For years I have been trying to find the crucial aspects in offshore project management. Both in managing our own projects (during the period we also did fixed price projects for our customers) and in observing how our customers are handling it. My simple conclusion is: it’s not easy for people who are new to it and it takes time and patience. Maybe patience is the key characteristic of the project manager that eventually makes offshoring work smooth.

The first ‘how to’ revolves around People. To manage your team effectively, you have to get the right people in your team. This may sound obvious, but in most offshoring cooperations, the project manager on the customer-side has no influence on this.He gets the contact details of an account manager and a project manager on the supplier side, but programmers are kept ‘secret’ and are often even rotated based on the requirements of other projects (who on earth would do that you ask?…well, it happens more often than you’d even dream). Make sure your programming team members match your requirements in terms of skills in communication, coding quality, team work, analysis and personal skills.

Now in the ideal world with loads of time to prepare for cooperation, I would say the second most important is to establish a clear, effective Process. But I know that you want to get going, because you have an urgent project and you have to make a deadline. So the second how to in my opinion is: don’t focus on deadline and promises in terms of time and delivery, but focus on the technical problems. If a programmer creates a delay in your project, your natural inclination is to conclude that offshoring is too complex and the programmer is not good enough. You start asking the programmer and maybe also the project manager ‘when will you deliver?!’ > They will tell you ‘don’t worry, tomorrow it’s ready’ and of course tomorrow it’s not ready. The secret is: I have not met many project managers who showed different behavior, they all get frustrated and start blaming the programmer. Perfectly normal behavior. In my experience, when a programmer creates delay, it means he got stuck somewhere. And programmers have a pride in their work: they always think that they can solve the issue in the next hour, even in reality it might take them a few days. As a project manager, you have to find out the exact (technical) details of where the programmer got stuck. Drill down just as long as you have a complete understanding of the problem and then involve someone to help him out. Don’t stress him out with pushing for the deadline, it will have a reverse impact (more bugs because of time pressure, leading to even more frustration on your side). Manage on helping the programmer solve his problems, don’t manage on time and deadline only (of course you want to make that deadline, so does the programmer… there are more roads leading to finishing your project).

This second how to relates to another important question: should the project manager on customer side be a technically skilled person (maybe even a programmer) or a non-technical manager, who is apt at managing time and deadlines? My experience is that the best project manager understands technology. Ideally he can make code too, but at the minimum he should understand what the programmer is doing, he should know every detail of a functional and technical design and manage on the details of the project, not on the rough timelines. A non-technical project manager can’t help the programmers and won’t be able to solve serious problems.

As third: Process. I have written about this in previous articles and will continue to do so, because I believe in general it’s the second most critical success factor in an offshoring context. And especially in the project management context. If you don’t have a step by step description of ‘how we work’, how will you and your team know what to do next? What to do if we face a problem, whom to consult, how to communicate about it? Write down any aspect of the cooperation and keep on adjusting your process descriptions until you have the perfect process for your situation.

Bridge has extensive experience in making offshore cooperations successful. We try to use our knowledge to help our customers achieve more growth and more profit. If you want to know more about how to manage your offshore project, feel free to contact one of our offices near to you.

In an article about the common underestimation of the People factor in outsourcing deals, Joe Vales and Kerry Ann Vales make some points I couldn’t agree to more. Companies tend to send extended RFP’s to outsourcing suppliers and make huge lists of buying criteria, but such documentation frequently forget to really deal with people. As an outsourcer you want to have a match with everyone on the supplier side, both on the side of the account manager that you will frequently interact with, as well as the individual programmers or team leaders that will do your work. By focusing on the hard facts and nailing everything down into solid contracts, we forget about the soft factors, which have a much bigger impact on making outsourcing work. In the end of the day, no contract and no proven fact from the past can define the success in an outsourcing deal. It is the people working in the deal who decide if it becomes a success or not.

Some interesting statements from the article from Vales Consulting:

‘Nevertheless, service providers struggle to identify the people in the proposal who will run key aspects of the engagement. They consistently state that it’s tough in the RFP process to identify and hold the key executives who will run a relationship in six months or more when a contract is signed. Yet, the service provider still expects the buyer to agree to a five or 10-year contract based on the people in to-be-filled positions. It is crazy and a reason why many service providers lose the must-win deal. ’

‘This is an environment where a handshake is often more important than a detailed Service Level Agreement or a new technology platform. To succeed in this environment, an outsourcing service provider has to assign a sales and delivery team that can earn the respect of the small business owner and become part of his/her inner circle of trusted advisors.’

