ReconsideringOutsourcingDecisionsReconsideringOutsourcingDecisions
Friday,September11,2015
Friday,September11,2015
DefinitionofOutsourcing
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Theseweresomeofthediscussionsonthedefinitionof
outsourcingbythemembers:(1)augmentstaffwithextra
peopletohelponprojects,basedonspecificneedsfora
project;(2)takingawholeITdepartmentandoutsourcingit;
(3)setupcaptivecenter.Aquestionwasraisedaboutthe
captivecenter–ifyouhavedirectcontroloverit,isitreally
outsourcing?CanyouthinkofthisasglobalizedIT?People
workingatcaptivecentersareconsideredcompany’s
employeesbutusinglocaltalenttofilltheneed.Moreand
morecompaniesaredoingcaptivecentersthesedays.Below
aretheresponsestothequestionsbytheparticipants.
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HowmanyITfunctionsdoyoucurrentlyoutsourceor
haveconsideredoutsourcing?
ITEXECUTIVEEXCHANGE2015-2016
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Lookedatoutsourcingthe“helpdesk”function.There
wasdiscussionwhetheritmakessensetokeepitin
houseorshipittoathirdparty,whetheronshoreoroff
shore.Decidedthatthisfunctioncouldbedone
internallymuchcheaper.
OffshoringinIrelandandIndiaforapplication
development.
Outsourcesdatabasemanagement,24/7watchingkey
systems,notreallyhelpdesk,buttookfunctionand
decidednottobuildthatexpertiseinhouseand
contractedinsteadwithsomeoneelse,takingHRpayroll
systemandsendingitbacktothevendor,managingdata
center,moreofahostingtypething,notdealingwith
serverandnetworksideofit,couldalmostlookatthisas
acloud.
Projectbasedoutsourcing–findagroupofOracletalent,
theybasicallyhaveaprojectplannedandthenuselocal
talentinthatcountrytoworkonaprojectforpotentially
uptooneyear,dependingontheimplementation
schedule.
Offshoringforover10years.IthascontractwithIBM
Indiatodoapplicationmaintenance,desktoprefresh,
andnetworkprintermaintenance.
Technicalsupportdesk,invoicing,differentcloud
services,i.e.fax,telephonesystemsmaintenance–on
shoreoutsourcing;atleastadozendifferentservicesthat
arenolongercontrolledinternally.
Almostalltechnologyareasofabankareoutsourced,use
offshoreprimarilyfordevelopmentandQA,rigorousin
termsoftestingscripts.
Usealotofoffshoredevelopersbutnotquiteas
successfulbecausedon’thaveinstitutionalknowledge
thatisbuiltupbyateamthatunderstandsthe
application
Useonshorefortechnologycenter.
BusinessAnalystsarealmostalwaysemployees–not
outsourced;heavyinvolvementwithlegaland
complianceteamslocatedintheUnitedStates;because
ofdegreeofinteractionbusinessanalystsarealmost
entirelyemployees
OutsourcinginIndia–useforprimarilydevelopment
andtesting,alsohaveacomponentofseniorleadership
bothhereandinIndiathatusemoreofaconsulting
perspective,learnalotfromthembeingacontractor,a
consultantforothercompanies,onrepetitivetestsbut
notasrepetitiveasahelpdesk.
• Lackoftalentincertainareaslocally;wejusthaveto
rampupsomewhereelsebecauseweneedtofindthe
labor;costisnotnecessarilytheonlyfactor.
Whatissueshaveyouexperiencedwithoutsourcing?
Knowledgetransfer,peopleleaveanddon’ttransferthe
knowledge.
• Findingthetalentandmanagingthattalent.
• Keyhasbeenretainingpeopleovertime–haverelatively
lowturnovercomparedtomarketatlarge,don’tpaytop
dollar,tookabout5yearsbuthavehadprettygood
successforpast6-8years.
• Howtomakesureknowledgedoesn’tdissipate(losing
institutionalknowledge)whenpeoplemoveonand
keepingcontinuity.
• Offshorewithcountriesthataremuchlowerincost.
ThinkingaboutPhilippines,andVietnam.Havebeen
buildingagroupinRomaniaforseveralyearsonthe
engineeringsideandnotIT;biggestproblemislanguage
barrier.
Whatarethekeystosuccessfuloutsourcing?
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Havekeypeopleinthecountrythatmanagethatproject,
stillhavetosendpeopletoandfromthesecountriesto
checkin,hopingyougetgoodtalentandhopetheyfollow
yourscriptalongtheway.
Struggleincertaincountriesbecausewelosepeoplevery
quickly,tomaintainthatexpertiseisaconstant
challenge.
Tryandretainpeoplethroughmoneyincentives,
performancebonusorretentionbonus.Allowcontractor
tochoosehowtobestdistributeitbasedontheculture;
contractuallyofferperformancebonusinoverallcontract
aswell.
Havetakenandgivenincentivestoemployeestomove
theirfamilytoanothercountryfor1-2yearssotheycan
getsomeofthatknowledgetransfer,butthisisa
challengetofindsomebodytodothat,canworkifyou
gettherightgroupandrighttalent;employeewillgoout
andmanagetheoffshoregroup.
Biggesthumancomponentofoffshore–wanttobe
involvedinthelargerorganization,wanttounderstand
whothesponsorsandcustomersare;goandvisita
coupletimesofyears,havevideoconferencesoften,want
toknowtheyaretalkingwithsomeonewhoisimportant.
Maketripsandtakeleadersandalsosomeofthetesters
anddevelopersandinteractwiththepeopletheywork
with;themeoftryingtodeveloprelationshipsalltheway
downthelinewithpeoplewhointeractatmanydifferent
levels.
