Thought Leadership

Transparent, Flexible Global Outsourcing - Offshore Could Mean Next Door ----- By Stephen Nicholas

Offshore outsourcing is not a fad or a method of gaining a one-time cost advantage. According to the Giga Information Group, 200 companies on the Fortune 500 list are utilizing the offshore capabilities of various information technology (IT) service providers. Driven by a combination of cost benefits, immediate availability and access to teams of highly skilled and dedicated professionals, companies of all shapes and sizes are turning to global IT service providers to help them get jobs done.

We know that outsourcing to offshore development companies significantly reduces software development costs. According to Gartner, American companies are finding that sending IT work offshore can reduce hourly project billing rates by as much as 60 percent – a compelling savings in any economy

As appealing as this fact sounds, there is much more to the offshore phenomenon than doing more with less. An enterprise takes a big risk if it selects a technology services provider that’s not equipped to handle offshore work professionally.

For example, until recently, enterprises were reluctant to pursue the offshore option because they feared the distance between their IT team and the vendor’s team would cause a loss of control over their initiative.

Today, clients have choices that eliminate this concern. American-based service providers are becoming better and better at creating systems and methodologies to provide local management of projects. In a recent offshore study, Giga reported that the most effective outsourcing model is a combination of an “onsite-offshore” presence – the client company only deals with domestic onsite resources, making the offshore relationship is virtually “transparent.” The chief executives I speak with see this delivery model as the emerging gold standard for offshore outsourcing options.

Consider the experience of a global commercial finance company that has been using offshore outsourcing for years as one weapon in their overall IT strategy. The company, with $10 billion in managed assets and approximately 1,300 employees in 20 locations, needed its internal IT staff to be able to focus on training and migrating into new technologies. At the same time, it needed to diminish a considerable backlog of legacy requests and implement significant technology upgrades that would maintain and improve quality, and control costs.

After carefully exploring their options, this enterprise chose to outsource, using a blended on-site/offshore delivery model. Its onsite IT consultants located worked as a team with dedicated consultants operating from at an offshore facility in India. The company’s 125 team members adopted “follow the sun” work shifts, allowing for more productive and strategic uses of its IT budget.

The easily accessible onsite consultants eliminated the need to adjust management of the project to compensate for the time difference between the U.S. and India, while the India-based staff allowed the seamless continuation of work to support overnight and time critical projects. Strong local management and supervision provided by the vendor obviated any anxiety about time zone, cultural and language differences. Video conferencing, combined with morning and evening progress report meetings, helped both teams achieve transparency.

This scenario underscores the importance of having an offshore outsourcing provider who can be trusted to act as a business partner, not simply “a vendor.”

Other keys to the success of the transparent onsite/offshore delivery model are the creation benchmarks for quality, written expectations about timing, and in having clear communications channels and a process for problem escalation. Established service providers should be able to demonstrate their commitment to adhering to the Software Engineering Institute’s (SEI) Capability Maturity Model (CMM) and the People Capability and Maturity Model (PCMM). Both, along with the International Organization for Standardization (ISO) 9001 certification, represent the highest possible quality level and the gold standard for assessing all outsourcers.

For decades, sending labor-intensive technology work offshore had been the exclusive domain of a select group of savvy global brands in the manufacturing, financial services and retail industries.

Today, the offshore outsourcing phenomenon is spreading to middle market enterprises and beyond as a preferred method to achieve rapid deployment, world-class quality and reduced costs. These new clients are coming to appreciate what many Fortune 500 companies began to experience years ago.

In the hands of the right IT partner, offshore can seem like next door.

Stephen Nicholas is senior vice president of Commercial-West for Covansys Corporation (a CSC company), a global provider of technology services. Headquartered in the U.S., with dozens of locations worldwide and three development centers in India, Covansys has more than 12 years of experience in offering global clients the value of transparent on-site, offsite and offshore outsourcing.