Realizing the Value of Offshore Sourcing - MISRC · Realizing the Value of Offshore Sourcing Praba...

Compressing the time to sustainable cost savings.™

Private & Confidential

September 10, 2004

Realizing the Value of Offshore Sourcing

Praba ManivasagerGeneral Manager, Renodis Global Services,

Analysts International

Analysts International ©


Agenda

• Offshore sourcing is mainstream

• Offshore comes with strings attached

• Increasing your odds of offshore success - A step by step guide

– Strategy & Planning– Solution Design– Implement & Transition– Manage & Optimize

• Key Take- aways

• Q&A

• Best Practices

• Risks and Pitfalls

• Case Studies

• Sample Deliverables

• Key Criteria

• Measurement & Analysis


Renodis Background

• Founded in early 2000• Offices in Minneapolis, New York, and Chennai, India• Focused exclusively on offshore sourcing of BPO and IT services

from India• Vendor neutral services• Specialists in the full offshore outsourcing lifecycle including planning,

design, implementation, transition, optimization and management• Assist organizations with the challenges faced onshore (alignment of

domestic organization) and offshore (service delivery)• The foundation of our offering is to assist organizations with the

challenges in the near-term to become self-reliant in the long-term• Recently acquired by Analysts International (NASDAQ: ANLY) in

November 2003

Renodis is a leading offshore advisory and management firm positioned to assist companies maximize ROI, compress time to cost savings and minimize risks of moving business operations offshore.


Focus of This Discussion

• Practical ideas for successful offshore sourcing• Sourcing of services from offshore locations• Primarily IT related services with some BPO• Most favorable location for offshore sourcing of services – India

(with brief discussions about other locations)

Out of scope• The outsourcing industry • Sourcing of products from offshore locations• The political and social ramifications of offshore outsourcing


Offshore Sourcing is Mainstream

• The global outsourcing spend was $320 billion last year and in 2005 it is expected to be $585 billion and $827 billion in 2008.India's share in total IT spend will be 3 percent. -- Secretary General of UNCTAD

• 2.3 percent of total IT software and services spending by U.S. corporations in 2003 was devoted to offshore outsourcing activities. That figure will rise to 6.2 percent in 2008, the study says. During that same time period, total savings from offshoring are expected to climb from $6.7 billion to $20.9 billion. -- ITAA

• The cost savings and use of offshore resources "lower inflation, increase productivity, and lower interest rates. Thisboosts business and consumer spending and increases economic activity. -- ITAA


Offshore Sourcing is Mainstream – cont.

• The benefits of offshore IT outsourcing added $33.6 billion to real gross domestic product in the United States last year. By 2008, real GDP is expected to be $124.2 billion higher than it would be in an environment in which offshore IT software and services outsourcing does not happen. --ITAA

• The "incremental economic activity" from offshore IT outsourcingcreated more than 90,000 net new jobs in 2003, and is expected to create 317,000 net new jobs in 2008. -- ITAA

• Shipping software and IT services work abroad leads to higher real wages for U.S. workers through lower inflation and higher productivity, according to the study. Real wages were 0.13 percent higher in 2003 and are expected to be 0.44 percent higher in 2008. -- ITAA


0.33

*Estimate based on historical U.S. reemployment trendsSource: McKinsey Global Institute

Offshoring Actually Generates Greater Value for the Global Economy.

• Taxes ($0.04)• Revenues ($0.20)• Local suppliers

($0.09)

. . . delivers value to India . . .

0.67

• Cost savings ($0.58)

• Goods sold ($0.05)

• Profits from Indian ventures ($0.04)

. . . brings returns to U.S. . . .

1.45-1.47

. . . and makes the global piethat much bigger

0.45-0.47

. . . creates new value from re-employing U.S. labor* . . .

$1 previouslyspent in U.S., now offshored to India . . .

$1.00

The United States is reaping the largest benefits from outsourcing, with $1.12 to $1.14 of every $1.45 to $1.47 in value created coming back to U.S. citizens through lower prices on goods and services and increased business sales and profits.


How Offshore Benefits the Twin Cities economy

• Global Insight, economic consulting firm, estimates that 1,854 jobs were created in MN as a result of foreign outsourcing in 2003, and grow to 6,700 by 2008.

• Donaldson’s General Manager: "If we didn't follow the [trend], we'd be out of business.”

– In Donaldson's case, the company now has twice as many workers in China -- 2,500 -- as the 1,100 it has in Bloomington. The Chinese operation not only has allowed Donaldson to keep making a product it no longer could make at a profit in the United States, it also has helped boost the company's Minnesota employment, up by 400 people since 1990.

