In today s sourcing business, many companies are
outsourcing IT services and projects to India, some
as a Captive Center (employment of own Indian staff),
others choose external service providers for delivery.
While a few years ago such offshore decisions have
primarily been made to save costs, today these decisions
are more often included into a global multi-sourcing
strategy, where overall sourcing goals determine
the right sourcing method. And, offshore outsourcing
(e.g. to India), is still a good solution for specific
situations.
A challenge for decision makers is to profit from
lessons learned other companies have experienced,
since companies are typically not willing to openly
admit and share their failures.
The underlying article comprises a series
of key success factors that can be observed
in almost any mid-size to large-size outsourcing
project focusing on India. The question is:
how is success measurable?
The answer to this is very simple: from the very beginning, KPIs should be defined
to measure the success of the project. In addition, it is advisable to institutionalize
regular satisfaction surveys that measure the perception of the engagement across
several stakeholder levels.
The success of an offshore outsourcing engagement should be pro-actively addressed.
The following list is a key collection of criteria to ensure a successful outsourcing
engagement:
1. Cultural awareness: In most cases, there is tremendous time pressure to offshore services or projects. The tight time schedule of a project plan forces the management to save costs quickly. The consequence is that often knowledge on already existing outsourcing experience is not sufficiently shared, not even within the company, and therefore, with respect to cultural awareness, this is very important. A misunderstanding of the Indian culture will result in higher costs later and can at times result in cost deficit disasters. Indian staff working with Western staff (on each level) and Western staff working with Indian staff must be trained on cultural differences. Very helpful for effective working relationships are mutual visits in the other country. This has shown drastic improvement on each others understanding and quality of work. Furthermore, it is beneficial to have a specific percentage of Indian colleagues work onsite (e.g. 20% onshore - 80% offshore). The assumed higher costs mostly compensate for costs that arise otherwise (see below).
2. Strong Management & Sponsorship: For offshore outsourcing projects, a
strong management team (onshore and offshore) and a fully dedicated sponsorship
are crucial to enable fast decisions and clear directions. The continuous drive
and proactive attitude must come from the service recipient. For large-size projects,
it is inevitable to have a Program Management Office (PMO) in place that ensures
all communication is bundled, interpreted and available. The PMO ensures that
respective rigor is given throughout the overall engagement, that the right communication
is done in time and that problems are de-escalated appropriately.
3. Governance Framework: Watching the market, it has proven that most India outsourcing
initiatives fail with their goals unsatisfied because of the fact that a clear
governance framework has not been defined. The governance framework ensures that
all managerial rules, regulations and processes are explicitly stated and will
be followed by all stakeholders. It is considered as the backbone for an engagement.
Typically, it is aligned to internationally accepted quality models and adjusted
to the project needs.
4. Outsourcing Readiness: Several questions need to be addressed in order to
evaluate outsourcing readiness. Is the internal staff ready for outsourcing?
Extensive knowledge and training are required prior to transfers and need
to be consistently supported; strong resistance might adversely affect a
company s success. Are processes mature enough to be outsourced? Have the
processes been scanned and evaluated carefully, considering maturity and
risks to ensure they are suitable? What is the documentation level of the
processes? In most cases, this question will be answered with "90% documentation
done" while the reality shows that instead "30% documentation is
done". Documentation is a time intense activity and mostly underestimated.
5. Experience: The bigger the offshore outsourcing initiative the more important
it is to have the right experience available. Identification of risks and foresights
are crucial to ensure a successful engagement offshore. Wrong decisions and wrong
expectations can easily result in a back transfer of the services to onshore.
6. Quality Adherence: Services are typically outsourced
to save costs. Although most experienced consultancy
companies today discourage this perspective, nevertheless,
many offshore businesses are motivated primarily
by cost advantages. It is often realized late in
the process that quality is one of the top two to
three driving factors for a successful offshore engagement.
Lacking qualities have an impact on performance and
reputation of the engagement. Poor qualities can
cause considerable follow-up costs, which in turn
have a negative impact on the business case.
A close adherence to Industry Standards, such as ITIL, ISO9000, SixSigma, CMM,
etc. is highly recommended, as well as regular quality audits and continuous
quality improvements. Quality initiatives should be a standard asset for
successful delivery.
7. Expectation Management: Outsourcing engagements
have a supplier (also in-house) and a recipient,
which causes different expectations. The fact
that a service is delivered from India, complicates
the expectations. Expectations are often becoming
unrealistic and sooner or later, these wrong
expectations become problematic. It is important
to close expectation gaps which lead to dissatisfaction.
One typical example for expectation gaps is when service owners are in doubt
about the service provider s capability and hesitant to give services offshore,
while the service provider (also in-house) might feel unchallenged by dealing
only with standard, unchallenging topics.
A good expectation management will ease communication and sets expectations right. This can be accompanied by innovative approaches - initiations by quality management, for example.
8. Contract: In case the services are handed out to an external service provider,
a respective contract management is needed. If there is no in-house legal department
available, external legal advice is inevitable to ensure that the business is
built on a stable base.
Over the past several years it has proven that "built for change" contracts
are most suitable. More and more companies are starting
to negotiate penalties for lacking service quality
or specific situations.
Offshore outsourcing is seen now as one out of several sourcing options. It can
be selected in alignment with the overall company Multi-Sourcing strategy. India,
as one of the choices for outsourcing, is constantly becoming more and more expensive.
While it is not clear when stagnation can be expected, India has a few advantages
to offer. Today, the key players in India can offer very good experience, skilled
management staff, a good infrastructure and a decent understanding of the Western
IT market and needs.