5 Mistakes Made When Offshoring & what to do about them
The shared services & outsourcing network published a good list of ten mistakes that companies make when offshoring. Although all factors are relevant, by focusing improvement efforts on 5 of them, you will improve your chances of success by at least 80%. The list of ten from SSON can be read in the original article and I have listed the 10 factors below. I will shortly discuss the 5 most crucial and what you can do to change the odds.
Lacking a corporate offshoring strategy
This is where it all begins. Although corporate and strategy may sound heavy, especially for SME's engaged in offshoring, the most important first step is to make a conscious strategic decision. Why do we want to go for offshoring? What problem do we want to solve? What will we do onshore and/or offshore? Who will be accountable for what?
Developing a clear vision and a detailed offshoring roadmap will create more clarity and support from the management team. The decision is long term (it is not easy to turn back once started) and offshoring is not something you do overnight.
Not allocating sufficient time and resources to transition, insufficient ongoing management & Not having clearly defined roles and responsibilities
This is usually a result of the first ‘trap'. If you made a conscious strategic decision, you are likely to take the effort serious and allocate time and energy to make offshoring work. In the transition, some very crucial things need to be done:
1. Develop a strong offshore process; describe every step that will be taken by all people involved to produce the desired outcome.
2. Define clear roles and responsibilities; for each person involved on both ‘sides' it should be clear what his responsibilities and accountabilities are. These accountabilities can be attached to each step in the process.
3. Set up performance measures; performance indicators can show if you are reaching the desired outcomes and can identify the teams' strengths and weaknesses. Additional to the performance indicators, other feedback mechanisms could be created in which individual team members are assessed or in which both the onshore and offshore company keep up a ‘mirror'.
3. Create a structured meeting rhythm; as the SSON article describes, not every detail can be described in process documents. By ensuring regular contact between the team members, actions, responsibilities and outcomes can be more aligned and gradually improved. Any derailer can be identified at an early stage and bent to stay on track.
Not achieving a level of partnership with a vendor
The ideal as described in the article is ‘Strategies are shared and the offshore provider is an extension of the clients operation'. One aspect worth adding is the human side of offshoring. In many cases offshoring partnerships are started with official RFI's and RFP's, followed by professional negotiations and monitored with thick SLA documents. But wait, aren't we talking about services, which is by definition a people business? The human aspect is frequently ‘forgotten', while it's such a crucial ingredient for success.
By creating a human relationship with the key people on the vendor side, by visiting the vendor's office, going out for dinner and getting to know each other, the chances of selecting a vendor that ‘fits' are more likely. By being involved in the selection of each individual team member on the offshore side, you are more likely to select the right person for the right position. By regularly visiting your team or by asking them to travel onshore, the human relations are intensified, people will value each other more and will understand each other better.
Top Ten Mistakes Made When Offshoring according to SSON:
1. Not allocating sufficient time and resources to transition 2. Not making the appropriate choice between outsource and captive 3. Having insufficient disaster-recovery plans and backup 4. Skimping on the due diligence 5. Lacking a corporate offshoring strategy 6. Letting advisors and attorneys lead the negotiations 7. Not creating sufficient visibility around offshore operations 8. Insufficient ongoing management 9. Not having clearly defined roles and responsibilities 10. Not achieving a level of partnership with a vendor
Lacking a corporate offshoring strategy
This is where it all begins. Although corporate and strategy may sound heavy, especially for SME's engaged in offshoring, the most important first step is to make a conscious strategic decision. Why do we want to go for offshoring? What problem do we want to solve? What will we do onshore and/or offshore? Who will be accountable for what?
Developing a clear vision and a detailed offshoring roadmap will create more clarity and support from the management team. The decision is long term (it is not easy to turn back once started) and offshoring is not something you do overnight.
Not allocating sufficient time and resources to transition, insufficient ongoing management & Not having clearly defined roles and responsibilities
This is usually a result of the first ‘trap'. If you made a conscious strategic decision, you are likely to take the effort serious and allocate time and energy to make offshoring work. In the transition, some very crucial things need to be done:
1. Develop a strong offshore process; describe every step that will be taken by all people involved to produce the desired outcome.
2. Define clear roles and responsibilities; for each person involved on both ‘sides' it should be clear what his responsibilities and accountabilities are. These accountabilities can be attached to each step in the process.
3. Set up performance measures; performance indicators can show if you are reaching the desired outcomes and can identify the teams' strengths and weaknesses. Additional to the performance indicators, other feedback mechanisms could be created in which individual team members are assessed or in which both the onshore and offshore company keep up a ‘mirror'.
3. Create a structured meeting rhythm; as the SSON article describes, not every detail can be described in process documents. By ensuring regular contact between the team members, actions, responsibilities and outcomes can be more aligned and gradually improved. Any derailer can be identified at an early stage and bent to stay on track.
Not achieving a level of partnership with a vendor
The ideal as described in the article is ‘Strategies are shared and the offshore provider is an extension of the clients operation'. One aspect worth adding is the human side of offshoring. In many cases offshoring partnerships are started with official RFI's and RFP's, followed by professional negotiations and monitored with thick SLA documents. But wait, aren't we talking about services, which is by definition a people business? The human aspect is frequently ‘forgotten', while it's such a crucial ingredient for success.
By creating a human relationship with the key people on the vendor side, by visiting the vendor's office, going out for dinner and getting to know each other, the chances of selecting a vendor that ‘fits' are more likely. By being involved in the selection of each individual team member on the offshore side, you are more likely to select the right person for the right position. By regularly visiting your team or by asking them to travel onshore, the human relations are intensified, people will value each other more and will understand each other better.
Top Ten Mistakes Made When Offshoring according to SSON:
1. Not allocating sufficient time and resources to transition 2. Not making the appropriate choice between outsource and captive 3. Having insufficient disaster-recovery plans and backup 4. Skimping on the due diligence 5. Lacking a corporate offshoring strategy 6. Letting advisors and attorneys lead the negotiations 7. Not creating sufficient visibility around offshore operations 8. Insufficient ongoing management 9. Not having clearly defined roles and responsibilities 10. Not achieving a level of partnership with a vendor
