10 Steps to avoid Offshore Outsourcing failures


Although offshoring is a mature business practice, it still has the potential to propel businesses to success today. In many cases, businesses tend to focus on outsourcing small and routine tasks since they are generally easier to undertake, thereby missing out on huge advantages in the process. Admittedly, many outsourcing consulting companies have built mature practices that can help find the right offshoring model and partner, but internal causes of offshoring failure does not receive sufficient attention. Below outlines some steps that can assist. These steps are relevant in offshoring even when building in-house teams.

  1. Clear Strategy & Consistent understanding of key objectives – There is a need to understand what are the key objectives of outsourcing. These can be, but are not limited to cost arbitrage, talent access, value creation, 24x7 customer service, go to market strategy for local presence for longer term play, etc. If its not clear what the organization is trying to achieve, they may end up creating the wrong structure, for example cost arbitrage has largely different setup needs versus value creation, in terms of infrastructure, leadership etc. It is also critical to be completely aligned on the objectives, because a lack of understanding can later result in lack of cooperation and support from within the organization

  2. Acceptance of Outsourcing/offshoring - Many failed outsourcing implementation attempts result from job insecurity, concerns about control, offshore country perceptions, cultural differences, communication gap, etc. Therefore, finding the right motivation or incentives can help overcome resistance to outsourcing internally, specially at the leadership level. Whenever changes occur, problems are a possibility; however, with everyone working together, proper solutions can be found

  3. Vendor evaluation & selection Capability - When selecting the right organization to outsource to, the offshoring organization needs to build adequate competency to evaluate based on their critical needs - such as business background, skill set, quality processes, infrastructure, speed to respond, domain knowledge, location, flexibility to meet changing needs, total cost, talent retention policies, data security & confidentiality, disaster recovery ability, customer references, use of subcontractors etc.

  4. Joint Migration Team – Companies need to engage champions who want to see this project succeed, and slowly convert the others. Engage them in a joint migration team, engage all internal and external stakeholders upfront in the process - key customers, key business unit leads - consulting, product managers, sales & marketing, operations, finance, HR etc. Once everyone is involved, support and commitment is more likely to follow

  5. Work Transition strategy - This would be a great opportunity for many organizations to take a fresh look at their internal processes, their product, tools used etc. Most offshoring companies have developed mature processes, in-depth knowledge of newer technologies, tools and methods. There could be opportunities to build the product from scratch, or redesign the process, but consider what would work best - Shift and fix vs. fix while shipping.

  6. Knowledge Sharing goes beyond trainings - Offshoring can’t be successful without transferring knowledge and information between the parties involved, its not a case of throwing stuff over the wall, and hoping it will all come together. Consider investing in practices like onsite exposure to offshore team, adequate handholding at offshore, going beyond basic training.

  7. Adequate Ramp Time, specially for business knowledge - Most offshore vendors would have very strong technical capability, but it will take them time to build understanding of the business side. The domain and business knowledge the internal delivery team acquired over years of proximity to market, customers, sales team etc., will take time to develop offshore, so always be prepared to plan for some buffer

  8. Governance Structure & Performance Metrics – Early warning systems, using a simple system like red, yellow, and green lights for periodic checks, and detailed monthly reviews would all be required. But Metrics which may have worked with an internal team, may no longer be adequate. Possibly engage experts who have offshoring knowledge to build adequate governance and performance metrics

  9. Performance incentives for offshore team – Build incentives for the team and offshore organization to achieve the key objectives. Example - consider adding small incentives for the outsourced team like a quarterly team dinner, awards/recognition program, and so on. Money is generally an excellent motivator, but for many, recognition is highly valued.

  10. Relationship Management - Always be ready for issues between teams. Disputes will most likely arise; however, the right attitude and right motivations, will make conflicts easier to overcome. Constant open communication, and investing in building relationship at all levels is key to long-term success.

As Azim Premji said “The important thing about outsourcing or global sourcing is that it becomes a very powerful tool to leverage talent, improve productivity and reduce work cycles.”  Keeping an open mind, willingness to learn and improvise, focussing on building common ground, along with these ten steps can ensure better success.