My personal experience is that most service providers fail to recognize this importance. Before I set up three captive centers for Bridge in Ukraine, Moldova and India, we used to cooperate with suppliers mainly in Ukraine. The general inclination is to skip all the preparation work and get on with executing projects as soon as possible. In many cases, I did not even know who were the people working on our projects, nor was I supposed to know, because there was an account manager who was my interface and if I had a technical question, I could speak to the project manager. What about the people doing the actual work? They are the most crucial aspect to do it right.

To create that solid fundament to make outsourcing work, we have to start with the People. Does the account manager whom I speak to gain my trust? Is he reliable and does he know how outsourcing works? Do I have an influence on the hiring process to build my team? Can I visit the offshore office to meet anyone who has an influence on my projects? A buyer needs to have a personality match with the supplier and should as well have full control over the decision who will join his team.

Mark Hillary, a British author writing about offshoring just posted an article that discusses the same topic. The article deals with jobs in England that are filled by people from other nations. In offshoring, the jobs ‘move’ to the other nation, but the result is the same.

I agree with Mark that one of the reasons why jobs are filled by foreigners are usually because companies can’t easily find the right people for the job they need to get done. While people in our own country don’t want to drive 50 kilometers to go to their work, people from Eastern Europe even move to our country to get that job and they are happy at it. Besides, we are all ‘Europeans’ and we together decided that we create a Union of countries. This touches the side of the equation that always moves me most: why do people think about ‘we’ and ‘them’? Why do we stick to our old beliefs based on the borders that our grand grand parents have drawn on a map?

In my view, we are all world citizens. It doesn’t matter whether I am Dutch, British, Ukrainian or Indian. Everyone in the world has a right to have a good life and a right to have a well paid job. If a company has a position to be filled and someone from another country is happy to work hard in that job, even at a lower pay, what is wrong with the company’s decision to hire that person? It’s pure rational behavior: get the right person at the right cost for any position.

We live in a new era. One in which labor is distributed on a global level. And it’s just the start. In a few decades, it will be common for any company to hire the right person from any place on earth. I believe we all have to become used to that idea and move away from ‘us’ and ‘them’.

The article deals only with IT outsourcing and describes that we won’t need huge amounts of programmers working on software development in India anymore. Everything will move into the cloud and software will be available from the cloud. Now I think the title attracts a lot of attention and that might be the author’s main goal. But isn’t outsourcing about something much more diverse than IT? Isn’t it a much broader movement that will shift the way labor is organized worldwide?

I see three main powers at work here:

1. IT outsourcing is the top of the iceberg

Somehow, driven by cost pressure and labor shortage, IT has been the ‘pioneer’ in international outsourcing. Companies have a long learning curve in mastering the skills needed to make offshoring work. IT outsourcing is by no means a simple business process. Outsourcing bookkeeping or other administrative tasks is simpler because it’s easier to describe what needs to be done. With the skills learned in IT outsourcing, the learning curve in having people from another country do other business processes for you will be much shorter. So companies will do just that: outsource any activity which can be done remotely with the use of an internet connection.

2. The transformation of companies into lean organizations with the lowest costs possible

The era of growing big multinational firms is over. Companies strive to focus only on their core strengths and outsource anything they can’t do well or prefer not to do. Companies will transform into an organization with an internal team doing what they do best and a network of external people around it. Value will be created by this network of people cooperating.

3. All that matters is the right person at the right price

Organizations have a core purpose, a reason for their existence. They need people to fulfill this purpose. And they prefer to have the right person to fulfill the responsibilities needed to produce the desired results. If I can chose between 2 people who are both ‘right for the job’ and one costs 50% of the other, which one will I chose? If a supplier offers me that he can do what I do myself more effective and at a lower cost, should I keep on doing it myself? Today, people have the mindset that a person should sit next to him in the office. Once people master the skills of outsourcing & offshoring, this mindset will change (and is already gradually changing). Offshoring will become a common way of fulfilling positions in a company and the bottom line will be to find the right person at the right price. Outsourcing in general will become natural for organizations and if an activity can be done better and/or cheaper by another firm, it will be done externally.

So the A.T. Kerney article might be right about the shifts in IT: (‘The outsourcing market is on the verge of experiencing its most massive transformation since the concept arose more than 20 years ago.’), but the impact of outsourcing and offshoring will be much bigger. It is not about IT, but about creating lean and profitable organizations with the right people at the right price.

