pitfalls of outsourcing - the top 10 pitfalls of offshore outsourcing

8/11/2019 Pitfalls of Outsourcing - The Top 10 Pitfalls of Offshore Outsourcing

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The Top 10 Pitfalls ofOffshore Outsourcing

and how to avoid them.

Amritt Ventures, Inc.Gunjan Bagla, www.amritt.com 9/2006
http://www.amritt.com/http://www.amritt.com/


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The Top 10 Pitfalls of Offshore Outsourcing

10) Be Aware of Time Zones

Its 9 am in Los Angeles and you need a quick answer from your vendor in Mumbai. But its10:30 pm already at your vendors location and now you have to wait until the next morning.This situation is easily avoidable by requiring some overlap in your working schedule; Indianvendors can have some staff work a staggered schedule to provide you overlap in both earlymorning and late afternoon hours as needed. Vendors in China sometimes find it easier tooverlap schedules with the late afternoon on the West Coast. Many of our clients find itconvenient to use SMS text messaging and Instant Messaging to get quick status updates fromoffshore vendors

9) Avoid the lowest bidder

If you plan correctly, you will add plenty to your bottom line by deploying resources from China,India or the Ukraine. There are many vendors for any conceivable service and some of the low-end operators are not running on a sustainable business model. Low bidders may often (but notalways) lack critical overhead resources like management, power backup, working capital,quality processes, etc. They may put up a good act to win your business, but cannot sustain it forlong. Dont be too greedy, and you will be happier in the long run.

8) Maintain good communication with your onshore employees

Frank, clear and consistent communications with your in-house staff are crucial to the success ofany outsourcing effort. If your company has not been through a wrenching transformation inrecent years, this communication often gets postponed until the last minute. Innuendo and rumorare going to fill the information vacuum and misinformation usually has a worse effect than thehard truths. Ask for help from an outside professional if you are unsure how to handle suchcommunications.

7) Retain some core in-house staff

New types of customers, new products, or other business changes may suddenly require you to be more actively involved in some outsourced functions. If your head counts are large enough,consider keep a core group in house so that you can react quickly to market changes.Experienced players will tell you that retaining a core group also gives them a laboratory to trynew processes and a continuing benchmark by which to evaluate the external group.


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6) Plan very, very, carefully for the transition to outsourcing

Have your team draw up thorough checklist of all possible issues to deal with during thetransition from an in-sourced to an out-sourced operation. The team should include key membersof your staff and your vendors. Some companies include third parties to assist in the transitionand you should budget resources for this transition period. This is a stage where many companiesfalter; it is not rocket science to anticipate most problems but the excitement to jump in andenjoy the benefits of outsourcing often overtakes the need for due process. Make sure the vendorhas adequate plans to execute full knowledge transfer; else you might find yourself under duress.

5) Consider the full costs o f outsourcing

Costs during the planning include possible travel, fees to advisors, opportunity costs ofmanagement attention. Costs during the transition include payments for layoffs, retentionincentives for key staff to stay until a certain date, overage payments on unused leases and othercontracts, possible training costs. Ongoing expenses may include some oversight staff on your

payroll and possible domain-specific onsite staff provided by the outsourcer for bettercommunication with your team.

4) Ferret out intangible differences among possible vendors

On the surface Wipro may seem just like Infosys for your purposes. This is more the case whenthe contenders are smaller players. Vendors will boast about CMM 5 certification, ISO 9000

processes, 6-sigma quality, and state of the art facilities but dont be dazzled by this. There areinvariably major differences in the way vendors will relate to you. How important is your business to them? Do they work closely with your competitors already? Do they have othercustomers in the same American cities as your locations? What is your chemistry with the key

people who will communicate with you? How often will upper management at the vendor visityou? You get the idea.

3) Dont panic at the first s ign of trouble

When grizzled veterans of outsourcing get together over a drink, they often share war stories of

the horrors during their transition periods. When the first trouble hits, and it surely will,remember that you need a few good stories of your own. Rarely is an outsourcing projecttrouble-free but with the proper planning and guidance and with the appropriate escalation

processes in place, and a sense of humor, you will find that your and your vendor partner willovercome most early bumps on the road.


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2) Visit your vendor (or have independent evaluators visit)

Most initial and some intermediate evaluation can be carried out by phone and email and byhaving the vendor visit you. At some point before signing on the dotted line, your due diligenceshould include an onsite visit with a pointed and specific agenda to make you fully comfortablewith the kind of operation that the vendor claims to run. There is no substitute for this kind offace-to-face interaction and there are few situations where such a visit is unwarranted orunproductive. It helps to have someone familiar with the local culture who is on your side toassist you with such a site visit.

1) Retain very tigh t contro l of budgets

Outsourcing and offshoring are painful and time-consuming processes. If you have the will tocarry them out, ensure that you and your investors get to reap the full rewards. Budget creep canoften start eating away the savings brought about by outsourcing. Dont let this happen to you!Advances in information technology and management processes have made outsourcing a viablestrategy for companies of all sizes. But the need for fiscal discipline still present.

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Amritt Ventures, Inc. is an American advisory services company with expertise in guiding companies tobetter utilize offshore outsourcing to China, India and other countries. The information in this white

paper is general and broad, and many exceptions apply. For an in depth analysis of your situation, pleasecontact us to schedule an evaluation . www.amritt.com . [email protected]
http://www.amritt.com/mailto:[email protected]:[email protected]://www.amritt.com/

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