenue sharing depends on what each partner brings to the project, effort and cost spent on the project for building the product/solution and support during the revenue generation period. Transparency should be maintained during the Revenue generation phase for both the parties and such information should be built into the product or solution so that the information is available for revenue sharing.

Aghreni Technologies Global Organization structures

Mon, 17 Nov 2008 21:02:16 -0600

Offshore Delivery Model Organization Structures

The offshore delivery organization greatly depend on the type of offshore work that vendors for the different Clients, size of the engagement, duration of the project, nature of the project and etc. Hence outsourcing vendors have organized their deliveries using different organization structures to better meet their business and client needs and growth.

Offshore Delivery Centers (Client specific / Verticals / Segments / Business Units)

The very popular organization structure is called Offshore Delivery Center (ODC). Vendors create ODCs for clients by putting all client projects under the ODC, which is more or less run like a Business Unit. ODCs can vary in size from a few members to several thousand members. The advantage to client and vendor is that all of the projects for the client are managed within the ODC itself.

Several ODCs for different clients can be grouped under an industry vertical for better management of expertise in that vertical. This will not only help to bring in best practices for managing projects under the vertical, but also share resources across the ODCs in that vertical and better competency management.

Organizing by ODCs also provide better client management, governance of the client projects, and belongingness to the client’s business. Better processes and practices can be applied to all of the projects under ODCs and as well extending to Client’s business units.

Instead of setting industry verticals, Business units can be established to focus on each business areas. Organizing the vendor business into business units depends on the variety of business that vendor is pursuing and the size of each business. Profit and Loss accountability can be established for each business unit and managed for both top line (Revenue) and bottom line (profit).

Competency Center (Domain/Technology/Practices)

Another way of organizing the delivery is through creating competency centers based on technology, domain or business practice. This will provide greater leverage of competencies to both clients and vendor and focus on building the core competencies in the selected area. If the client’s projects fall under one technology or domain, it is easier for the vendor to manage. If they fall different vendor competency centers, the vendor may have to create a program management office to manage all client projects across competency centers.

Organization by Competency centers or Practice Centers facilitates creation and building of strong competencies in the chosen areas in the organization which can benefit both client and the vendor.

Build-operate-transfer (bOT)

When Client doesn’t want to hand over control to the offshore vendor, but would like to manage the offshore directly with an intention to own it at some point in the future or keep the Intellectual Property (IP) rights fully safe guarded from the vendor, he may create a Build-Operate-Transfer (BOT) center with the vendor. Vendor assists the client in building the team, providing best practices for managing and delivering development and maintenance of the product for the client. Client takes over responsibility of directly managing the project and owning the resources.

BOT organization is suitable for product development companies that would like to setup offshore delivery centers as it creates a separate organization within the vendor and allocation & management of resources working on Client product providing greater visibility to the creation and maintenance of IP rights. It also provides greater belongingness to the Client organization, attracting and retaining key talent.

Aghreni Technologies Global Delivery Models

Mon, 17 Nov 2008 20:57:28 -0600

On-Site/Near-Shore/Off-Site Delivery models

The delivery model utilized is based on the location(s) of the project resources in the service delivery.

Onsite Delivery Model

Under the Onsite Delivery Model the service providers position their skilled personnel on the client’s site who work in continuous interaction with the client’s team for the entire period ranging between the point of collecting information to its implementation as well as its maintenance and support. The only difference between the customer’s normal working model and the onsite model is that the client’s task is accomplished by a team of outsiders i.e. service providers working within the same premises as the other employees of the client.

Onsite Delivery Model is usually adopted where the scope of the project is repetitive and open-ended as is the case with most of the process re-engineering related services. Also where the client is not very clear regarding the end results required by them or where there is a possibility of fluctuating requirements during the course of the project, Onsite is a preferred delivery model. In some cases where direct and continuous client participation and interaction is desired after each and every step involved like getting the approval of the client’s team after each stage of project this is the only model which fulfills this need. If the client wants to upgrade their existing system and migrate to the latest technology then in such cases also the onsite model is preferable, if the client is able to afford the changes that will be required in their existing set-up to accommodate the service provider’s onsite team. Onsite Model is the best for short-term projects.

As for example if the client wants to install an ERP system in the organization, then it has no other option than to go for the Onsite delivery model. Clients may also insist on working with the onsite model where the project concerned is a highly confidential task and everything has to be done in a secretive manner. Well, for this model, it becomes necessary that the client is able to accommodate the sudden scalability in its teamwork as well afford the costs involved therein.