Now I wonder: is this deal made because the Indian can’t say no or because of other factors? I have been faced with the same situation many times in the past (past, because Bridge learned that taking projects on a fixed price is very hard to manage in an offshore situation and hence we use our dedicated model to ensure success). And each time a customer asked me ‘can you do it for a lower amount of hours’, I was tempted to make a deal, just to get going. Isn’t this a natural habit of sales people? And if you have that programmer sitting idle, it’s tempting to just strike a deal and let him do the work. Of course, you can be sure the expectations are set wrong as you are very likely to spend more time than those 10 days estimated initially. But I would say this is a common problem in any IT project anywhere in the world?

The article claims that the ‘no’ saying affects the offshore cooperation between an Indian and a European company. The strange thing is that in my own practice, I can’t even recall a problem which was caused by someone in Bridge India not being able to say no. I lived in India for a year and even in daily life, my experience is not that Indians can’t say no. Somehow, when you spend more time with Indian people and try to understand the culture and adapt to it, you get used to their way of communicating (and vice versa). When someone in India wiggles his head, I can see whether he means yes or no (they make the same movement, but the meaning varies).

Whether it’s fact or fiction, I think the impact this cultural trait has on offshoring, has a solution: Preparation, selecting the right People and investing time in developing a clear Process (also see my previous article on the 5 P’s of offshoring: http://bridge-outsourcing.com/offshoring/wondered-key-success-factors-offshoring). I actually believe that once those three ingredients get enough attention, it doesn’t matter where you outsource: to a company next block or to India. You have to think about the ‘how’ and ‘who’ before you start acting. And once the cooperation gets going, it will take some time to adjust (the process will have to be improved step by step), but the good news is: many companies have gained substantial revenues by not saying no to outsourcing, but by embracing the opportunity, while paying attention to the P’s.

- Timeline. Outsourcing brought $12 billion to India in 2004. India has grown even bigger on this number since 2004 and many other countries have followed India’s example in the IT outsourcing field. These numbers will keep on growing for the decades to come.

- Timeline. In 2010 companies still choose price over quality (the below document is about the US, I believe in Europe this might be different) and companies are frustrated about the quality of work. In my opinion, there are 2 important things here. First, price is important at the moment because of the worldwide recession. In times of rapid economic growth, companies need people and outsourcing is a requirement for companies to grow as shortages in IT staff make it hard to find talent. Second, companies report frustration because global sourcing is still in its infancy. People need to gain experience in order to know how it works. As more companies outsource, more frustration is reported. As people gain more experience in the next years, outsourcing will become more normal, eventually making it normal practice in  any company.

- Models. Traditionally, most companies outsource projects or tasks. Especially in IT, it is hard to define clear requirements for projects, resulting in gaps in expectations between client and supplier. With big distances both physically and culturally, such gaps grow. Hence, the future of outsourcing will be in more direct models, where outsourcers either set up their own captive center (either through BOT or as direct investment) or directly manage a team employed by a supplier. Below this is also mentioned as ‘making things work’. Outsourcing projects is more complex than managing offshore staff directly (provided that the right processes are in place!).

- Types of services. IT has been the launching business domain in global sourcing. Sometimes I wonder why this has grown this way, as IT is more complex than many other business processes. Currently, BPO and KPO are growing substantially and I expect other fields to dominate the global sourcing market in a decade. It will become normal to outsource any task or activity which can go through a wire to the best fitting country or company.

- Impact on the economy. The figure shows that the US insources more services than it outsources generating a trade surplus. Similar numbers hold true in Europe. Even though a lot of offshoring-opponents believe the impact on an economy to be negative, the future will prove that offshoring facilitates the growth of the economy, resulting in wealth on both ‘sides’ of the equation.

Source: Focus.com

In my previous article, I wrote about personal values in the offshoring context. In this article I want to discuss the role of people in making offshoring work. Some questions related to this subject:

• Who are the people in my offshore team?
• How do I create support for offshoring among my people?
• Does the culture of my company match with the supplier’s culture?

Based on my experience with offshoring success and failure, I would say that companies that place an accent on the people, increase their chances. Let’s take a look at the three above questions.

Who are the people in my offshore team?

This is a crucial element in offshoring. Eventually, no matter how good you think your supplier is: the work is done by people and the supplier is as good as the people they put on your team. Even if your team is very big, you want to make sure that you have an influence on the selection procedure. Your people will have to cooperate with your offshore team and they should be happy to work together and to cooperate to achieve your goals.