• After the 9/11 terrorist attacks slashed demand from the hotel and airline industries for its software, Bloomington-based Integrated Decisions had to cut costs. By outsourcing offshore, Integrated Decisions saved several million dollars due to lower wages, cheaper real estate and a "tax holiday" granted by the Indian government.

• "I think it's almost a certainty we would have had to close the company, had we not had the ability to move these jobs offshore when we did, in response to a crisis," Robinow (CFO) said. "The company would not be here and the 50 jobs that we now have in the United States wouldn't exist.“

• In Minnesota and six other Midwestern states, fewer than 1 in 10 of the workers laid off lost work to someone overseas – US Bureau of Labor Statistics


Benefits of Offshore

• Cost savings • Faster Time to Market • Just in time skilled resources • Higher quality• Redirection of internal resources• Scalability • Shareholder value

Studies show a benefit to the US economy of $1.12 for every $1 spent on offshore services


Offshore comes with strings attached


Known Issues

• Communication and cultural related problems• Mismanaging across time zones• Process gaps• Steep learning curve associated with offshore initiatives• Mismanagement and definition of SLA’s and contracts • Improper planning and analysis• Insufficient governance model• Lack of proper work transition• Poor project tracking and monitoring• Overlooking vendor management• Mid-handling change management


Known Issues – cont.

• Quality and time issues due to cultural differences, lack of business knowledge and distance

• Data security if appropriate measures are not considered/implemented

• Cost over-runs/hidden costs associated with transitioning and offshore management

• Aiming too high, too fast before the model has been proven

• Poor project management due to lack of offshore project management knowledge

• Internal backlash and lack of support


Show Me the Savings!

Offshore companies often advertised cost savings of 40-60% when moving work offshore.

Through Renodis research, and application of our Total Cost of Offshoring™ (TCO) Model which quantifies actual savings, studies have shown that companies who have learned to offshore efficiently and manage hidden costs often save 20-30%.

Several companies have seen little or no savings!

Myth: Low Bill Rate = Lower Overall Project Cost

Truth: Low Bill Rate ? Lower Overall Project Cost


Increasing the odds of offshore success: A step-by-step guide


Renodis Global Services Methodology

A four phased approach to implementing a successful offshore program.


Step 1: Strategy and Planning

The key to any successful offshore program is a plan that is aligned with the overall business strategy of the company.


Step 1: Strategy & Planning

Leading Indicators : 1) Offshore has been identified as a key component of corporate

strategy.2) Competition is using offshore sourcing successfully.3) Rogue offshore projects underway within business units.4) You’ve been assigned as the offshore manager.

Key Takeaways : 1) How to develop a business case for offshore sourcing2) How to develop an offshore sourcing strategy3) Understand the various operating models for offshore sourcing4) How to develop momentum and enlist support for offshore sourcing5) Learn the difference between offshore, nearshore, bestshore etc.

Output:A detailed Offshore Roadmap and execution plan


What to outsource?

+Assets IT Management+

AssetsPhysical Infrastructure+ Telecommunications Data Center Business Process

Outsourcing (BPO)ApplicationOutsourcing

Outsourcing Continuum

Application Maintenance & Development (AMD)

ApplicationSupport

Application Strategy & (Bus.)

Architecture

ApplicationPortfolio

Management

ApplicationConversions/

M&A Integration

ApplicationEnhancement

ApplicationDevelopment

& Implementation(Custom + Pkg.)

ApplicationMaintenance

What can be moved offshore? Where do I start?

Application(Technical) Architecture


Country Comparison

According to the a McKinsey & Co. study, India provides the highest quality resources at the lowest cost.

– 400 of Fortune 500 companies outsource some software development to India– India has 80% market share of offshore outsourcing market– India has 32 out of the 58 companies worldwide who have achieved SEI CMM Level 5– Cost advantage – Active government support/

Tax-free software exports– Maturity– Large, skilled, English speaking

engineering scientific base, second only to the US

– 12 hr time difference Hungary

India

MalaysiaPhilippines

ChinaRussia

Israel

Singapore

Mexico

Low High

LowH

ighQ

uality

CostSource: McKinsey Analysis


Comparison of Operating Models

Ability to share business and financial risk

Ability to manage and control complex business processes

Knowledge required of offshore country

Ability to integrate with onshore processes

Training of offshore resources

Due diligence required

Regulatory hurdles

Time to deploy solutions

Capital commitment

Long-term cost savings

Short-term cost savings

AcquireSubsidiaryBOTJVODCOutsourceCriteria

Legend = - Low - Medium - High


Offshore Governance Model

• Strategic direction and oversight• Financial stewardship• Sponsorship of strategic initiatives