ReconsideringOutsourcingDecisionsFriday,September11,2015
Strategy–tryandbringthemtotheUSasoftenas
possibleforseveralweeksatatimeintheinitialstagesof
theproject;givessensethattheyarepartofthe
organization.
• Nomoremisunderstandings–becausesomeonefromUS
isactuallyleadingtheteam;havelessdelaysandbetter
quality.
• Haveshiftedworkhourssothereismoreoverlap;don’t
workexactlysamehoursaseasterntimebutatleasthalf
thedayisoverlapped;gooffshoretoseeteam.Video
conferencingisaprettygoodwaytobuildarelationship
andunderstandtheotherperson.
Problemswithknowledgeretention
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requirements;otherwiseitwillbeadisaster.Youwillget
codethatisnotquiteright,doesn’twork,hasissues,requires
goingbackandreworkingandspendingmoney,postanalysis
reviewandrealizespentalotofmoneyandmayhavebeen
cheapertonotgooffshore;generallyliketomovefastand
furiousfromtheretailperspective;notgoodatcomingup
withrequirementsandchangemindsometimesandthat
modeldoesnotworkverywell.
Managingoffshoreemployees
Hasn’tbeenthebigissue;atthispointoffshoringis
becomingmoreofacomponentoffindingexpertise
particularlyinthetechnicaltradesthanitisaboutfindinga
lowcostanymore;can’treduceoffshorebecausedon’thave
capacityorpeopletomeetthebusinessneed;knowledge
transferispartofcontract,encounteredissuesbecausethey
documentthoroughlybutthentheyleaveandthencompany
encountersaproblemthattheyhaveneverseenbefore.
Benefitofhavingownstafftomanageoffshoreemployees;
keptthislayerofmanagementthathasbusiness
understandingandabletomentornewemployeesandtrain
prettyquickly–havebeenprettysuccessfulatthat;tomake
suretoretainmanagersisgiveopportunityandbeableto
changecareerswithoutchangingcompanies;have
establishedastandardlineofpromotion;aswehave
empoweredthemtomakedecisions,havebecomemore
comfortablewiththatmodelanditworksprettywell;do
havetofindrightpeopleandfindpeoplewhocanthinkon
theirfeetandhavetherespectoftheirpeerssotheycanlead
theteam.
Companiesexperiencewithturnoverofemployees
Whatisyourexperiencewithturnoveroffshore?
Lastcoupleyearshaveexperiencedthesamebetweenboth.
Worsewithcontractingfirmbutitisspecifictosomeofthe
culturaldifferencesbetweenIndiaandUS;verydifferent
system,modelisthateveryoneaspirestobeina
managementposition,ifnotescalatedappropriately,then
theyleave,havemorecontrollocallytobeabletoincentivize
people.Solution:throughcontractnegotiations;factorina
bucketofmoneythatallowsthecontractortoincentivize
theirpeopleinmuchthesamewaywouldincentemployees;
incentiveismoneyandinIndiathishasworkedwell
Itcanmakeupto30%ormore.Ifyoutakecareofpeople
well,makethemfeelapartofthecompany,don’ttreatthem
liketheyareexpendableoffshoremembers,theyaremore
likelytostay.InIndia,thecultureisdifferent.Itisnotjustthe
money,involvetheirfamily,somecompaniesgiveemployees
promotionthentheyhaveabigeventandinvitetheir
families,sotheyhavealittlebitofpressuretostaywiththeir
currentemployer;importanttogetfamilyinvolvedwhenit
comestoIndianemployees.
Doyouinvestintrainingforculturalintelligencefor
employeessotheybecomeawareofUSculturalnorms?
Don’tnecessarilytrainonUScultures,moresooncompany
cultureandcompanybusiness;treatasiftheyarepartofthe
organizationeventhoughnotemployeesofthecompany;
teachtheprocessestheyhaveinternally;haveanemployee
whorelocatedtheretorunthegroupofcontractorsandit
workedextremelywell.Employeebringsthatknowledge
backtothestatesevery3-4monthsofwhatherteamis
doing,havelearnedthatemployeesinIndiawanttobepart
ofthemothershipintheUSandlearnaboutthecompanyor
elsetheywilljumpshipandgotoanothercompanyifthey
don’tfeeltheyarepartofthelargerorganization;contractors
canmovearoundveryeasilyfromjobtojobsohavetotreat
thatoffshoresubsidiaryasiftheyareyoursorelsethereare
opportunitiesfortheemployeestomoveandtheywilldoso.
Failureswithoffshoreteamsandlessonslearned
Fromapplicationdevelopmentstandpoint,itbecomes
absolutelyimperativethatyouhaveveryspecific,detailed
Summary
Companiesaregenerallysatisfiedandcomfortablewithwhat
theyarecurrentlydoingwiththeiroutsourcingandoff
shoring.Ithastodowithnothavingalotofoptions–can’t
findresourceslocallyorcan’tacquirethemquicklyenough;
matured–havelearnedfrommistakesoverthelast10-15
yearsandhavelearnedhowtomanageremotelyand
technologyhasimprovedsomuchwithateamontheother
sideofthecountry;mucheasiertosucceedtoday.Major
advantage:emergencycomesupandsomethinghastobein
bytheendoftheyear,canbringon15additionaldevelopers.
Companiesarescaredtooutsourcedatacentersbecauseof
thesensitivedata.However,accordingtotheCIOMagazine,
thetoptrendsof2015isoutsourcingdatacenterstoplaces
likeIndia.Indiancompaniesaregoingafterinfrastructure
marketandin2014begantowinmoreinfrastructuredeals
thanbefore.Butthebiggestchallengesaresecurity,
reliability,andcomplianceissues.
(PreparedbyKendraCarpenterandProf.B.S.Vijayaraman)