Friday, July 13, 2007

Outsouring, Offshoring-- Success & Issues

The concept of saving money by sending Operational & IT jobs overseas has taken strong hold in corporate world today. To some extent, offshore outsourcing is a logical extension of the idea of the global marketplace, which technology like the Internet has helped create.

That being the case, it's not surprising to hear that the jobs aren't coming back. According to a Gartner report titled "U.S. Offshore Outsourcing: Structural Changes, Big Impact": "The movement of IT-related work from the United States and other developed countries to vendors and offshore sites in emerging markets is an irreversible megatrend."

Success will come if you know what you are getting into-- some tips:
  • Do your homework-- Companies that haven't yet moved into offshore outsourcing can expect a steep learning curve. Top 3reasons to choose offshore outsourcing are "cost, cost and cost," but companies will not reap a rich fiscal harvest if they aren't careful during the evaluation portion of their decision-making process.
  • Consultants might be worth the investment
  • Be specific about deliverables-- Know exactly what you're getting. To start with, the terms of engagement must be very clearly specified
  • Factor in the hidden costs-- moving the work overseas involves significant time and travel expenses, Companies will also need to hire onshore liaisons, and they'll need to beef up network and security measures to support the offshore project. Travel costs will go up. And finally, there's the cost of laying off staff -- and the costs are both fiscal and psychic. Severance packages don't come cheap, and the CIO will have to deal with a morale problem as the staff survivors come to terms with the new reality.
  • Actively manage the project-- Vendors would like Managers to believe that they can toss project specs over the wall and then forget about things until the finished project appears magically at the door but it doesn't work that way.
Clearly, with the traction that offshore outsourcing already has in the corporate world, Managers can only expect to see more of it. While nobody likes to be the person cutting jobs, the reality is that this trend is here to stay. Smart Managers will learn how to make the best use of it.

Both from my experience and historical study/data-- Culture & Operational Issues standard out the most.

Assuming your strategy is to grow the offshore center by hundred employees over the next years-- you increase your hiring, you no longer have access to as many employees who have prior experience with American or multinational companies. the virtual global teamwork pattern affects ever-larger numbers of onshore employees. The growth of your center puts in place a whole offshore management structure that may or may not mesh well with your domestic management structure. Employees at both ends exhibit symptoms of stress. Frictions and mutual irritations don't disappear with time. You hear complaints about communication failures, commitments not met and tensions around matrix reporting relationships. If you ignore this state of affairs long enough, you get to the point where initial good will and positive expectations between the onshore and offshore teams give way to finger-pointing and mutual blame. there has usually been a history of cultural mismatches in work styles that has left significant tracks in people's consciousness. This impacts retention and results -- at both ends.

Often struck by a certain confusion between hope for a cultural awareness Quick-fix and realization that there are probably some operational root causes that need to be identified and addressed. This results in a jumbled analysis that lumps together issues such as the different meanings of "yes, no and maybe" in American and Indian culture with issues such as time zone differences, HR policies, decision-making structures and hand-off protocols. The expectation is either that cross-cultural awareness will solve the operational issues or that the cross-cultural issues can be addressed adequately though operational improvements.

Expertise will help to manage issues proactively by implementing organizational processes for:
  • Systematic assessment (at both ends) of cultural work style differences impeding the effectiveness of your teams.
  • Facilitated strategic analysis of the strengths, weaknesses, threats and opportunities present in the operational model of your onshore-offshore operations, involving key stakeholders on both sides.
  • Region-specific cross-cultural awareness training customized to your company and delivered to all levels of your management and workforce (both offshore and onshore), starting at the top.
  • Facilitated strategic development process involving these key stakeholders in strategic planning, organizational execution (including structures, processes and skills development) and results tracking over time
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