Projects can be partially or completely outsourced. The outsourcing can be done partially or entirely offshore. The most common scenario I usually encounter is when a company outsources a project to a consulting company. The consulting team usually works on-site, and often have several resources located offshore. There seems to be a trend for consultant who used to work on-site, to be allowed to work remotely.
As I pointed out, many EIM/SPM solution vendors and consulting companies will discuss the benefits which can be achieved by outsourcing parts of an Incentive Compensation Management implementation. I agree with these benefits, but there are also many challenges which must be carefully managed to be successful.
Working with an offshore team through a consulting company reduces a lot of the risk; you don’t have to worry about contracts, quality, infrastructure, intellectual properties, etc. Furthermore, consulting companies usually have a good relationship with their offshore arm.
Setting aside all ethical and macro-economics discussions about offshoring, here are some of the main pros and cons.
Main offshoring benefits:
Labor: Skilled labor can be very expensive, but it can especially be very difficult to find. Even a large consulting company may have problems finding an available consultant with the right skill set.
Cost: Offshore locations are usually developing countries where labor is significantly cheaper.
Speed: When a project is well managed, more people usually mean a more aggressive schedule.
Work 24/7: For North-American people, working with a country such as India makes it “easy” to work around the clock.
Some of the challenges to be managed
Communication and language barriers: Most of us have some experience working with team members who are located somewhere else, and have faced communication challenges related to this. Offshoring brings another layer to the communication challenges, a topic to which I will dedicate another article.
Coordination: Because of all the communication challenges, complex coordination activities become even more complex.
Cultures: Each culture have their own principles and values. Not being mindful of cultural differences can lead to big problems.
Cost: Savings could be only marginal, especially with rising labor costs in some countries (especially in India)
Quality: This is a challenge for on-site and offshore team alike. Offshore teams are usually very good at achieving very high quality standards. However, quality is still perceived as a higher risk with offshore teams.
Security: Quality is another concern most companies have, especially when dealing with confidential employment information. There are very secure mechanisms to collaborate, even across continents, but security is a topic which requires particular attention.
Key to Success
In my opinion, the key to successfully leveraging an offshore team is in:
- Having a good manager and team leads experienced with offshore projects
- Having A good [formalized] communication strategy, “hand-off” mechanism between onshore and offshore teams and processes in place
- Having a good understanding of which project components can be tackled “at night” by the offshore team and handed to the onshore team “in the morning”, and vice-versa.
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