The advantages of Onsite Delivery Model are the following:

Face-to-face dealings with the client: Continuous interaction with the client is possible which enables the service provider to have a clear understanding of what the client is expecting from them and also of the end results desired by the client.
On Hand Information: The service provider can obtain first hand information by understanding the scenario existing at the client’s place.
No chance of communication gap.
Minimum chances of alterations in later stages: The number of changes required in the output provided by the service provider will almost be negligible.
For the clients, time-to market involved in this model is less.

The additional costs involved in providing the additional facilities to the onsite team working within the client’s premises may act a limiting factor for the onsite model to be adopted by the clients.

Offsite Delivery Model

In Offsite Delivery Model, the service provider works in a nearby vicinity of the client i.e. the service provider will be located within the same city/country as that of the client. This will prove beneficial to the client as well as to the service provider as the service provider will have a better understanding of the client’s need resulting from the fact of having an almost similar background as far as the geographical factor is concerned.

Offsite Model enables the client and service provider to have a face-to-face interaction on a regular basis, which will be advantageous to both of them. This is especially beneficial when the client’s requirements are not well defined and are expected to change during the course of the project. The offsite service provider working near to the client will be able to understand and accommodate those changes in a faster and better way into the project. Also when the client is not in a position so as to expand its facilities all off a sudden to accommodate the service provider’s team and requirements and at the same time they want to outsource to somebody located near to them then the offsite model is the one, which caters to both these needs. The client also feels as if it’s playing an important role in the development process by having a significant and sufficient control on the development process.

Suppose the client wants to have an additional functionality incorporated within its existing software product that is currently being used by it so that it can meet additional requirements being faced by the business. The modifications should be compatible with the client’s existing set-up. Here the client would like to go for offsite type of outsourcing model for the simple benefit that the service provider can come over to the client’s place and study the existing system in detail and then work on the modifications. Even after the implementation of the modified software product if the client faces any problem, the offsite team will be able to help them out.

The advantages of offsite delivery model are the following:

Faster Response: Responsiveness to changes in client’s needs is faster.
Clear Perception: Physical proximity helps to understand the client’s needs in a better way.
Good Synchronization: Better coordination between the client’s team and service provider’s team.

Because of the factor of geographical proximity involved in the offsite model between the client and the service provider, the client will have access to limited technical expertise only, which may affect the quality of work that could have been received by going for service providers beyond their geographical boundary.

Offshore Delivery Model

In Offshore Delivery Model, the entire project is accomplished at the service provider’s offshore development center, which is located in a different country. The client will be dealing directly with the offshore team. The service provider will have no face-to-face interaction with the client during the entire process once the initial interaction with the client regarding their requirements and expectations is over. Of course as the project progresses, both the parties will be communicating regularly through other means of communication so as to clear off any doubts that may arise.

The offshore software delivery model is preferred where the project is well planned in advance to its commencement and the service provider’s offshore development center team has a clear understanding as to what the client's needs are. Also the client should be very clear about what they expect and it should be conveyed in clear definite terms to the service provider. The level of fluctuations in the client’s requirements is expected to be minimum in this type of model. The clients prefer to go for the offshore model when their project is long termed and voluminous.

Offshore Outsourcing is again the best option when the client expects to have a series of IT projects, critical to achieve its business objectives, to be done at an affordable cost. The offshore development center can have a dedicated team catering specifically to the client’s needs; thereby enabling the service provider to provide the best possible results as expected by the client. The outcome of such an arrangement will be in perfect compliance to the client’s anticipations.

In cases where the client wants a particular application developed, which caters to a specific task of that client alone, then it’s better to go for Offshore Outsourcing Delivery Model. This model will facilitate the service provider to go for the number of trials involved therein and then hand over the final product to the client. The client will not have to bother about the risks resulting from trial testing within its existing setup.

The advantages of Offshore Delivery Model are the following:

Reduced Costs: Advantage of low labor cost, which will be reflected in drastic reduction in the overall costs.
Excellent Results: Clients can get high quality work from the quality offshore resources.
No extra Expenses: Client doesn’t have to put additional infrastructure needed to complete their tasks.
Access to the Most Optimal Resources: Client can have access to the best possible technology, skilled manpower and equipments, depending on their budgets.
24/7 Productivity: Project is not affected by time-zone difference.

Since there is no presence of the service provider at the client’s site, in the offshore model there is always a possibility of communication gap between the client and service provider, which may lead to some misunderstanding. Here the level of risk involved is also high as if any disaster strikes the offshore development center or the offshore center faces any problem then the progress of the project would be interrupted resulting in delay of project completion.