I believe that any organization wishing to make offshoring work, should engage in the recruitment of the team members, by aligning interviews, performing tests and making sure the people ‘fit’ with your company.

How do I create support for offshoring among my people?

This question is hard to answer because every organization differs. In general, it is wise to engage the key players in the decision to offshore, from an early stage. The project manager who has to manage your offshore team should be among the supporters of the initiative. So is your management team.

The best starting point is setting out your vision and making sure everybody sees the same picture. Then define goals that you want to achieve within 1 year and goals that you want to achieve within 5/10 years. Everybody should see where you´re going.

Another important topic to address is the risk for people that they will lose their job. Many people believe that the logic outcome of outsourcing is that they will be fired. But do you really envision that? Do you create an offshore team to have extra capacity or do you want to cut down your costs and let some local people go? Do you move your current people to another job, will they have the same growth perspective?

Last but not least: let your onsite team physically meet your offshore team. You will see that as soon as they have drunk a beer together, they will start helping each other, producing better results and bringing you closer to your goals.

Does the culture of my company match with the supplier’s culture?

This last question should be asked early on in the supplier selection process. It is the basis for your cooperation, because if the cultures don’t match, you won’t have the right people on your offshore team and there will be no support from either side. Focus on the feeling you get when meeting your supplier, ask about their values, ask about the way they pay their offshore employees. Maybe you even want to interview a few people from their offshore centers to get a feeling of the company’s way of working.

I just wrote a comment on Computable, a famous Dutch IT newspaper; the article discusses a research from Ordina about the under estimation of the human side in outsourcing. Speaking about the human side of outsourcing puts two central subjects into my mind:

1. Focusing on people when organizing outsourcing

This brings questions like:

-           Who are the people in my offshore team?

-           How do I create support for offshoring among my people?

-           Does the culture of my company match with the supplier’s culture?

2. The impact of offshoring on your personal values

This subject deals with the human motivations as opposed to sound business logic:

-          Did you ever think about your feelings when thinking/acting on outsourcing?

-           Do you decide purely on rationality and numbers or is there also a voice inside of you telling you                     ‘let’s do it’?

-           What does offshoring add to your personal values?

I want to discuss the second subject in this article and will discuss the first one in my next article.

To me, business is intriguing; it’s exciting to see what people do to make a living, what ideas they implement to set up a business. But on the other hand it’s often boring to speak about business subjects that are so far away from my basic human needs (eating, sleeping, relaxing). Do I need to make all my decisions based on profit, on sound business logic, on achieving business goals? Isn’t it much more interesting to look at my personal values, to do something which makes me happy, brings me fun, to do something bold and exciting?

One of my personal values is adventure/entrepreneurship (those are synonyms in my personal perception). To me, offshoring is a big adventure. The first time I was having a video conversation with someone from Ukraine through skype, I thought it was so incredible. And still I believe it’s great that we have the possibility to cooperate with someone on the other side of the world. That borders have disappeared and it doesn’t matter if someone works for me from India or is sitting in my Dutch office. And that we are able to make offshoring work, to set up something and profit from it.

Another important value for me is love and openness. This may sound weird in a business environment (my colleagues also looked surprised when I named these in a value-definition meeting we did a few years ago), but it’s important to me. I spend so much time working with people that I like to feel love towards each other and to be completely open with each other. This value is also the basis of my curiosity to work with people from other cultures. The way people in the Netherlands deal with love and openness is completely different from Indian and Eastern European people. Opening up to other cultures gives me insights into my own believes and I learn from that.

And finally, I love to travel and live abroad. Offshoring gives me this opportunity and I travel to other countries regularly. Without Bridge, I would not have had the great experience of living in India.

Of course profit, process and performance are essential to make offshoring work. But I believe that humans sometimes tend to forget about their deep personal values in their business endeavors. I am very curious on how you think about this subject and hope you will share some ideas.

If you are working in IT, I think that you have pondered over this question somewhere in the recent past? Two or three years ago, when the economies were booming, the main question was ‘how can I attract the talent to let my company grow and provide my customers with high quality services’. The answer was not to be found in the local labor market, because there simply were not enough people. Today, with more supply on the labor market, companies think different.

Some facts from research

Our company provides services mainly to customers in Northern Europe. In a recent study of Nyenrode University, it is found that 35% of Dutch companies have already offshored part of their activities or are planning to do so.     Our head office is in The Netherlands, where our daily practice shows that many companies we speak to are open to the idea of having an offshore team. In Germany, where Bridge is also represented, the sounds are different. A big part of the people we speak to prefers to have an in-house team. German companies are reluctant to try outsourcing to distant foreign countries. Only one in twelve companies is planning offshore outsourcing in future. Every fifth Germany company has however already shifted operations to other European countries. (Source)

Have we forgotten what happened in every economic up cycle in the last decades?

