Large enterprises are able to handle the IT needs of business with sizable in-house IT teams or they can afford to outsource IT to established large IT service companies. They are also able to mix outsourcing with offshoring and thereby enhance the overall value for business by using mix of strategy.
On the other spectrum small and medium enterprises rarely have the luxury of having a complete in-house team that can be self fulfilling in all aspects. Hence, they end up with an option to outsource number of projects with no long-term outsourcing plan. Outsourcing in some economies come at a reasonably high cost. Many SMEs opt for outsourcing offshoring to third party IT service companies in India, some with success some with failures or partial success. The failures and partial success cause worry and anxiety leading to fear for offshoring.
- The biggest cause of failures is poor offshore management rather than poor or not up to the mark technical teams. Even hiring a right resource and motivating him to perform or deliver as per specifications is more of a leadership or management issue in offshore geography. Technology is rarely the cause.
- Second most important cause of offshoring failure is outsourcing to a small unverified third party provider. The uncontrolled situation when added with greed leads to failure.
- Third most important cause is outsourcing with cost only as prime driver, thereby outsourcing at a very cheap unfeasible rate, leading providers to cut corners and put very low end resources that lead to ultimate failure.
- The fourth cause that often leads to failure or a distasteful experience is cultural difference, mostly occurring when a onshore manager starts dealing with technical teams directly without a cushion of experiences local manager who can deal with cultural aspects.
- The fifth cause is giving lowest importance to partner relationship and treating offshore provider as a vendors and not as a partner. A good relationship can multiply value manyfolds.
Whereas, most small and mid size companies are struggling to get the IT under their control, they are hardly able to think about offshoring as a solution. The offshoring remains an uncharted territory for most SMB size companies for uncertainties and fears. One of biggest gap that remains to be addressed is someone with knowledge about offshoring who can work with management team in SMB organization to control and govern the offshoring proposition.
Having a senior resource, who can bring in the subject matter knowledge of offshoring and related operational issues can be a highly advantageous and increase the trust level on offshoring resulting in to a measured value gain and success of offshoring endeavor.
The needs for offshoring amongst SMEs, may vary largely depending upon their stage evolution as well as type of business. Some Start-up organizations may just need a third party to develop a dynamic website with SEO and social media integration. Others may need for example a dedicated team to handle the continuous development and/or management of their e-commerce portal or a product that a start-up organization may have piloted and wants to move fast in market post pilot phase.
Whereas a small requirement may be handled by a third-party expert IT service provider using offshore outsourcing model, a requirement for continuous development and management of IT in an organization may be handled by setting up a dedicated team. Managing offshoring is needed in both the situations with a difference of short term outsourcing or project management to a long term offshore operation management in an In-sourcing model.
In offshore outsourcing model, an external subject matter expert (offshoring manager) resource can come on board with a SMB company to help manage the complete life cycle of offshore outsourcing. This may include managing offshoring in totality and on continual basis, or just drafting a RFP, search selection and identification of a third party provider through a fast tracked due diligence process. The offshoring expert works as part of management team of SMB organization and brings in value by way of using knowledge, controlling the outsourcing process and thereafter governance of the offshore outsourced project with measured service delivery.
Small and Mid size companies can actually look for a more medium or long term approach by having a dedicated offshore team and in such a situation the offshore outsourcing models starts converting into an Offshore insourcing model. The relevance of an offshoring expert management team takes a center seat as there is a need to establish a dedicated team, an offshore facility and provide offshore operations management on a continual basis. The expert offshoring team becomes an extension of the SMB organization in offshore geography and helps in running the operations with set expectations, targets and objectives. The expert offshore managers use best practices in offshoring mixed with their experience to achieve desired success. The offshore center so established and engaged by SMB Company becomes a branch office or project office with all controls in hand of parent company. The rules of operations and economies associated with such a setup are much the same as they are in an in-house team.
Use of internet tools helps in reducing the distance between the geographies. The integration of management teams and peer to peer interaction of development of IT teams is very akin to having a center in other part of your campus or locality. It is much more than a virtual branch office as in present times most official interaction even in same office are done using internet. Hence the external offshore expert or management team can be fully integrated with your in house management team.
The managed offshoring in both ends of offshoring life cycle i.e. offshore outsourcing and managed offshore development center brings in a huge advantage be easily extending the management of offshoring to experts by way of achieving the following:
- Delegating the task of offshoring or outsourcing to an expert.
- Mitigating all offshoring risks, including any legal risks.
- SMB organizations need to adapt less because offshoring managers are able to create a adaptable organization in offshoring geography, which adjusts to the needs and demands of the parent SMB company.
- Establishing the processes and measurable metrics for offshore operations.
- Managing offshore-onsite relationships between the teams.
- Leading and motivating offshore teams to desired productivity levels.
- Over all governance of the offshore organization.
Large businesses do resort to use of such external consultants or offshore experts. They however use big consulting outfits for such a purpose, which are mostly out of the reach of Small and Medium enterprises. Offshore service companies like Induri provide much needed help and support to SMB companies in extending the managed offshoring and making it affordable for SMBs to both use the offshoring management resources and also using offshoring. The reason for this the focus on making offshoring successful rather than providing coding or software development professionals.
Offshoring to matured IT destinations like India helps enhance business value as despite India having risen on price front is still about 40% to 50% cost saving with quality output. The matured IT industry in India gives an advantage over any other offshore geography as in addition to cost saving, users get access to highly trained manpower, quality processes, set productivity norms in large IT industry pool and much needed management expertise to manage the global operations.
Small and medium size businesses should therefore explore means to offshoring to enhance their business value using an external offshoring expert or expert organization whose focus is on management of making offshoring successful rather focusing on a particular technology, vertical or domain. The offshoring expertise is the domain for bringing success to offshore-onsite operations rather than the vertical industry domain.
To summarize the small and mid size businesses can enhance their business value by using offshoring in a measured way by aligning with a offshoring expert managers who can deliver a measured value by forming dedicated offshore teams, saving cost without any lose of quality and full control on your process ands Intellectual Property.