| What is outcome-based offshore outsourcing? | | | | 7. 7. Ability to incent more innovative behavior from |
| Traditional outsourcing models focus on input; for | | | | provider |
| example man hours, person months, emails answered | | | | 8. More cohesion of work being delivered |
| or number of calls processed. On the other hand | | | | What are the challenges for buyers? |
| outcome-based focuses on output i.e. reaching a | | | | Potential lack of transparency into how work is |
| business goal such as customer satisfaction, customer | | | | being performed |
| loyalty, support cost as a percentage of revenues etc. | | | | Little insight into cost of service (unless visibility into |
| Why the interest in outcome-based approach? | | | | resource consumption is maintained) |
| | | | Additional administrative burdens associated with |
| 1. From the buyer point of view, cost savings through | | | | root cause analysis (if service is not being delivered as |
| labor arbitrage has plateaued in many offshore | | | | promised) and evaluation of service delivery |
| outsourcing relationships; labor costs in places like India | | | | Resistance from vendor |
| have risen during the past decade. So these buyers | | | | Measure of success needs to be tied to the |
| are looking for additional ways to realize value from | | | | outcome under the vendor's control |
| their offshore outsourcing efforts. | | | | Often difficult to measure the outcome |
| 2. Many offshore providers want to move up the | | | | Traditional model will continue be sufficient for many |
| value chain and add value in new and different ways - | | | | buyer organizations |
| they see it as a differentiator in the market place. | | | | Outcome based model is not for everyone. You may |
| 3. Ultimately, buyers do not want to buy person hours, | | | | find that traditional activity based model is the better |
| but you want an outcome -- such as a completed | | | | suited for your situation. If you cannot define the |
| product or a satisfied customer. | | | | outcome clearly and if they are not under the control |
| 4. This model helps align the business goals of | | | | of the offshore provider, it is hard to hold them |
| providers and buyers. | | | | responsible for the outcome. In addition, your |
| 5. 5. Potential for higher eventual savings as labor | | | | organization may not be culturally ready to enter into a |
| arbitrage is replaced by productivity and synergies | | | | true partnership with a provider where you need to |
| between tasks as key savings drivers | | | | share strategic information. In some cases even if the |
| 6. Freedom from operational issues such as | | | | cultural orientation is there, for competitive reasons you |
| interviewing and monitoring individual members of the | | | | may not be willing to share strategic information. |
| provider's staff | | | | |