• Vendor relationship (onshore/offshore)• Performance dashboard• Key operational issues• Finance and budgets• Enterprise-wide initiatives• Service Level Management

• Project prioritization• Project management• Process and technology evaluation

ExecutiveCommittee

Program Management

Office

Business Unit Steering Committee

In an effort to maximize cost savings, many organizations fail to dedicate resources to successfully manage an offshore initiative. It is recommended that organizations spend between 2-7% of the contract valuein performing management activities.


Case Study: UK Based IT Services Company

The client offers a range of award winning, innovative products and world-class services in the areas of application services, infrastructure management, enterprise software products and business process outsourcing. They operate globally, with operations in Europe, the Americas, and Asia; with offices in England, India, The Netherlands, Russia, Scotland, Sweden and The United States. The client engaged Renodis as strategic advisors to help them formulate their India strategy and to facilitate a series of acquisitions in the Indian marketplace. We provided them with the following services:

? Requirement definition

? Strategy formulation

? Business planning

? Prospect identification

? Valuation analysis

? Hosted site visits

? Deal structuring

? Due diligence reviews

Client Benefits

? A strong understanding of the vendor landscape in India across offerings, industries, valuations, and size

? Review of each prospect on valuation metrics and operational characteristics

? Understanding of negotiation tactics and options to integrate acquired company with current operations


Step 2: Solution Design

For companies that are outsourcing, a solution design involves finding the right partner and putting together a win-win outsourcing agreement. With over 1,000 IT and BPO vendors in India vying for your business, the selection process can be complex.


Step 2: Solution Design – (outsource to vendor)

Leading Indicators : 1) Offshore strategy mapped out2) A business need is eminent3) Business units looking for cost control mechanisms

Key Takeaways : 1) Establishing RFI criteria2) What to look for in site visits3) Technical and Business Due Diligence4) Contract Negotiations and Service Levels

Output:Signed agreement with 1 or 2 offshore vendors


Vendor Selection - Process

• Define offshore requirements and form basis for evaluating potential partners

• Create an initial list of qualified vendors using Vendor Intelligence DB

• Draft RFI/RFP and distribute to vendor list• Manage response process and vendor communication• Evaluate responses and rank vendors using vendor evaluation

framework • Host offshore site visits with short-listed vendors• Perform detailed vendor due diligence • Define service level agreements• Negotiate outsourcing contract


Vendor Selection - Criteria

• Financial Stability• Ability to Provide Staffing• Depth of Technical Skills• Breadth of Technology Expertise• Software Development Process (i.e. Test Environment, Quality, Reporting,

etc)• Flexibility • Innovativeness• Engagement/ Account Management• Level of Commitment/ Exclusivity • Management – experience, longevity with company, vision, responsible

growth• Culture – compatibility • Employee satisfaction – benefits, openness, work environment• Nimbleness – adapt to market conditions• Willingness to work together– flexibility, value of relationship• Innovativeness with relationship• Due Diligence – Business and Technology


Best Practices – Service Level Agreement

• You can only manage what you can measure

• Involve business managers in SLA development (i.e. quantify business impact of sub par service level)

• Establish a ‘warm up’ or transition period before measuring

• Communicate excessively, establish escalation protocol

• Build in flexibility to change SLA criteria based on changes in business needs

• Establish achievable SLAs based on internal history and vendor capability


Case Study: $350M IT Services Provider

A $350M IT and creative services provider engaged Renodis to assist with defining and implementing the company’s offshore strategy. We provided the following services to the client:

? Strategic guidance? Operating model analysis? Business planning? Partner selection? Structuring relationship? Pricing negotiation? Integration of offshore into service portfolio offering? Sales force training? Offshore recruiting

Benefits to Client? A fully operational service offering that they could take to their clients? Ability to compete in a cost sensitive business environment and create a

competitive advantage? An offshore mature sales force that understands the offering and its benefits

beyond cost savings? A dual-shore partnership that involves risk-sharing and ‘best-shore’ task

allocation


Case Study: $250M ERP Software Vendor

A $250M ERP software vendor, was looking to significantly reduce R&D costs by developing offshore capabilities. The company engaged Renodis to help executives make decisions on the appropriate course of action. The project included:

? Strategic advisory? Business planning? Country selection? Partner selection? Operating model analysis (JV, acquisition, Build-Operate-Transfer, Outsourcing)? Hosted vendor site visits? Offshore feasibility analysis across entire product line? Financial modeling? Operational and financial due diligence? Contract negotiation? Deal structuring (build-operate-transfer)

Benefits to Client? Cost savings of 30% on activities across the development lifecycle? Best-shore product development practice? Ability to grow individual business units by using offshore as a center for

integrated services? Reduced time-to-market through multi-shore development? Increase in professional services revenue by freeing up product specialists


Step 3: Implement and Transition

Once an agreement is in place, both the internal organization and the vendor have to prepare before work can be transitioned. The first 120 days of offshore relationships are the most trying and several steps can be taken to reduce the risk of failure.


Step 3: Implement and Transition

Leading Indicators : 1) Signed agreement

Key Takeaways : 1) Establish Offshore PMO2) Align Internal Organization3) Use Offshore Viability Process to select projects 4) ‘Grow’ offshore project managers5) Measure and report

Output:Successful transition. Steady state reached. Minimize backlash


Organizational Change Management

• Executive commitment at the highest level• Educate executive leadership on strategic importance of offshore

initiative• Two-way cultural orientation• Identify discrepancies and similarities among corporate cultures• Targeted workshops and seminars for all stakeholders• Implement strategy to retain key personnel and contractors• Carefully planned internal and external communication (over

communicate)• Implement governance structure• Manage results not resources• Tie compensation to offshore success

The single largest barrier facing organizations as they pursue offshore outsourcing is the challenge of internal organizational change. Often companies under estimate this factor resulting in unexpected cost over runs.


Program Management Office (PMO)

• The Program Management Office is a strategic entity that is formed at the corporate level. They come in various sizes and structures but overall they cover the following areas:

– Project Support: Provide guidance to managers in business units– Project Management Methodology: Develop and implement a standardized

methodology– Training: Conduct training programs as required– Home for PM’s: Maintain a central organization from which PM’s are loaned out

to business units– Internal consulting: Advise employees about best practices– Software tools: Select and maintain tools for employee use– Portfolio management: Establish portfolio of projects and allocate resources

accordingly

• It is important for the structure to closely follow the company corporate culture in order for it to successful. However, they are not a quick fix to the organizations problems and they do not deliver immediate savings.

“37 percent of those who have had a Project Management Office for less than one year reported increased success rates, those who had been operating one for more than four years reported a 65 percent success rate increase.” -- CIO Magazine & PMI Institute


Validation of PMO Structure

• A properly structured PMO will help ensure:– All projects are managed and controlled by trained and experienced ‘offshore

mature’ project managers– Activities, knowledge resources, human resources, and tools are organized to

encourage reuse to prevent duplication of effort– Project quality is continuously monitored and areas of risk are regularly identified

and mitigated– Processes are consistent across all projects within the program– Cost, quality, scope, and issues are effectively communicated both within

Discover and with the vendor organization

A Project Management Office, including it’s goals and processes, should be a subset of the PMO, and needs to be integrated and aligned properly.


Offshore Viability Process

• Organizational experience with offshore

• Process maturity

• Business criticality

• Size of project or process

• Level of complexity

• “Packagability” of tasks

• Technical environment

• Offshore vendor skills

Sample CriteriaSample Criteria OutputOutput

Client Client Offshore Offshore

ReadinessReadiness

ProcessProcessDetailsDetails

Offshore Offshore Delivery Delivery

CapabilitiesCapabilities

Chance for Success

Reward

Process D

InputsInputs

Renodis Global Services Offshore Viability Process allows each individual process/ project to be fully understood and reviewed before segmenting what is beneficial to be transitioned offshore.

Process A

Process B

Process C


Work Transition Model

• Initiate: Team building, training, client/product knowledge• Co-Locate: On-site operations, environment/system knowledge• Assess: Progress, adjustments, balanced scorecard• Remote Pilot: Identify/resolve issues• Offshore Pilot: Real offshore, validate/update processes

Initiate Co-Locate

Assess RemotePilot

OffshorePilot


Training and Mentoring of Project Managers

• Project Managers are essential to the success of an offshore project, and PM’s who have a strong background often don’t realize the need to be versed in offshore delivery

• The training sessions led by offshore verse project managers will help the onshore project managers better manage the offshore initiative by addressing the following topics:

– Onshore expectation management– Process expertise– Quantitative measurement and analysis– Conflict resolution– Cultural awareness– Communication skills– Workflow management– Relationship management– Vendor management– Scope/change management


Knowledge Management

• Knowledge transfer between an onsite and offshore team is vital to the success of transitioning a project offshore. The following is a process that can assist in transferring knowledge. Shadowing of resources by allowing the offshore resources to visit onsite, and then using a train-the-trainer approach at the offshore location can help the project become successful while helping it stay within budget.

