Chief Digital Technology Officer & SVP
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Offshore Reforms: Increase Rewards, Avoid Excess
Well, it looks like I have some very formidable competition when it comes to doling out offshoring insights. Geraldine Fox and Nigel Hughes of Compass share this fantastic piece on "The Seven Sins of Offshore Outsourcing" this month in Baseline Magazine. Aligning the common mistakes companies make when they offshore to the Seven Deadly Sins, the two authors and business executives have developed an excellent guide for how to avoid major offshore outsourcing pitfalls.
The article begins by pointing out the fact the businesses "that properly plan and operate offshore initiatives can reap substantially higher rewards" than the standard 15-20% offshore savings. At Harvey Nash, we consistently see our clients cost savings in the 25-30% range, and it's because we ensure clients have the knowledge and support needed to avoid "offshore sins," such as foregoing due diligence and rushing to offshore too much too fast. In fact, our offshore introduction model is founded on the pilot approach: we introduce the client to Harvey Nash offshoring through a small development pilot project. From there, the engagement grows to meet the client's IT, operational and bottom-line goals.
The Baseline article lists pride, lack of due diligence prior to offshoring, as the first offshore sin. I would add that this has become the least of the sins as fewer and fewer organizations today are guilty of it. I find that so many businesses have heard the horror stories of poor planning that most have become very good at taking time to research and plan up front or look to providers for support in those areas.
Fox and Hughes also explain the sin of offshore greed as businesses that fail to show concern for the offshoring organization and location (the people and resources doing the work offshore). I have seen first hand in our work in Vietnam how nurturing offshore teams with training, career resources and opportunities builds loyalty and greater performance (just as it does in any workplace).
A company should never view offshore outsourcing as a staffing solution 10K miles away. Instead, it must be looked at as a solution requiring the team to be trained and mentored in the same way an onshore team would be. If the offshore team is not nurtured, a company risks devastating turnover challenges, especially in offshore destinations with staggering turnover. For example India and China suffer turnover rates often soaring over 40% while Vietnam's turnover hovers around 5% and the Philippines sees rates around 10%.
For me, one of the strongest points of the article was the reminder to not throw problems at offshore providers and hope for the best--the article refers to this sin as lust/extravagance. Sending your problems overseas will not make them better, only more costly. Offshoring should be used to accomplish carefully outlined projects and functions with clear milestones and goals. The problems and challenges a business has internally should be fixed at home and close to the source so it can, as the article says, "reap" the true benefits of offshoring: lower salaries, greater efficiency, increased resources and expanded expertise.