Do’s and Don’ts of Offshoring

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    Lately, a few of the multinational companies have shifted their India base back to the United States. Salaries have been on the rise and employees with specialized skills here get approximately 60%-70% of salaries that they would normally get in the United States, along with the drop in efficiency that may arise due to the time difference. Dipping value of the dollar vis-à-vis the rupee also doesn’t make the situation easy.


    So am I saying that offshoring to India doesn’t make sense? No, but offshoring just to save cost doesn’t make sense. Recently, Pari, our CEO, and I were discussing the areas where companies go wrong in offshoring and identified a few rules in this arena:



    • The India center shouldn’t just be looked upon as a cost-cutting measure but should be looked upon as a strategic unit. India has a vast talent pool that is not so inexpensive but which definitely is talented. Besides, India is also a potential market and a growing ecosystem for a lot of industries. Therefore, it makes sense to capture full advantage of this country.

    • Dependence on the various teams between the two destinations (say, US and India) should be less. The pieces of work sent here should be independent pieces.

    • The impact of the time difference should not be underestimated. While the same geographical factors can be utilized for support activities, they cannot be overlooked by product development companies for research centers.

    • The offshoring center should be autonomous and must have authority to make decisions. Waiting for overseas approvals brings delays in the system.

    • Two-in-the-box reporting systems should be avoided, and, if required, authority, roles and responsibility of the managers should be clearly defined. Similarly, the staff augmentation model should be avoided and, ideally, must be in place for transitioning processes.

    • Documentation is important and should be encouraged as a culture. It averts over-dependence on individual employees and eases the transitioning of processes.

    • There should be metrics (to measure productivity, etc.) in place. This would help evaluate each center to estimate the workflow and avoid fingerpointing. Productivity of each resource (irrespective of where they are placed) should be estimated as the same and hence the burden of work should be equal.

    • Hybrid models of having a captive and third-party vendor is gaining ground and one should not feel hesitant in dividing work accordingly. For processes that are simple in nature and which require a small and independent team, a third-party vendor is a good option.

    • Communication between the two centers should be open and frequent. Long-term goals should be shared and weekly reports should be sent.

    • Cultural differences should be understood and worked upon.

    These are but a few of the areas to be looked at when opening an offshoring center. The process does take time, but once the wheels are oiled and the centers function smoothly, there is no dearth of benefits one can acquire from such business models. We have many examples to learn from, like the R&D center of Yahoo! and Microsoft in Bangalore and Hyderabad. They have managed to successfully offshore some critical part of their Product Development here. I am sure there will be many more to follow!


    — Priyanka Rana, Consultant, Market Expansion

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