Common Offshore Outsourcing Mistakes

And How to Avoid Them!

Article Published August 20, 2018

There was a time offshore outsourcing was a novel concept. Working with someone across time zones, across cultural barriers, across political barriers was such an enticing opportunity. In spite of millions of success stories, and no sure shot recipe for success, costly mistakes were made as well. This article examines the reasons and best practices for managing offshore outsourcing relationships.

The Offshoring Story

Offshore outsourcing has been around for almost 40 years, although gained traction in the last 20-30 years. Motivations for offshoring range from cost-savings, a chance to build scale, offer 24x7 services, serve clientele across the world, or just tap the global talent pool. The most common reason why companies use offshoring, even today, is to save on labor costs. And we're using the term 'labor' rather loosely here. And yet, there have been others that have focused on the chance to build capability and scale in conjunction with cost reductions.

Not to sound disparaging to all the good work and the great relationships that have been formed by millions of people of businesses across the world, you do need to take a critical look at offshoring as a strategic option. You'll do yourself and your business a favor.

The Story of Cost Savings

Nothing wrong with using cost-savings as your goal when you offshore. It enables you to do more with less. But that isn't always the case. Lower operational and development costs with offshore resources are often offset, in part, by higher management costs. And this is something most outsourcers fail to account for.

Saving time with Offshoring?

The fact that you can't sit across the table, or look over the shoulder and tell your developer or designer what to correct. So, there's the cycle-time that you need to consider as well. You're working with people across different time zones. Sure, you can ask for the outsourcing providers to work in your time zone, but that means higher costs - sometimes as much as double of what you would normally pay. And that comes with the risk of not attracting the best and the brightest at the location.

Enhancing Capability?

So, you thought hiring that guy who looks great on paper is a good strategy to add capability to your team? Well, not always. Especially if you didn't vet the capbility seriosly enough. Or, if you didn't pay attention to whether the skills on paper matched the reality. Building capability takes more than just hiring the right people. There's the time you need to spend in integrating the people with your culture, processes, and teams. It takes time and isn't something you can achieve overnight.

Being Local

Nothing wrong with using offshore outsourcing to serve customers in different time zones. After all, cultural similality is a thing. Right? Well, again, not always! Whether you hire a team offshore, or set up your own offshore design/development/innovation/customer support center, you need to spend time to achive culture fit, visibility, and control processes, even a full Governance and Risk Management protocol depending on the size of your offshore team. You need to get ahead of issues before they snowball. Doing that with an offshore team can be hard. And time-consuming. And costly.

Scared of Offshoring Now? Well, don't be. Read On.

Why are you offshoring?

Know your reasons before you even take the first step.

Saving on Costs

Perfectly Good Reason to think for offshoring. But what's your benchmark? Your own costs? Competitors? Savings Targets? Prevalent 'industry standards'?

There are offshoring consultancies that'll give you 'benchmarks', asking to pay a minimum of this or a maximum of that. Chances are, a lot of this advice is pure baloney. In an industry where you can find brilliant people selling their services online for $10/hr, which is below minimum wage in many countries, and companies charging $200/hr, how do you differentiate? The individual offering services at $10/hr might be more attuned to your needs. And believe it or not, might be making a decent amount of money as compared to salary levels in his or her home country.

You need to be clear about your objectives, what makes sense for your business. Talk to the offshore provdiers, see where you have a comfort level in terms of your capability. And well, let the offshore consultants keep their benchmarks. You set your own benchmarks, based on what's right for you. Simple.

Building Capability

Outsourcing to add capability is great. But, you need to be sure what you need, what you're getting. Just counting the number of years of experience isn't enough. Your outsourcing provider might have been in business 20 years, doing mediocre or sub-par work, and would be considered 'experienced' enough. Contrast that with a relatively younger organisation with great people, processes and technical strength. You know what I mean.

It's about the people. From their hard 'technical' (I am using the word rather loosely here, again) skills to the environment they work, the processes the organisation has. How easy is it for you to transfer knowledge to the outsourced team? Be diligent about what matters, and leave aside what doesn't.

Managing Time Crunch

So you've got that tech exhibition coming up, and you've promised everyone you're going to showcase something. You know your internal team isn't enough, or you've bitten off more than you can chew, or both. And you're now scouting for someone to help you deliver. I won't say it can't be done, but you're setting yourself up against an impossibly steep climb. The only way you can achieve that is if you have existing relationships and with a stellar technical managemetn on your end. Either of these go amiss, and you know the story. You can't expect a new provider to jump in, start coding, and then help you deliver something exceptional. At best, it'll be a series of quick fixes or sub-par work for no fault of anyone. At worst, a total disaster.