However, before deciding to adopt the offshore delivery model the client needs to be aware about certain offshore outsourcing issues, which have to be taken care off. In addition to this, before selecting the service provider certain points need to be evaluated before deciding to go for a particular offshore vendor.

Onsite/Offshore (Hybrid) Delivery Model

In Onsite/Offshore (Hybrid) Delivery Model, the outsourcing work is distributed between the service provider’s onsite center and the offshore development center & thereby the client gets the advantage of both types of outsourcing models. It is one of the most successful and popular outsourcing models employed today by many companies. The distribution of work depends on the type of project. Usually 20-30% of the work is done by the onsite center and the rest is done by the offshore development center.

Generally, the tasks accomplished at the onsite center include:

Gathering initial information about the project through direct interaction with the client.
Understanding the requirements/specifications clearly.
Planning and initial designing as to how the project will go about.
Interact directly with the clients to accommodate any changes, if there are any, so as to minimize/eliminate last minute changes.
Execution/Implementation of the project in accordance with client’s expectations and making sure that the client is fully satisfied with the end results.
Dealing with the client and managing partnership.

Tasks accomplished at the offshore development center include:

Understand the specifications and come up with a detailed design.
Responsible for the progress of the project.
Ensuring that the outcome matches to the specifications given by the client.
Crucial and continuous support to the onsite center.

Onsite/Offshore model is generally preferred in cases where the project is complicated and is expected to continue for a longer period of time. So the client will not have the burden of managing a large onsite team and at the same time can also avail of all the benefits of offshore outsourcing. Besides the client can get any queries cleared by interacting with the onsite team.

Hybrid model is preferred in software development outsourcing as the offshore factor results in huge cost savings as well as the total cost of ownership of the infrastructure and manpower involved is also reduced considerably.

The advantages of Onsite/Offshore Delivery Model are the following:

Direct dealings with the client: Direct interaction with the client is possible through the onsite center. So no possibility of communication gap. Also the service provider gets a better picture of the client’s needs.
24/7 productivity: Round the clock continuous work cycle becomes possible by making the best possible use of the time-zone difference.
Access to the most excellent resources: Client can have access to the best technology, skilled manpower and equipment possible made available to them by the offshore development center.
Great cost benefits: Cost savings resulting from majority of the work being outsourced to the offshore development center where the resources are comparatively cheaper.
Best possible management of resources: Usage efficiency of resources is highest with this model.

The management and administration costs involved in maintaining both the centers may inhibit many service providers from going for the onsite/offshore model. Also cultural differences between the onsite team and offsite team need to be managed effectively to get better results.

Offsite/Offshore Delivery Model

Offsite/Offshore delivery model is also one of the most successful and popular outsourcing models employed today. In this model the service provider will have their center near to client’s premises and the job will be distributed between this offsite center and an offshore development center located in a different country. The offsite center will act as the mediator between the client and the offshore development center. The task undertaken by each of the teams depends on the type of work as well as on the facilities available in each of the centers and the facilities required to complete the task. Usually, the offsite team handles 20-30% of the total work and the offshore team manages the rest.

Tasks accomplished by the offsite team:

Collecting initial information from the client.
Analyzing the collected specifications of the project.
Planning and initial design.
Communicating in a right way, the complete specifications to the offshore center.
Testing/Checking before handing it over to client.
Interacting with the client on a regular basis.
Ensuring on-time delivery.
Helping the client in implementation and maintenance.

Tasks accomplished at the offshore development center:

Thorough and comprehensive design.
Successful Development of the project as per the detailed design.
Testing before handing it over to offsite team.
Providing technical and operational support.

The Offsite/Offshore Model is preferred where the clients want to outsource to a service provider located near them thereby having a control on the development process and also where they want to avail of the benefits resulting from offshore outsourcing. Changes in client’s requirements, if any, can be communicated better to the service provider on account of the client’s proximity with the offsite center.

In software development cases where the Offsite/Offshore Model is used the offsite team does all the requirement analysis and hands over the specifications to the offshore development center wherein the development and testing of software is done. The software is then handed over to the offsite center, which then implements it at the client’s site.

The Advantages of Offsite/Offshore Delivery Model are the following:

Quick Response: Responsiveness to changes in client’s requirements is faster on account of the offsite center.
Clients get all the advantages of offshore delivery model.
The client has control on the development process up to a certain limit.

The management and administration costs involved in maintaining both the centers may inhibit many service providers from going for the offsite/offshore model. Also the cultural differences arising from the geographical differences between the offsite center and offshore center need to be managed effectively.

