I became
interested in offshore outsourcing after a brief experience with it this
summer. I wanted to know why outsourcing experiences are so hit and miss. I
recently finished a paper on managing offshore outsourced projects, and with my
research and personal experience I now better understand why so many projects
have failed to meet budget targets and other expectations.
The
problem begins with estimating the time and cost for an offshore team to work
on a project. It all seems so simple… pay $20/hour for services offshore
instead of paying a local employee $100/hour to do the same job. It’s a no
brainer, right? Outsourcing reduces employee costs and can therefore increase
potential project profit. How could this fail? How could a project being
outsourced for a fifth of the price end up costing more than having a local
team do it?
Where
inexperienced managers go wrong is they forget to accommodate the cost of
cultural differences, language barriers and the added time they will have to
commit to project initiation and maintenance. An offshore team cannot simply
replace a local team of the same size. Although technical skills may be
equivalent, an offshore team will lack the soft skills to efficiently
communicate with local management. Managers also underestimate the amount of
initial time and money they will have commit to get the project running. In
North America, it is commonly believed that sending detailed documentation to
the offshore team will clarify their roles and expectations for the project.
Wrong. Interpretations of the documentation are misunderstood and the project
can start off in the wrong direction quickly. It is important to always keep in
contact with the offshore team on a daily basis and monitor the work outcome
regularly. Face to face communication is the most recommended
communication medium as you have a visual sense of the confidence or
uncertainty in the team’s roles and assignments during the project. In an agile
environment, expenses can also accumulate because you either have to arrange
for the offshore team to directly associate with the client regularly, or have
local team members interpret potential changes to the plan with limited hours
for face to face dialogue due to work time variations.
What a
client envisions and what a client describes are usually different. Clients
often do not know exactly what they want so it is important that all three
partners, the client, the local management team and the offshore team know what
is expected from the project. Most often, the problem with offshore teams is
that the project is contract-based. Therefore, whatever the contract states
becomes the expectations of the offshore team. However, the offshore team has
to realize, and the project manager needs to clarify that the course of the
project may change as the clients desires change. It is expected of the
offshore team to follow up on changes to the contract identified along the way.
The
stories of success often come from experienced managers who have been
consistently working with offshore teams for quite some time. Most of them
agree that outsourcing is not a “quick fix” to budgeting issues and that most
projects will not see any benefits to the outsourcing process for about nine
months. The outsourcing process takes time to learn how to estimate project
costs effectively and account for hidden costs that will undoubtedly surface
along the way.
Here are
some final words of wisdom if you are planning on outsourcing a project:
- Be patient. The cost savings are not immediate.
- Managers or lead team members will still have to commit as much or more time to the project.
- Cultural differences and language barriers will always increase the cost.
- The right project has to be picked for the offshore team. Not just any project will work.
If you
have any experience or insight on offshore outsourcing, please comment on your
experience.
