| Introduction | | | | Also ensuring continuous knowledge transfer to the |
| Many well intentioned offshore projects get off to a | | | | vendor’s employees working on your project, |
| flying start, but fail to succeed over the long term or | | | | make feel as a part of your extended organization |
| worse still are abandoned mid-way, even though a | | | | and perform better. |
| considerable time & effort is spent by companies | | | | Failure in bridging the Cultural Gap |
| before and during the initial stages of an offshore | | | | Most of the offshore workers will not have an |
| engagement on activities like documenting the project | | | | exposure to the Western way of life and to the |
| RFP, evaluating and shortlisting service providers, | | | | Western work culture. Therefore besides the training |
| defining quality parameters, training the offshore team, | | | | related directly to work, your in-house staff may need |
| and the like. This article looks at some factors that | | | | to spend time in acquainting the vendor’s |
| may impede the success of the offshore outsourcing | | | | employees with the cultural nuances of the |
| endeavor with suggestions to avoid or overcome | | | | organization and that of the your company’s home |
| them. | | | | base, be it Europe or US. For example although English |
| Unrealistic assumptions on cost savings | | | | is an official language in India, pronunciation and accents |
| The first and major obstacle to success is the | | | | can vary tremendously. Though many service |
| unrealistic assumptions on the savings. Organizations | | | | providers put their employees through accent & |
| assume savings will happen right from the day the | | | | language training and have cultural education programs, |
| delivery starts happing from the offshore location. | | | | inherent differences due to culture, religion, social |
| The initial costs involved in the offshoring (often | | | | activities, way of dressing, and even the way a junior |
| referred to as the soft costs or hidden costs) that are | | | | interacts with a senior colleague will not be easy to |
| over and above the direct cost of the contract, often | | | | overcome. Something that’s common sense to the |
| bring down the resultant savings drastically in the first | | | | Western worker may be a completely foreign |
| six months to a year. These costs arise due to time | | | | concept to an overseas worker. |
| spent in pre-offshoring activities like process | | | | Similarly your senior management & your in-house |
| documentation, vendor evaluation & selection, | | | | staff directly involved in the transition process need to |
| overseas travel both to the vendor location and of | | | | acquaint themselves with the culture of the country |
| their pilot project team to your offices, and upfront | | | | where the vendor is located to communicate |
| investment in equipment & other hardware to | | | | effectively with them and be able to understand the |
| facilitate data communication between your office(s) | | | | soft aspects of doing business with them. This avoids |
| and the vendor’s offshore location(s) before the | | | | issues that can arise due to misunderstanding the |
| process transition can begin. | | | | ‘language’ at either side. Mutual visits to the |
| Also many companies that outsource work offshore | | | | other country are very helpful for effective working |
| wrongly assume that labor arbitrage will yield savings | | | | relationships as they help in drastic improvement of |
| on a person-to-person basis (i.e., Since a full-time | | | | each others understanding and in the quality of work. |
| equivalent employee in India cost 40% less, the savings | | | | Some companies may try to save the travel cost by |
| will be in the same range!) without factoring in the | | | | communicating over the phone or using video |
| difference in productivity of and offshore worker v/s | | | | conferences, but in the long run this proves to be more |
| that of an inhouse employee; and the differences in | | | | expensive because of the delay related to transitioning |
| operating model of the offshore vendor. Hank Zupnik, | | | | the process overseas and the longer time taken to |
| CIO of GE Real Estate, who has overseen numerous | | | | get the expected quality or performance from the |
| projects outsourced offshore for over a decade, | | | | offshore team. |
| rightly observed that one offshore worker couldn’t | | | | Disaffection of in-house staff |
| simply replace all the work done by one American | | | | Extensive knowledge transfer and training are required |
| worker. | | | | prior to and during the transition of work to the vendor, |
| In reality, most organizations save 15-25% during the | | | | and this needs to be consistently supported by the |
| first year; by the third year, cost savings often reach | | | | in-house staff. However layoffs can cause major |
| 35-40% as both the sides move up the learning-curve | | | | morale problems among the in-house "survivors," |
| and the client modifies their internal operations to align | | | | leading to disaffection and work slowdowns. Internal |
| to an offshore model. Its is important to set realistic | | | | people may refuse to transition to the offshore model |
| targets and timelines for cost savings at the start to | | | | because they have a certain comfort level, or they |
| avoid a mid-course ‘blame-game’ both internally | | | | don't want their co-worker to lose his job. Some of |
| and with the service provider. | | | | your staff may also start proclaiming, that offshore |