Aghreni Technologies Global Execution Model for Delivery of Onsite and Offshore Projects

Mon, 17 Nov 2008 20:53:52 -0600

Introduction

Businesses worldwide today are evolving either to adapt to the needs or defining the needs for the societies globally. This has driven more invention in this century and defining the ways people live and interact globally. Communication has changed the ways people interact and has brought in more interaction with the people across the globe. New products are being invented and services are being redefined.

The opportunity in the market place has attracted entrepreneurs to enter the market to offer innovative products, services and commodities. As more people enter the business, there is a crowding in the market place and the consumers have many options. This has forced the business to differentiate them from the rest. The needs of the customers are constantly changing; the profiles of the customer becoming very distinct. Apart from satisfying existing demand of the customers, businesses are identifying new needs of the customers to grow further. As several businesses jump into the race, there is growing need for the businesses to speed up product innovation, agile to the needs of the economy and environment and sensitivity to cost of the product or services offered. As the products are being developed for global customers, businesses are creating their brand awareness across the globe and hence truly becoming a global company. This needs understanding of the global needs as the needs may vary from country to country, culture to culture or ethnicity to ethnicity. The companies have moved to several geographies identifying opportunities and to serve the local needs. However those companies may manufacture and deliver through single or multiple locations based on the economies, costs, availability of talent and tax incentives.

Global education in management and technology is attracting students to developed countries from developing or underdeveloped countries for want of good education and employment opportunities. This movement of talent has changed the landscape of the globe, wherein the top talent from the developing or underdeveloped countries with greater drive and motivation for excellence is working hard and smarter in developed countries to reach higher. They in turn bring in relatives and more eager to do business with their native countries with better understanding of how things work at home and how to leverage the strengths back home.

Global Execution Model (GEM)

Global Execution Model (GEM) is a framework for distributed project management and execution through multi-location teams working on the project in a seamless way. GEM provides clearly defined process guidelines emphasizing information flow and communication during the execution of the project.

GEM is the most successful outsourcing model amongst all the other models. It’s a combination of onsite model and offshore model but unlike the onsite/offshore model wherein the offshore development center of service provider is located at only one place, in the global delivery model the service provider has its offshore development centers spread out across the entire globe. The service provider need not have their own offshore development centers across the globe but they can use the resources of their partners located around the globe, and thus follow a global delivery model. This provides the client with a large working team with varied qualities and expertise in different fields.

Tasks accomplished by the onsite team:

· Understanding the client’s requirements.

· Directly interacting with the client to get a better idea of their needs and changes in them, if any.

· Acting as a mediator between the client and the offshore development centers.

· Planning & Designing the initial steps of the project.

· Allocation of Tasks amongst the available resources.

· Testing the outcome of the project in tandem with the client’s team.

· Executing the project successfully at the client’s place.

· Provide the required support for maintenance.

Tasks accomplished at the offshore development center:

· Detailed design that will be continuation of what the onsite team designed.

· Deciding any specific technological requirements for the project.

· Development.

· Testing before handing over to onsite team.

· Continuous technical support.

Global execution model is preferred where the client requires that the job be done in a quick manner, which is made possible by the number of offshore teams working together towards the completion of the task. Also where the project is very big requiring sufficient skilled manpower to complete the task this is the only model, which provides solution in such cases. The level of risk involved is also minimum since even if any of the offshore development centers face any disaster the project work will not be stopped, as the work can be transferred immediately and continued by the remaining offshore development centers.

The advantages of Global Execution Model are:

Lower Risks: In case of any disaster/emergency at one of the offshore centers, the work continues at or is transferred to other offshore development centers. So the risk involved is low.
Round-the-clock productivity: 24*7 work cycle becomes possible because of the time-zone difference.
Best Results: Accomplishment of high quality work is possible, as the client will get the benefit of skilled manpower spread out across the globe.
Shorter lead-time: Shorter project completion time as the work is completed by a number of offshore development centers working together with the same target.
Cost benefits: The cost saving benefits for the client resulting from offshore outsourcing is also appreciable.
No new employee additions required: The service provider can provide the client with a large working team with varied skill set, which the client may not be able to employ for just the task at hand.
No possibility of communication gap: Onsite team, which will be in direct contact with the client, is able to understand the client’s needs in a better way. So no chance of misunderstanding the client’s needs.
Faster Response: Because of onsite team’s presence response to changes in client’s requirements is fast.

Having a perfect co-ordination between all the offshore development centers and that too in accordance with the client’s satisfaction is a big task. However this limitation can be overcome today by making the best possible use of the most modern means of communication.