The way to do it right to deliver against some tough deadlines is to have a relationship you can bank on, teams that are in sync, well-established technical processes and architecture, and stellar communications & collaboration between the teams, preferably working side by side. Don't expect a new team to come in, learn everything about your business, your apps, architecture, culture (more on that later), and just deliver like a machine. Irrational, ill-thought out deadlines won't work wonders. Quite the opposite.

Tactical? Or, Strategic?

Offshoring can be a great tactical move, or something you work on for the long-term. Starting with the right objectives, and communicating these objectives transparently is perhaps more important than anything else that's written here. Tactical offshoring decisions are, by their very nature, are for the 'now', while Strategic offshoring is when you look at a longer time horizon. Either way, you need to pay a lot of attention to your objectives before you set out to make your offshoring initiative a success.

Even if you're taking a tactical decision to offshore, to maybe take care of a 'project', you need to be diligent with your selection. Just selecting a provider, hoping things would turn out well isn't going to work out. Hope, as it is often said, isn't a Strategy. The basics remain the same, and the timeline gets compressed. That means more pressure, more vigilance and better early-warning systems.

For strategic offshore outsourcing, you need to focus more on building organisational strength, thinking long-terms, while still focusing on bagging the low-hanging fruit. You need the hand of time, and funding, when you're taking long-term decisions.

Tactical? Or, Strategic?

Offshoring can be a great tactical move, or something you work on for the long-term. Starting with the right objectives, and communicating these objectives transparently is perhaps more important than anything else that's written here. Tactical offshoring decisions are, by their very nature, are for the 'now', while Strategic offshoring is when you look at a longer time horizon. Either way, you need to pay a lot of attention to your objectives before you set out to make your offshoring initiative a success.

Even if you're taking a tactical decision to offshore, to maybe take care of a 'project', you need to be diligent with your selection. Just selecting a provider, hoping things would turn out well isn't going to work out. Hope, as it is often said, isn't a Strategy. The basics remain the same, and the timeline gets compressed. That means more pressure, more vigilance and better early-warning systems.

For strategic offshore outsourcing, you need to focus more on building organisational strength, thinking long-terms, while still focusing on bagging the low-hanging fruit. You need the hand of time, and funding, when you're taking long-term decisions.

Culture Fit? What Culture Fit?

One of the most overlooked aspect of most outsourcing relationships is the culture fit between the client and the outsourcing vendor. It may not appear to be very important consideration at first, and the decision usually centres around capability and cost efficiencies gained by outsourcing. But once the relationship is underway, the single biggest determinator of success is how aligned the two sides on cultural elements.

Even the most well-intentioned and technically-adept teams may not be able to deliver on the promised efficiencies or capability-add in the absence of a culture-fit between the two organisations. Before you can realise any benefits from your outsourcing program, you need to spend some time ensuring you are selecting the right outsourcing vendor one that has cultural similarities at the core. And it's not just about the language. It's about values, ethos, who they are at their core, and how well they gel with your world view. It doesn't have to be the same. But certainly conflicting opinions between your people and the outsourced team might just be a recipe for disaster.

Communicating Effectively

Effective communications isn't about daily phone calls and chatting about this and that. Sure, chit-chat helps build that conversational ease between you and your offshore partners. But never lose sight of the fact that collaboration has to be result-oriented for it to have any meaning in an offshoring situation. Communicate your expectations, architecture, metrics. And have your offshore partner communicate progress effectively. Know where the bottlenecks are, how to get past them.

There's always that distance issue in offshore situations. Set up expectations on when you expect something to be communicated, have regular meetings to discuss project progress, issues encountered. Ask the right questions. Know when the answers are cloaking more than what they're revealing. Pay attention to the early-warning signs, like missed deadlines and missed communications. Delays never happen in one go. It's the small, incremental delays that can add up and set you back.

Conclusion

Whatever the challenges, offshore outsourcing is here to stay. It gives you access to a global talent pool. Sure, it has its challenges. But what doesn't? Know how to navigate the landscape, keep your basics clear, and you are setting yourself up for success.

Look forward to hearing your thoughts.

Author Bio
Author
Harjeet Singh
CEO, Millipixels Interactive LLP

For over 20 years, Harjeet has been at the forefront of digital innovation as an entrepreneur, trainer, consultant, author and a user experience design visionary. He has helped clients like Google, Facebook, McGraw-Hill, and Danone/Nutricia deliver exceptional products and services over these years. His essay on 'Social in the Enterprise' as well as other contributions appear on the O'Reilly Press book 'Designing Social Interfaces'.

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