I started in the offshoring/nearshoring/outsourcing market in 2005 and in that year, I already heard people share negative stories about offshoring. Today, in 2012, this is still the case, maybe even more, as more people have experience. It surprises me that there are so many cases where people get a negative experience.
But at the same time, the size of the markets grows like a rocket and companies offering offshoring and outsourcing become massive. Infosys started little more than 20 years back and has over a 100.000 people working for customers all over the world.
In Eastern Europe the same happens in the last decade, some companies grow to several thousand people serving Western European customers. So there are also many positive experiences, otherwise outsourcing would not exist. What is the underlying reason?
I believe there are several reasons:
1. Offshoring is a relatively new phenomenon. So there are many people without experience in managing remote people, who decide to outsource projects. And there are many providers who don’t have a clue how to manage remote relations. And software projects regularly have results that were different from expectations. Adding language distance and cultural distance to this doesn’t help. And things need to go wrong before they start going right.
2. There are low quality offshore suppliers. The IT industry in many countries has grown rapidly. This attracts all sorts of people who want to earn a buck, providing services. Not all of them can be good at what they do.
3. Often companies choose the wrong model. The traditional way of developing software in another country is working project based, often with more or less fixed prices and a waterfall-approach. Requirements are extensively documented, sent to the ‘other side’, the ‘other side’ makes a planning and then we start. Four weeks down the road there is a milestone and that’s the next moment we have contact. No result. At least not what we expected. Let’s try again?
4. It is not easy to work remotely. You need to get used to it, you need to choose the right tools to support your remote work, you need a good way to communicate with each other and many more factors (I have written many articles on what is required to make remote work smooth). If you expect to get the right way of working within one project or within a few weeks, you might get a negative experience.
The question is, what do we need for an industry to improve upon the overall customer experience in outsourcing and offshoring?
My own insight, linked to each of the above points:
A. We need time and learning. The more experience one gets in managing remote team members, the better one gets at it. It helps to involve people who know how it works, who can help in choosing the right tools, the right way of communicating and help to overcome cultural differences.
B. Customers of course need to perform a good qualification when selecting a provider. We may need a quality label for offshore providers.
C. My experience is that the best model to make remote work is to have dedicated team members. Of course this is preaching for my own model, but I have tried and seen all other models and having people who are part of your team and feel connected and responsible, simply works better. You want to have a choice in the people that work for you and you want them to work hard to make your projects a success. And this works better if human beings have a common ground and feel connected to the same goal.
The agile or scrum based methods helps the industry too. The combination of having a dedicated team and a flexible model to build your projects, works…. if you have the right people, you know how to streamline the communication and you choose the right tools.
I would appreciate other insights. What do you think cause + solve the negative experiences and messaging?
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not enough qualified project managers who understand difference in language and culture. People start ofshoring because they dont have the funds, and they get crappy results because they don’t manage their projects well enough. They would have the same results with local developers, but dont have the money to work with them and screw up their unmanaged projects.
The number one reason is of course job attrition followed closely by quality control. Too often those in charge of an outsourcing project leave much to chance. Just as you would want to “manage” any outsourced manufacturing project in the states, it is even more imperative to have a trusted associate or team on the ground managing day to day activities wherever something is being outsourced.
Not everything should be outsourced and many are mired down with indecision when determining whether something should be considered for offshoring. Freight, startup costs, quality and IP protection should be at the heart of every analysis and decision.
There are a lot of negative offshoring stories and a lot of reasons, too. Outsourcing projects fail to progress and/or continue because both service provider and buyer have failed to set their foundations firmly. When I say, that includes the statement of work and clear objectives/goals. It is also possible that they have a mismatched partnership. You see, not all outsourcing companies are equal in terms of expertise and capacities. It is important to learn the areas that should be considered before outsourcing such as People, Processes and Technology. Looking into these areas will help you decide whether the outsourcing provider is the right partner for your company.
This is why we try to make our website as informative as possible, to give businesses the chance to make their outsourcing partnership work because, truly, outsourcing can be beneficial if done the right way.
My main problem with “outsourcing” is that it makes 1% of the population astronomically wealthy while reducing job prospects and opportunities for 99% of the population of the country whose jobs are “outsourced”. If you live in India, Malaysia etc and are rejoicing about your new “outsourced” job, don’t spend too much money celebrating. It’s only a matter of time before the “suits” find someone, somewhere willing to do your job cheaper. Then you, too, will experience the negative aspects of “outsourcing”.
Hi Hugo!
Managing the offshore team of specialists is quite different type of HR management if comparing with traditional process. I think one of the major reasons why peoplr get negative experience is because they are not ready for this difference.
Before hiring offshore team one should do some research in order to find out how it works better.
Because it is systematically over-sold, and very often ends up in problems instead of solutions…Many buyers mainly listen to the pros, not the cons, and many offshoring/outsourcing-sellers only present limited info about the cons. The result: Negative results and negative stories.
I guess that we outsource to easily and without being aware of the implications which in my opinion are due to soft inter-human and cultural factors. So we make a superficial decision based on the fact that ‘they’ over there speak good English and have a university degree and 4 years of experience and are therefore able to do the job.
Than after passing over the briefing of our project we relaxed and assume that the team will make a good effort all will turn out OK. When problems arise we become suddenly aware of the ‘distance’ between us and the team which is ‘far away’. Far away or distance has little to do with geographical distance but more with cultural distance different cultures live in a different reality. It’s much harder to explain the functionalities of a dating website to an IT person in Asia who thinks it’s logical that the oldest brother has the task to find a husband for each of his sisters. Maybe he can understand the concept but its unlike he will add value to this strange approach to find a partner. In contrary: the local IT person in Europe is already searching and comparing possible partners via similar tools and will have an opinion and some value to add. Read Hofstede about Cultural Differences and you will understand a lot more about outsourcing.
So I guess a lot of the negative stories about outsourcing are not about the outsourcing itself but about a lack of communication, understanding and awareness between different cultures.