Though it is difficult to anticipate all of the issues, taking the time to do a thorough evaluation of internal processes, the capabilities of your potential outsource partners, cultural aspects, customer expectations, and more will find the projects that will succeed offshore.

It may sound simple but you have to make sure you clearly define the objectives of your outsourcing initiatives. This will lead you to an initial list of potential projects. You can then apply the concepts and criteria presented in this article to see if they have the potential for success. Here are some recent instances of offshoring and lessons learned that will help you understand the issues involved in selecting the right projects.

Ensure an adequate resource pool offshore
This issue is not always obvious and based on recent hype in the press, most companies do not bother to check thoroughly. In this case, a mid-sized networking company sent part of their technical support offshore to India. The initiative was started about a year ago and a variety of issues have arisen in that time. First, it took twice the time expected to get offshore personnel trained in the technologies used by the company. During that first year, the company reduced its internal staff but since the offshore personnel weren’t ready as anticipated, they couldn’t provide the level of support and service to clients and customer satisfaction took a nose dive. Both the offshore vendor and the company worked hard to get offshore engineers trained and gradually customer satisfaction improved. Just when the offshore vendor and the company began to feel that they had the offshore project on track, a group of key engineers left the offshore vendor for other opportunities. They were back to hiring and training, and customer satisfaction took another dive.

In retrospect, training issues could have been handled better by both the vendor and the company by planning a longer and more intensive training cycle. But the larger issue was the availability of talent in the market. The company assumed that the vendor could take care of it, since in this case the vendor is a large established company. This turned out to be a poor assumption. The company provided specialized training to the vendor’s staff and with that training, staff members became easy targets for other companies competing for the same resources offshore. Some were lured away. Attracting and retaining skilled personnel in a country like India, in today’s environment, is challenging even when there is a large enough supply in the market place. If the resource is limited, you leave yourself exposed to the risk of losing people and not being able to replace them.

Tip: You must be actively involved in managing offshore partnerships; while you need to rely on the vendor, you also need to conduct your own due diligence in key areas.

ROI
Probably the most common reason for offshoring is to reduce cost. To do that, regardless of the size of your company, you have to look at the total cost of offshoring -- not just the salaries paid to offshore personnel or your contract with the provider. For example, you have to consider the costs of maintaining common data and knowledge, training, infrastructure, and much more. For more details on this topic please refer to a previous article, “The Hidden Costs of Offshore Outsourcing,” SSPA News, November 2, 2004.

Compliance with U.S. regulations
Some projects, notably those involving certain encryption technologies, cannot be sent to certain countries. Federal guidelines are updated constantly. You need to first make sure that you will not run afoul of the law, before you go too far with offshoring a project.

For example, if you’re considering offshoring level one support, where there is no need to provide access to source code for offshore personnel, these laws may not apply. On the other hand, if you plan to offshore escalated support that requires access to source code, you may have a lot to consider. In some cases, we’ve found that only a small portion of a product could not be sent offshore but other components could be. Be sure to take a close look at your code and government requirements.

In addition, if you do business with a state government agency, check to see if there are regulations that do not allow you to offshore support. If you aren’t sure, consult an experienced professional who can help determine what is applicable in your situation.

Other factors
In addition to these factors, other issues you should pay attention to include whether you have definable deliverables, the level of interface and infrastructure required between the offshore and internal teams, how long and how much investment you need to make for transfer of information/training of offshore personnel, and more.

To help you assess the likelihood of whether a particular project is a candidate for offshoring, here is a Project Selection Scorecard. Assign a score of 1 to 10 for each attribute. If you assign 10, it implies that you have the high confidence of success against that particular attribute. You may need to change or add some attributes to make it more applicable to your specific needs but this will provide a starting point for your evaluation.

Criteria Score (1-10)

1. Definable Deliverables (Can you clearly articulate what the offshore team needs to do?)
2. Level of Interface (How much interaction does the offshore team needs to have with the U.S. team?)
3. ROI (Financial Analysis) – Make sure you accounted for all offshoring costs.
4. Specialized equipment needed by offshore team and associated costs
5. Transfer of Information and Training (How long does it take, at what cost and whether you have personnel available to devote to this, in addition to doing their own current tasks?)
6. Cultural fit (Contextual knowledge necessary); is it possible to train offshore personnel in this aspect within a reasonable time frame?
7. Attracting and retaining offshore talent
Total

A total score of 56 (80%) or better indicates a good candidate; a score or 42 (60%) or less is a poor candidate. This score card is meant to be a guideline and is not a substitute for good business and management judgement. Regardless of what the score, you may have other compelling business reasons for making a decision either in favour of or against offshoring.

About the Author
Sath is the author of the book, “Offshore Development and Technical Support - Proven Strategies and Tactics for Success”, a practical guide for executives trying to successfully launch and manage offshore initiatives. His experience in the industry spans 25 years. During the last 14 years he has focused on offshoring -- initially as a Fortune 500 corporation executive leading offshoring, then as start-up CEO utilizing offshore resources, and now as author and consultant. For more info, www.gdcinc.biz or sath@GDCInc.biz (408) 865-0474.