Monday 12th January 2004
In discussions about outsourcing, most of the attention has been paid to the
performance of the offshore supplier rather than on managing the outsourcing
relationship once the contract is signed. Management of offshore outsourced
activities is difficult because they are not under one roof and under single
management control. Offshore outsourcing is an even bigger problem when the
other party is many thousands of miles and several time zones away and has
a different culture.
When the dust has settled after the conclusion
of the large offshore outsourcing contract
organisations cannot relax, as there is much
work to be done to establish effective cooperation
with their outsourcer. Cooperation of offshore
outsourcing needs to be based on well-defined
management principles with clear accountabilities
and have unambiguous processes to deliver
the promised benefits.
Offshore Outsourcing Principles
Principles in offshore outsourcing are crucial
for setting the tone of the relationship.
They describe the rights and responsibilities
of each party to share information and
the limits of each party's decision-making
authority. Despite the vast improvement
in global communications, contact with
offshore outsourcing suppliers is often
constrained by time differences. Well-designed
principles are doubly important in these
circumstances, as they ensure decisions
are made that are informed by and align
with the principles of the agreement.
Joint Management Structure
An offshore outsourcing project needs a joint management structure to manage
operational, tactical and strategic liaison. The management structure will
define the roles and responsibilities of each party and the management committees
that direct and control the outsourced activity.
New processes will be required to manage the contract
and the outsourcer's performance. Existing IT management
processes will need to be modified to handle the
new arms-length relationship. Additional communications
and liaison processes will be needed to resolve
issues that will inevitably arise between the partners.
These processes need to be developed and agreed
in partnership with the offshore outsourcer - a significant
challenge when the outsourcer is on another continent.
Even minor differences between business cultures
can lead to many more misunderstandings in agreeing
business practices and assumptions. In offshore outsourcing
a shared information workspace is crucial to ensure
that all crucial information is in fact shared so
that the playing field stays level.