| recently published an article outlining the "real" costs of | | | | way buyer can consistently improve the service quality |
| offshore outsourcing. It has compelling arguments why | | | | from offshore staff. |
| offshoring drives down strategic value in the long run. | | | | 2. Geo-Political risks |
| They touched upon five major risks for offshore | | | | This is somewhat of a systematic risk. We certainly |
| outsourcing. It is so convincing even a firm globalization | | | | hope law makers from different countries work to |
| believer like me has to acknowledge these | | | | achieve international standardization on various |
| disadvantages. Here are - | | | | regulatory issues in the post US sub-prime era. Besides |
| 1. Service quality by offshore staff rarely is as good as | | | | counting on the governments, buyer and vendor can |
| onshore staff, especially in call center and customer | | | | leverage enterprise 2.0 technologies to ensure a more |
| service fields. | | | | transparent governance structure and more efficient |
| 2. Geo-Political risks abroad, especially concerning | | | | communication on regulation requirements and updates. |
| offshore service providers meeting compliance in the | | | | 3. Offshore relationship risks |
| Western nations. E.g. Satyam scandal. | | | | Like any vendor management, relationship is the key. |
| 3. Offshore outsourcing vendor relationship = High | | | | Offshore relationship is more breakable due to culture |
| management costs & High percentage of failures. | | | | difference and complex outsourcing contracts. "Don't |
| 4. Intellectual property protection risk, especially | | | | put all egg in one basket" approach is one way to |
| outsourcing to China. | | | | mitigate vendor risk but not very sustainable. You can't |
| 5. Risk of losing intellectual capital and knowledge | | | | hob around vendors continuously. An ideal approach is |
| based hurting company's long term competitive | | | | to establish a dedicated offshore team with 100% |
| advantages. | | | | transparency. You should assign each onshore team |
| Although these are "good" reasons not to offshore, I | | | | member an offshore buddy. You can design policy and |
| still believe the industry will prosper with innovative | | | | project tasks to accommodate their collaboration on |
| models. Let's face it. The fundamentals of international | | | | the daily basis. With all the great social media tools |
| trade won't change - labor arbitrage and most efficient | | | | available today (e.g. Enterprise Twitter, Enterprise Wiki, |
| allocation of worldwide resources. Many companies still | | | | etc.), it is easy for onshore individual to build work |
| see commercial benefits to offshore. The key is | | | | chemistry and social relationship with his or her |
| building a collaborative offshore model to successfully | | | | offshore buddy. As long as they work well together |
| manage the 5 risks mentioned above. | | | | and drive end results, your vendor relationship will be |
| Outsourcing 2.0 buzz has been around since 2004. In | | | | just fine. |
| essence, it is about aligning buyer and vendor's | | | | 4. Intellectual Property protection risks |
| interests with more collaborative and agile approaches. | | | | This is indeed the most challenging risk to mitigate. IP |
| However, the industry still lacks a standard approach | | | | protection is a big issue among local team as well. |
| to so call Outsourcing 2.0. One of the challenge is how | | | | Vendor typically won't mess with your IP but it's the |
| do you properly define such overused term "agile." | | | | vendor's offshore employees. You have little control of |
| What exactly does being agile mean with your | | | | what they can do with your idea and IP when they |
| offshore collaborators? Ideally agility drives values to | | | | leave the vendor to join a competitor or start a new |
| customer with greater service flexibility. | | | | venture. The best advice is "know your offshore |
| Here are a few ideas of how "agility" can help mitigate | | | | team." Again I am stressing for transparency here. |
| the 5 great offshore risks. Remember, both you and | | | | You should invest time to screen through the quality |
| your vendor have to reach agreements that | | | | and integrity of your offshore staffs and have |
| transparency and honest assessment are key | | | | traceability of offshore HR. This way, in case of IP |
| components to execute agile offshore engagement. | | | | breach, you have better chance to identify the leak. |
| You should also leverage the latest web based | | | | 5. Intellectual Capital loss risks |
| technologies to accomplish agile collaboration. Please | | | | The concern of losing intellectual capital somehow |
| do not take these as best practices. They are far | | | | contradicts the principle of "outsourcing." Companies |
| from perfect. But hopefully they provoke further | | | | suppose to "outsource" their non-core components. |
| thoughts and discussions to help establish the right | | | | Since offshore industry and process mature, buyer |
| offshore engagement under different circumstances. | | | | today can leverage offshore vendor's expertise to |
| 1. Offshore service level risks | | | | support mission critical products or services. In such |
| Buyer should devote more time and executive level | | | | engagement, buyer needs to maintain ability to |
| support on directly training the vendor's mid to low | | | | replicate those outsourced processes or tasks shall |
| management personnel. Buyer can not simply | | | | offshore relationship ceases. Referring back to the |
| outsource the entire training responsibility and expect | | | | training investment buyer should make on offshore |
| great results. Buyer needs to have a more | | | | staffs, the same can apply to rebuild an in-house team |
| collaborative process on training design, delivery and | | | | if necessary. |
| measurement with offshore vendor. This is the only | | | | |