The Allure Of Offshore Outsourcing   (Part 2)
Can it Work?


By Dr. Wendell Jones

Offshore outsourcing can be worth doing – that is what we reviewed in the last newsletter – if it’s done right. This is the second of a two-part series on managing offshore outsourcing. In the first, we discussed the special considerations that pertain to offshoring and the integration issues involved when bringing two organizations together in an outsourcing relationship. This second part discusses the relationship management team, information flow, documentation, meetings/reviews, and people factors.

Relationship Management Team

The relationship management team should be identified and appointed as early as possible but not later than the outset of the transition. People who participated on the offshore outsourcing evaluation and negotiating team are well versed in the details of the arrangement and should have already established relationships with supplier staff. So they are good candidates for the relationship management team.

The offshore outsourcing manager is involved in managing both the costs and benefits of the services in question. He or she is responsible for monitoring supplier performance and trying to balance the cost of monitoring against the benefits that monitoring brings. The typical department manager certainly monitors his or her department’s performance, but the ultimate arbiters are the customers or users.

In other words, the perspective and skill set needed by offshore outsourcing managers is somewhat different from those for internal department managers. Yet it’s common to automatically appoint the internal director to manage an offshore outsourcing relationship.

Necessary skills for relationship managers involve more than technical knowledge. They include business oversight abilities in monitoring requirements, approving changes and handling disputes; technical oversight abilities in planning technology architectures and setting standards; financial oversight abilities in monitoring costs and paying invoices; and contract administration ability to adjust the client-supplier relationship in response to changes such as new or declining business requirements.

Information Flow and Documentation

It is advisable to designate one focal point for receipt and distribution of information from the supplier. If the deal is a large one, a point of contact might be designated for each of the major functions. A focal point ensures that vital information is passed to the right people and helps with the management of the offshore outsourcing relationship. It is also wise to document the flow of information, including information exchanged in all meetings, so that questions and problems can be matched with responses.

Meetings, Reviews, and Audits

The communications that are essential for effective management of offshore outsourcing begin with regular meetings and reviews involving managers on both sides. The meeting and review schedule may be specified in the contract, and if not, a schedule should be established early in the transition phase. Be sure the relevant people from the supplier side are obligated to attend these periodic meetings or reviews and have authority to make decisions.

Audits are an important way of maintaining control over suppliers and ensuring the quality of supplier work. Now in startup, the audit procedures are put into action. It’s best if the contract specifies audit frequency and/or the conditions under which audits occur. If these are not identified in the contract, the client should set supplier expectations with respect to the areas to be audited, conditions, and frequency.

Managing People Issues

Personnel issues may be the most difficult to manage. Open communication with employees is usually the best policy. It’s hard to hide the fact that outsourcing is in the works, particularly large outsourcing deals. The atmosphere of rumor and recrimination that accompanies an outsourcing shrouded in mystery normally fuels morale problems. Turnover problems can be reduced if employees receive timely and accurate information. Acceptance also depends on the perception that management is acting in good faith. As talks and negotiations progress with would-be suppliers, communicate at least the broad outlines or scope of the possible offshoring arrangement.

An important part of planning for offshore outsourcing is to identify the groups of people who will be affected by offshore outsourcing and to decide what their roles will be during the transition. Planning also identifies people who should be terminated. A retention bonus is one way to keep people in the organization during the transition and longer if desired.

Terminated Employees

Employees who have been terminated will want to know the criteria for termination and that these criteria were fairly applied. They should receive outplacement services and ample notice before layoffs occur. In addition to counseling and help with resumes, job searches, and office resources such as phones, the customer organization might extend benefits after termination to help employees make the transition.

Change Control

It’s rare for an offshoring relationship to endure without some changes. Both sides must establish ways of addressing and controlling change. Large changes may require amending the contract, but many smaller changes can often be made within the framework of an existing contract. And changes can be very challenging when they involve more than one supplier.

Summary

It is true that many offshore outsourcing relationships fail or do not meet expectations. Using a resource experienced in offshore outsourcing during planning and implementation can mitigate the problems, and… if you follow the principles in the first article and set up the relationship management disciplines in this article, you will succeed and realize the benefits you anticipate.
 

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