| A question many executives are asking is "how can | | | | sessions. You need to evaluate how many of these |
| we tell whether our offshoring efforts are delivering | | | | costs are incremental additions because of offshoring. |
| value to our company?" | | | | Cost of training and quite often, re-training |
| While you pay offshore vendors much less than what | | | | Additional equipment and/or software tools you |
| you would be paying a U.S. vendor, some members of | | | | need to provide because you now have an additional |
| your staff complain that offshore productivity is really | | | | location and the same tools/equipment quite often, |
| low, that 2 or 3 offshore personnel are doing the same | | | | cannot be shared. |
| work that used to be done by one experienced | | | | You should, in addition, assess the offshore productivity |
| person in the United States. And that’s not all: | | | | and factor that in; even if offshore personnel are as |
| offshore outsourcing entails additional costs for travel, | | | | competent as the local staff (which is your best case |
| communications, and duplication of equipment and/or | | | | scenario and unlikely to be the case when you are |
| software tools, to name just a few expenses. At least | | | | getting started), there will a productivity loss because |
| some of your staff may be implying—or even loudly | | | | of systemic issues. If you are just launching the |
| proclaiming—that offshore outsourcing is not saving | | | | offshore initiative, add the costs of finding a suitable |
| money after all and that it was a bad idea. Even if | | | | offshore vendor and launching the offshore operation |
| offshore outsourcing may have saved you money in | | | | for the first time. |
| the beginning, it may not be doing so any longer. After | | | | Compare this against the benefits you are receiving |
| all, offshore labor costs also tend to escalate over | | | | from offshoring – both tangible and intangible such |
| time. | | | | as reduced costs, easier round the clock coverage |
| The cost of offshoring isn’t only about money; | | | | and so on. This will give you a balanced view of the |
| it’s also about perception. If, for example, your | | | | situation. |
| management team must work into the night and arrive | | | | Real World Example |
| at work in the early morning to manage offshore | | | | This approach was recently applied in an organization |
| projects, their perception about who is benefiting and | | | | with complex software products and a sizable |
| who is hurting becomes personal. While added stress | | | | offshore operation. Mid-level managers, Project |
| on your domestic staff should not be ignored, the way | | | | managers were up in arms about offshoring; |
| to address this issue is to develop an objective view | | | | complaints about offshoring to senior execs including |
| of all facets of costs: | | | | the CEO were wide spread. When an objective |
| Direct labor cost which is the check you write to | | | | assessment of Business Value along the lines outlined |
| the vendor on a monthly basis | | | | here was conducted, many in the company was |
| Cost of travel both for regular monitoring and for | | | | surprised to find that offshoring was indeed saving |
| training | | | | considerable sum of money; however there were |
| Communication costs: Additional data | | | | issues they needed to address. This resulted in the |
| communication costs; in some cases companies have | | | | staff gaining a better understanding of the situation and |
| had to dedicate separate “communication pipes” | | | | the need for the company to continue offshoring. |
| in order to keep the offshore and local data bases | | | | Focuses shifted from a perception of offshoring as a |
| synchronized. In addition, there is the cost of voice | | | | bad move to identifying specific issues with the |
| communication, video conferencing, e-mail and chat | | | | offshore operation and begin addressing them. |