• Gather existing documentation from all sources (company repository, IT resource, business end-user)

• Analyze and understand all existing internal processes relevant to the project

• Gain an overview from the IT resource or group, and the business end-user

• Consolidate understandings, present to IT and business user if time permits

• Identify deficient areas and refine

• Conduct training with group members as required


Performance Management & Reporting –Measurements and Outcomes

• Some Key Performance Indictors for Performance Monitoring include:

• These Key Performance Indicators will quantify savings from offshore through the following reporting mechanisms:

Schedule Variance

Productivity Index Cost Efficiency Index

Calculated Estimate to Complete Cost Performance Index

Schedule Efficiency Index Cost Variance

Scheduled vs. Actual Effort Variance Summaries

Productivity Summaries Earned Values

Estimates at Completion Deliverable Completion Status

Estimates to Completion Planned and Actual Dates


Best Practices: Communication

• Communication is key to a sourcing initiative, and when sourcingto another country, key decision makers must realize that it is vital to add additional resources to the project management and oversight team to ensure effective communication. Establishing an offshore PMO to assist as the initiative scales often increases the chance for success

• Document all communication protocols and escalation channels, and include during all training sessions

• Clearly define and document all roles and responsibilities

• Ensure that the communication channels allow for variances in culture and communication skills

• Set a governing communication plan to ensure constant & consistent communication


Sample Performance Monitoring

Many offshore vendors have similar proprietary tools available, below are screen shots from Niku 6…


Step 4: Manage and Optimize

Even after an offshore initiative has reached steady state, organizations must ensure that they are properly monitoring, analyzing and optimizing service delivery.


Step 4: Manage and Optimize

Leading Indicators : 1) Signed agreement

Key Takeaways : 1) Total Cost of Offshore (TCO)2) Vendor Relations3) Measuring success 4) Improving cost savings and quality

Output:Improved cost savings. Increase breadth of outsourced functions.


Total Cost of Offshoring (TCO)

• Comprehensive cost model for offshore application development and maintenance projects

• Captures cost elements in every stage of the application development & maintenance lifecycle including:

– Start-up (or set baseline to measure against)– Requirements Analysis– Design– Development– Deployment– Enhancements– Maintenance– Training

• Allows companies to understand how much an offshore project is costing above simple bill rate calculations

• Upon completion of analysis, companies can closely evaluate areas in which significant costs are added to TCO and take specific actions to reduce

• TCO model includes both quantitative factors (e.g., bill rates) and qualitative factors (e.g., onshore/offshore communication effectiveness)

• Using the basic framework, a TCO analysis needs to be customized for a particular client and project situation

The Renodis TCO model allows organizations the ability to calculate their true offshore costs.


Total Cost of Offshoring™ (TCO)

Total Cost of Offshoring™ (TCO) is a comprehensive costing tool, areas of measurement include:

– Bill Rate– Communication– Quality– PMO Alignment– Infrastructure– Project Management– Relationship Management– Change Management– SLA Management– Performance Management– On-site/Offsite Ratio– Security costs

Once the TCO analysis is completed a root-cause analysis is needed to identify areas of improvement such as:

– Strategic Alignment– Budget– Portfolio Assessment Process– Global Procurement Process– Scalability– Change Management– Vendor Assessment– Need for Vendor Oversight

The above component measurements are translated into a blended Bill Rate to allow companies to understand their additional costs for offshoring.


