If you look at some of the statistics reported across studies, of corporations which outsource IT services with an offshore play (either through captives or through outsourced service providers), only about 50% report meeting some of their business objectives. Why does this happen? By now everyone has heard of the cultural gaps, rising wages, high attrition and communication challenges among some of the top issues with offshore teams. Why then has this not improved the collective knowledge of the industry to help improve the success rates of offshoring IT services?
1. Different Experiences: The experiences are not the same for every company and hence the standardization requires a larger collection of experiences which takes time and results in different slices of wisdom drawn. The issues themselves are almost always drawn from a given set of challenges but each enterprise sees a different permutation of these with varied degree of impact to business due to the nature of their contract, business spread, scale etc. Some issues are real but are muted in impact in each instance and hence talking to a small set does not help build a solid base of “known issues”.
2. Time to Mature: The risk profiling for offshored services are converging but will take some time before being consistent enough to reckon and be available to increase the success rates for offshoring substantially.
3. Moving Target: The socio-economic structure at offshore locations like India are changing so rapidly with several forces and counter-forces which makes it truly a moving target and hence difficult to sum up.
In the last few years I have closely seen over 100 clients in various stages of engagement with different service providers leveraging offshore and discussed several more through peer conversations and industry connects. I will pick one example, which provides deep insights into some key operational issues that are most often missed by enterprises who are early offshorers.
Context: This client was a F1000 global enterprise, a first time offshorer and had brought in two new offshore based service providers (one for app services and the other for infra services) through concurrent RFPs. Early from the transition stage they starting doubting the wisdom to go with providers who had come on-board promising at least 50% cost reduction along with 30% more service scope than the outgoing onshore based provider. They came close to cancelling the contract with the infrastructure services provider but realized that these decisions cannot be changed so fast without imminent impact to business. After a very turbulent three quarter period when the dust settled, a joint team sat down to list the following key lessons:
1. Retained Org Structure: The retained organization structure and composition needs a very close review when you bring on any new provider (not just offshore based providers). In this case, this was not done and the retained organization was trying to engage with the new offshore provider (who also had an onshore team but a lean one) in the same way as they worked with the earlier onshore based provider. The retained team was not sensitized to expect and adjust to the new model. Also since this was the first time they had moved offshore they had not properly planned the transition of folks whose roles had moved to offshore. Result was an avoidable ambient noise which was addressed in due course.
2. Governance and Engagement: Most offshore based teams are happy to be led than lead. First time offshorer clients are not used to provider teams which are willing to be directed thus. It happened in this case too. Hence the client thought it was a great opportunity to set up the governance and engagement process, much in line with what they had earlier. They kept the same governance process and meeting logistics as they did with the previous onshore based service provider. This was devastating as the offshore teams were new, remote and culturally different in their business communication. The governance process which was used with the previous onshore provider was one which had stabilized after 15 years of partnership and this was not factored and resulted several frustrating meetings including few at the exec level.
3. Take Business into Confidence Early: In this case, business was not prepared for a longer and bumpier transition and hence very soon the CIO found that while his shop was amidst a very difficult transition, the effects on business had been grossly underestimated in terms of depth, of impact and duration. Business teams were expecting a small blip due to the transition before services were fully restored. This led to the IT teams being under pressure.
4. Go beyond believing slide-ware and reference calls: In hindsight, for the enterprise, they had not done enough due diligence in validating the competence and experience of the service provider. During the RFP process, the responses and the presentations can be shiny but some of the realities like past experience were not fully mapped. They did go through a detailed RFP process and reference calls but the latter were done with clients who had experience with the provider on a different scope which was largely T&M and this was missed in their assessment. Most offshore based providers are keen to be on negotiation tables that were off bounds not too long back. In their eagerness to pick new business their approach is often to pick the business and then figure out how to deliver the commitments. This happened in this case too.
5. Key Personnel: A large part of the issues were due to the incompetence of some of the delivery leaders who were initially brought on. Many had not worked on such scale of infrastructure earlier and others were new to the service provider’s company and hence not so well connected internally be able to able to get the required help during crisis. The team that initially came worked hard to the point of being burnt out but did not match to the requirements of the program. An initial assessment of the key personnel before finalizing the contract (including a chat with the key folks) would have saved much of the grief and agony that followed.