European companies are finding financial benefits to outsourcing and are doing it more and more. The primary difference between American and European outsourcing is nearness. When an American company does offshore outsourcing, very little consideration is ever given to nearness of the vendor company. Technological developments have made this statistic negligible.

One of the biggest areas of European “nearshore” outsourcing is the IT function. These can be classified into three types of outsourcing: project based, dedicated center and captive operations.

The most common is project-based outsourcing. This is where the vendor company is hired to run or assist in completing a specific, usually long-term project. When the project and all follow-up work are complete, the relationship between the hiring company and nearshore outsourcing destination company is over.

The “captive operations” type of outsourcing is where the company sets up its own office in the nearshore location, usually an Eastern European country. There they hire native workers, but still management from their own country. This is possibly the most risky strategy in terms of investment capital required, operational efficiency and organizational issues. This path is sometimes appropriate for large and multinational companies prepared to take these risks and familiar and ready for the personnel and staffing issues.

A growing strategy is that of “dedicated development centers” (DDCs) which is less costly than the captive operations strategy, but works well in a long-term relationship approach. DDC involves having full-time developers working exclusively on client projects for a prolonged period of time. Although technically these people work for the vendor company, it is like having a virtual extension of the client office in the nearshore country.

DDCs can be further categorized. A dedicated team model, for example, is very common. In this model the vendor provides the facilities and allocates the team, but the client has full operational control.

The term “tailored DDC” is used to describe a facility tailored to the custom business model, with specific technology needs and perhaps special organizational structure. These can be product development centers, research and development centers, software maintenance and support centers, application reengineering centers, quality assurance centers, etc.

A joint venture DDC is often a transitional stage working towards a captive operations style of outsourcing. Both vendor and customer support it. They share the risks and responsibilities.

The “build-operate-transfer” option is similar to the joint venture DDC. In this case it is designed, specifically, to be turned into a captive operation. The vendor sets up the business infrastructure, hires personnel and establishes and runs the center for a predetermined length of time. Afterwards this facility is turned over completely to the client.

Many European companies wanting to outsource all or some of their IT functions are turning to one of these methods of DDC outsourcing.

Finland traditionally scores high in technology related studies and we take special pride in our hi-tech companies such as Nokia. According to Tilastokeskus, a market research and statistics company, 78% of Finnish households own a computer and 82% of people between the ages of 16 to 74, use the Internet weekly.

Online shopping itself is also featured on the list, rising slowly but steadily. Judging by these figures, Internet should be very important marketing channel for almost every Finnish company selling consumer goods and/or services.

So why these companies are not willing to invest money in online marketing? Why do they see it as a secondary way to promote themselves? Why in international researches, such as the ones conducted by IAB Europe, Finnish companies spend well below average on Internet marketing, leaving clearly behind of other Nordic countries.

One of the main reasons for this is that Finland has very strong traditions in newspaper and television advertising. To put it bluntly, marketers are used to pay to be seen and nothing more. In online world, you have to change that way of thinking and start being active. That means that marketers should participate in discussions, operate in social media and really pay attention on their web presences, adjusting to changes as they happen. That of course takes time and effort as well as willingness to communicate with your customers in much different way than before.

This is not currently happening, and we are in a situation where Internet marketing, as a word, does not quite have the right ring to it. When marketing executives hear it, they instantly think of passive advertising, when in fact they should think of it as a new way to approach marketing with ads being just one part of it, not the whole show. That, I feel, is the main challenge the Finnish online marketing world has to overcome in order to start flourishing.