Offshoring is an art

By Subraya Mallya on 16 January 2012 | Topics - Risk Management

By now you would think offshoring has acquired enough notoriety. Lots of water has flown under the offshoring bridge. Best practices have been written, re-visited and rewritten. So it was kind of a surprise when I got this call from a friend of mine who was trying to get this “offshoring” thing started in his new job at a midsize company. He wanted to know if there were some rules of the road and preferably a ready reference of potholes on that road. While having been involved with offshoring in some form or the other through my career either from the offshore side or hiring someone from offshore for work to be done in the United States, I thought this was a good opportunity to capture the strategy I follow while doing offshoring. I will make it a series of bullet points so it is easy to digest

I classify the whole offshoring effort into four buckets -

Vendor Selection

  • 90% of the success is driven based on vendor selection
  • Conduct small engagements with 2-3 shortlisted vendors to sample their capabilities – most overrate themselves. Seeing is believing – don’t tell them that there is a long term engagement in the offing. See if they can connect the dots. References are overrated and, most often than not, irrelevant to your specific case so evaluate their competency for yourself.
  • Evaluate the generals not the soldiers. Soldiers leave or get transferred, so measuring generals is a must.
  • Choose vendors from two different countries if you have the flexibility and split the work between them. Let them know there is a split and let them also know the fittest survives. Healthy competition is good. Don’t look for volume discounts initially.
  • Bake the quality metrics into the SLA and split the comp based on fixed + performance based parts.

Contract Process/SLA

  • Most SLA in offshore contracts involve availability of resource on time, for a desired amount of time etc. Those are vanity metrics. Metrics should be focused purely on quality of work, sticking to committed dates and value they bring to your organization.
  • Insist on a bench for an on-demand burst of resource needs you might have.
  • Know the country you are offshoring to and ensure that you get coverage during the off-day in that country. For example a country like India has a lot of holidays (national, religious, regional and then Force- Majeure holidays like strikes, rains, trains). I am sure there are similar issues to worry about in other countries.
  • Insist on the need to have shadow/backup resources who can take over in case of churn in the offshore company.
  • Notice period in case of the Leaders transitioning off the project is a must.  Specifically call that out in a clause. (Think service credits) Remember: they might be augmented resources but treat them like employees – notice period is a must. If not service credits should trigger.
  • Insist on short term contracts (11 month at the most) and replacements of resources if someone is found wanting.
Measure, Monitor, Track, Act
  • Dashboard the metrics, track them and make that available to the offshore company leadership. Both sides should be measuring the same metrics. That way you are on the “proverbial” same page.
  • Metrics should be based on performance, quality, on-boarding new resources, communication skills, presentation skills, problem solving, root-cause-analysis capability.
  • Compare & Contrast quarter-over-quarter results.
  • Act decisively, if there is a weak link. One bad performer brings with him his friend/relative. Look out for that stale slice of bread snuck in the middle of two good ones.
  • If you are paying for a lead in offshore team, expect him/her to lead and measure their performance. Weight the performance of leaders higher than the rest of the members of the team. Make sure the lead is a active member on the project not a figure head. 1 lead for every 5 members optimal.
  • Post-mortem quarterly results. Reward performers. Clearly identify areas of improvement and indicate that you are looking for them to be fixed in the next review period.
Finally, Points to remember
  • If you are doing offshoring purely for cost arbitrage – DON’T. It is the wrong reason. Not to mention, the cost arbitrage you are seeking is no longer there thanks to inflation in the offshoring countries.
  • Truly engage with the resource assigned to build loyalty. If your treat it just as a line item on your expense sheet  then the feeling will be reciprocated.
  • Plan to visit them or have them visit you once every contract term for a face-to-face meeting (11months). Bake that into the cost model.
  • Don’t micromanage – let the lead in the offshore team manage and you manage the lead.
  • Sell on the overall company vision than just the project. That builds the purpose for the team. If you treat them like a handyman they will do a handyman’s job and not a architect’s job.
  • Offshore teams need more hugs than others – they seek it.  It does not cost you anything, so give them that.  That said – don’t overdo the “Great Job. Pat on the shoulder” thing. You might just be trying to be nice, they will take it literally. It is the culture thing, it is quite different.
  • By now if you have not already figured it out here is the final tip – DON’T do the corporate american thing – “Being nice on your face and then screw them during performance reviews”. Be brutally honest with your feedback and don’t wait until the review date to share your feedback. A Stitch in Time saves Nine.

Hope my offshore philosophy helps in your offshoring efforts.

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    1. PrudentCloud Says:

      Technology Offshoring is an art http://t.co/eiUZfepO @prudentcloud #riskmanagement

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