Cost of Delayed Implementation

1 Year to Steady StateBill rate: $30/hrTime to 100 offshore steady-state resources: 12 months3 Year Project Cost: $18,000,000

2 Years to Steady StateBill rate: $45/hrTime to 100 offshore steady-state resources: 24 months3 Year Project Cost: $24,000,000

$4041010Hybrid – 2 years

$304410Hybrid – 1 year

$20444100% Offshore

$50101010100% Onshore

Fully Loaded Hourly Cost

Year 3 ($M)Year 2 ($M)Year 1 ($M)

Cost of delayed implementation to be amortized over 3 years: $24,000,000 - $18,000,000 = $6,000,000


Maximizing Relationship with Vendors

• Avoid drawing lines between customer and vendor—one team, one vision, one success

• Establish trust as early as possible• Expectation management is critical• Regularly gather, analyze and communicate information about costs and

performance • Jointly develop strategies for continuous improvement of outsourced services• Carefully perform knowledge management and transfer activities; assuring that

what has been learned in initial outsourcing actions is utilized to assure smoother implementation in future extensions

• Benchmark against industry & other vendors regularly; adjust periodically

ManageOffshoreSourcing Strategy

VendorSelection &

ContractsImprove

Sourcing Strategy Vendor Management

Offshore Sourcing & Vendor Relationship Management

Set up &Launch

25% 50%25%

Focus on Vendor Management:

Typically in the first year companies spend 40% on vendor selection, 40% on agreement and SLA and 20% on vendor management.

In the offshore context, we recommend 25% vendor selection, 25% on agreement and 50% on vendor management


Win-Win Vendor Relations

Long -term success depends on establishing mutually beneficial relationships; over time, the relationship and workflow processes supercede contractual details.

Phase 1

Evolution of Relationship

OffshoreValue

Contract Mgmt

Phase 2

ContractMgmt

Phase 3

ContractMgmt

Maximize Value

of Offshore

Source: Gartner, Renodis Analysis

RelationshipMgmt

RelationshipMgmt

Relationship Mgmt


Case Study: $200M IT Service Provider

Client engaged Renodis to assist with the legal and operational clean up an offshore recruiting center in India inherited from a past acquisition. Client wanted to transition this entity into a new operating unit. Renodis assisted with:

? Statutory and regulatory guidance? Obtained FPIB and RBI clearances? Facilities management? Offshore recruiting? Operational Management? Assistance in finding 3 rd party contractors? Business Planning

Client Benefits? Brought the India business unit back on track and in-line with organizational

strategy? Strong partnerships for post-Renodis operational stability? Recruited resources that helped realize cost-savings through India

organization rather than be a cash burn


-- BREAK --

• "The world actually passes you by about every three months in this field of outsourcing, and you need to hire someone who is current with it to help you. I used to go through trial and error with bits and pieces of HR functions before. But now that I've done a deal using a consulting firm, never again would I do this without expert help - even on a renewal. From a cost standpoint, they were invaluable to me for the Request for Proposal (RFP), the implementation details, and the negotiation of the contract." (HR Manager for F500 firm)

• A survey of buyers of global outsourcing services found that risk can be reduced by 50% through the use of sourcing advisors. (Ross Research)

• With a growing need to cut costs, companies are expanding their supplier base to offshore location such as India. The vendor due diligence processes are time consuming and costly. Also, due to the distances, it becomes difficult for the prospective customer to verify the details provided by the supplier in the RFI/RFPs. Thus, companies use offshore outsourcing consultants to:

– To reduce the time and costs of identifying the vendor, as well as reduce the overall cost of procuring the services

– To get assurance of the quality and the delivery capabilities of the vendors

– To reduce the risks of experimenting with “unknown” vendors

– To appropriately structure the Service Level Agreement (SLA) covering pricing and performance clauses (Merrill Lynch)

Outsourcing advisors can play a valuable role in the outsourcing process…


Strategies for Maximizing Offshore Benefits

• Understand and manage hidden cost elements– Several ‘soft’ costs will erode savings– Assume additional overheads

• Execute fast and transition large volumes– Move from pilot to production quickly– Small projects don’t justify the risk and overheads of offshore

• Focus more on project management than vendor management– Offshore requires different project management skills– Don’t rely on vendor, hire or train your own project managers– Manage outcome not resources

• Get executive commitment and align organization– Set savings and investment expectations


Keys to Success

• Offshore outsourcing isn’t easy, takes time• Understand why you are going offshore• Need strong senior management commitment (both client and vendor)• Select your vendors carefully, think long term• Not too many, be important to each other• Senior management to senior management relationship• Involve vendor in the planning process• Give and take, flexibility• Shared responsibility, credit and blame• Solicit and accept vendor input• Onsite vendor visits to get to know team• Dedicated vendor liaison/coordination role• Keep negative experiences in perspective• Conduct cross-cultural training early, both client and vendor organizations• Apply team building concepts• Client organization contributes to lack of offshore success• Strive for continuous improvement!!


A Possible Future?


Thank You

Praba Manivasager612.290.5886

[email protected]

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