In the Netherlands in 2008, there was a shortage of IT personnel of around 10.000 people yearly. This week, ICT-Office, published a report stating that as soon as the economy starts growing a little bit, companies will have difficulties filling their vacancies in IT. With slow economic recovery, the shortage of IT professionals will be 8.500 in 5 years. With a faster recovery, this amount can double to 16.000 people. The recovery might be close as another report announced that the demand of freelance IT personnel is almost on the same level as in January 2008.
The German market shows the same tendency; according to the Institution of the German Economy (IVW) there were 40.000 unfilled vacancies for IT professionals in February 2010, while in the same time there were only 33.000 jobless persons with the same qualification. For the 2nd quarter 2010 experts expect moreover an economic growth of 2.8% which will lead to a increasing demand of professional IT personnel. (Source)

To offshore or not to offshore?

I believe companies need to make a decision on an in-house team or offshore team in the light of the historical facts and future growth plans. Where it may be ‘easy’ to set up a strong team in today’s economic situation, it most probably won’t be in the future.

And yet another question comes in: what if you can save 50% on your IT department’s costs, would that be interesting? By setting up the team offshore, you ensure access to a big pool of talent and at the same time realize substantial cost savings.

You probably think ‘there is many other factors to take into consideration’? Yes, it is not only about money and finding the right people. You might wonder about the loss of knowledge? The complexity of communication and the cultural differences?

Knowledge loss: if you hire an employee or external person in your own country to develop for example a piece of your software, how big is the risk that he/she will leave your company? The risk is the same in any other country in the world (and yes, people say that attrition rates in India are very high, but if you work with a supplier which has a good policy and fair rewards, the attrition will not be as high as people say).

Complexity of communication and cultural differences: this is an area where one needs to practice and learn. The communication should be caught in a clear process where every person knows what is expected. Writing down clear requirements is important. There should be online tools to manage a project, store information. People on both sides should invest time to understand and respect each other (for me this is one of the most exciting parts of the whole offshoring field; I think everybody likes to travel and get to know other cultures?). But if you get to know the persons in the offshore team and frequently use skype to have a call, you will see that after a while it becomes normal and you understand the other person as well as the colleague next door.

Conclusion

The debate is more complicated than the above story and for each company or person, different aspects are important. I strongly believe that companies have a world to gain (cost savings, access to talent, flexibility, market access and much more) by building teams offshore. The sooner you start with it, the more time you have to make it work and leverage the results before all competitors do it. And apart from all the business considerations: isn’t it incredibly exciting to have colleagues in other countries, visit them from while to while and understand their cultures?

Very often, I speak to people who tend to generalize certain behavioral characteristics of people in the countries where we have offices. People speak about ‘the Indians’ or ‘the eastern Europeans’. In our business, the cultural differences have a major impact on the customer’s perceptions about the feasibility of outsourcing for their company.

There are many ghost stories going around in the market. Especially India is perceived in a negative way by many people. As India is the major outsourcing destination, it also receives the most publicity. If some offshoring initiatives don’t succeed (and this is reality, nobody in our business will deny it), people tend to think in general terms ‘outsourcing to India never works’ or even ‘outsourcing doesn’t work at all’. And if one hears or reads one story about a negative offshoring initiative, people tend to make conclusions that it can also never work for them.

But if one has not experienced working with a certain country, how can we make conclusions? If one has not worked with one specific company or even with a specific person inside that company, how can one decide it will not work? And if we have one or two bad experiences, does that mean that a ‘country’ or ‘outsourcing’ doesn’t work? Isn’t the risk to have such experience equal when we do business with a local supplier?

I strongly believe that the success is depending on the company and in specific the people that one does business with and not on the country only. In any country, there are people who are highly skilled, talented, productive, effective. And there are people who are not. No matter where the company is based. Culture does have an impact on how people operate and in offshoring there is no denying that these differences have to be bridged in communication, ethics, way of working and many other fields. It is the function of a company to offer world class services and those services can only be provided by attracting talent. If one outsources work to a nearshore or offshore provider, it is important to find a supplier who understands the cultural differences, is able to attract and retain talent and understands how offshoring can work for your company. But in the end of the day, deciding merely on generalizations about a culture or continent, doesn’t seem like sounds business logic.