| Lack of well documented in-house processes | | | | outsourcing is not saving money to the company after |
| Documentation is a time intensive and often neglegted | | | | all and that it was a bad idea, which futher lowers |
| activity. It is observed that most internal processes are | | | | morale of other employees. Sometimes your in-house |
| only about 30% documented, while one of the | | | | project management team may need to work into the |
| prerequisite before offshoring a process is that the | | | | night and arrive at work in the early morning to |
| documentation level should be at around 90%. The | | | | manage the offshore team, and their perception about |
| documentation activity should include mapping the | | | | who is benefiting and who is hurting becomes personal. |
| current process, putting down the transition strategy, | | | | You have to set aside management and employee |
| evaluation of all risks of failure and drawing up a | | | | time before, during and after the offshore transition to |
| contingency plan. Once the documentation is | | | | talk to your employees about the whole proposition of |
| completed, the company may change its outsourcing | | | | offshoring and how it will help the company to become |
| strategy (e.g., from a single vendor to multiple vendors); | | | | more competitive in the long term. A consensus needs |
| or it might actually give a greater thrust to offshoring if | | | | to be built among all employees favoring the |
| the vendor(s) seem better equipped to reduce risks | | | | company’s offshoring efforts. Without this kind of a |
| while keeping the costs low; or the company might be | | | | mandate, offshore endeavors are doomed. |
| deterred from outsourcing offshore due to the high risk | | | | Backlash from customers as a result of poor quality |
| involved if the endeavor fails. Though the results of risk | | | | control |
| analysis vary between companies, documenting the | | | | The cost savings resulting from offshoring is the |
| risks & preparing the contingency plan are | | | | primary motivation for businesses to engage in the |
| important and a lack thereof may lead to mid-way | | | | same. It is often realized late in the process that quality |
| abandonment of the offshoring project. | | | | is an important factor for a successful offshore |
| Poor expectation management | | | | engagement. Poor quality of service delivery will have |
| Outsourcing engagements have a supplier (vendor) | | | | a negative impact on the performance and the |
| and a recipient (client), and both will have different | | | | reputation of the company may suffer in the eyes of |
| expectations from the relationship. That the service is | | | | their customers. A lack of adherence to the quality |
| delivered from offshore complicates it further, and | | | | norms by the vendor and lack of monitoring of their |
| expectations mismatch become problematic. | | | | output can result in considerable rework, and |
| An expectation gap may arise when you are in doubt | | | | associated follow-up costs. |
| about the vendor’s capability and hesitant to | | | | KPIs (Key Performance Indicators) of the offshore |
| offshore anything beyond a specific task, while the | | | | engagement should be defined in the beginning itself, so |
| service provider expects greater chunk of “higher | | | | that the performance can be measured objectively |
| value” work and might feel unchallenged by dealing | | | | during the tenure project and mid-course corrections |
| only with standard, unchallenging tasks. If this | | | | are done wherever needed. It is also advisable to |
| expectation gap continues, the vendor may over time, | | | | institutionalize regular satisfaction surveys that |
| accord low importance to your project or may even | | | | measure the “perception” of the engagement |
| want to get out of the relationship as soon as a higher | | | | across several stakeholder levels. |
| value-add work comes their way. | | | | Conclusion |
| Similarly, you may expect the vendor employees to | | | | Offshore outsourcing is a phenomenon that’s here |
| come up to a level of understanding that matches that | | | | to stay. Companies that are adopting this are learning |
| of your in-house staff, but they may not be able to | | | | operate in a global business environment, and will |
| think or perform beyond the task that has been | | | | benefit in the long run as they gain insights into other |
| outsourced, and may ask questions that may seem | | | | countries and their way of conducting business. |
| ‘silly’, resulting in frustration at your end and | | | | However a failed or abandoned offshore outsourcing |
| possibly an early termination of the contract. | | | | venture may set back the company by both the |
| You should chart out a growth plan for the outsourcing | | | | money spent and the willingness to take up such |
| relationship so that the service provider have their | | | | opportunities in the future. It is therefore important to |
| eyes set on the next target in terms of new | | | | study and analyze all factors that will affect the |
| processes coming their way. Knowing this growth | | | | offshore endeavor and ensure that steps are taken to |
| path, the vendor and their employees will try to gain | | | | overcome the pitfalls well ahead of the offshore |
| deeper insights into your business, thus resulting in | | | | transition. |
| superior results during the initial ‘unchallenging’ | | | | References |
| stages of offshoring too, and a stronger sense of | | | | Dean Davison; Top 10 Risks Of Offshore Outsourcing; |
| loyalty to their relationship with you. | | | | 8. |