Offshore Outsourcing: Is This Change in Corporate American Business as Smooth as What You Have Read?

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3-2005

Offshore Outsourcing: Is This Change in

Corporate American Business as Smooth as What

You Have Read?

Mary F. Tochelli

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Recommended Citation

as

Smooth

as

What

You Have

Read?

By

Mary

Felice

Tochelli

Thesis

submitted

in

partial

fulfillment

of

the

requirements

for the

degree

of

Master

of

Science

in Information

Technology

Rochester

Institute

of

Technology

B.

Thomas Golisano College

of

Computing

and

Information

Sciences

B. Thomas Golisano College

of

Computing and Information Sciences

Master of Science in Information Technology

Thesis Approval Form

Student Name:

Mary Felice Tochelli

Project Title:

Offshore Outsourcing

Is This Change in Corporate American Business

as Smooth as What You Have Read?

Name

Prof. Ed Holden

Chair

Prof. Rayno Niemi

Committee Member

Prof. Dan Kennedy

Committee Member

Thesis Committee

Rochester Institute of Technology

B. Thomas Golisano College

of

Computing and Information Sciences

Master of Science in Information Technology

Offshore Outsourcing:

Is This Change in Corporate American Business

as Smooth as What You Have Read?

I, Mary Felice Tochelli, hereby grant permission to the Wallace Library of the

Rochester Institute of Technology to reproduce my thesis in whole or in part.

Any reproduction must not be for commercial use or profit.

Thisthesis is_{dedicated to my} parents

Mary

Ellen and AugustTochelli

fortheir_on-going loveand support

and

theirbelief that you can_{do anything if}you

try

THANKYOU

Special Thanksto:

Donnaand Sam Muto

and

Andrea Tochelli

for_{their editing,} grammar and

formatting

assistance

I never would have finished without your

help

and

Rayno Niemi and Ed Holden

Abstract 1

1. Background 2

1.1 What is Outsourcing? 2

1.2

Why

Consider Outsourcing? 2

1.3

Outsourcing

in Today's Environment 4

1.4

Outsourcing

Models 8

1.4.1

Outsourcing

model types 8

2. Benefits 10

3. Risks 12

3.1 Risktothe Outsourcer 12

3.2 Mitigation ofthe Risks 19

4.

Transitioning

toan

Outsourcing

Arrangement 20

4.1 Whatto do priorto

transitioning

20

4.1.1 Solicit bids 23

4.1.2

Crafting

a contract 24

4.1.3

Outlining

transition tasks 25

4.1.4

Determining

operational metrics 26

4.1.5

Reallocating

resources 27

4.1.6

Creating

an escalation process 27

4.1.7

Developing

afinancial plan 28

4.1.8

Maintaining

employee morale 29

4.1.9

Summary

31

4.2 The contract 32

4.2.1

Mitigating

contract issues 36

4.3 Service level agreements 37

4.4 Management Roles/Oversight 40

4.5

Managing

the outsourced team 40

4.5

Mitigating

the management risk 42

4.6 Howto Transition Outof an

Outsourcing

Arrangement 45

5.0 Case

Study

47

5.1 Case

Study

Conclusion 52

5.2 Case

Study

Process Improvement ₅₄

6.0 Conclusion 57

Hypothesis

The hypothesis

of

this

thesis

is:

offshore outsourcing: can

it be

proven

to be

a successful endeavor?

Abstract

The software

industry

isone of_{the fastest growing industries in} today's business

world. The focusseems tobeon the software

industry

now because thereare

so _manyother industriessuch as online retailersthatare relianton software and

the information

technology

world.

The purpose ofthis thesis is to extendthe knowledge on current practices,

methods and processes when application development is outsourced tooffshore

vendors.

This thesiswill also examine

key

stepsto avoid when

looking

to outsource an

applicationdevelopment project. Numerous risks will be discussed as well asthe

processesto be implemented andfollowed to abatethese risks. Offshore

development projectstend to have more _{risk, than} doonshore projects _and,

Offshore

Outsourcing

1. Background

1.1 _{What is Outsourcing?}

Outsourcing

iswhen an organization or_{companytransfers the ownership} and

control of a business process toan outsidevendor.

By

_{purchasing the} offshore

service while _maintainingownership, resources are availableto focus onother

areas of economic endeavors.

Exporting

ofthe ITrelatedworkfrom the US to

other

technologically

advanced countries is the most common form of offshore

outsourcing. The software

industry

isone of_{the fastest growing industries}

today

thatoutsources IT related work.

The focusis on the software

industry

now since all otherindustriesare reliant on

software and theinformation

technology

world. Three widely known

key

attractersto_outsourcing are: a

highly

skilledtechnical resource pool, lower labor

rates and _abilityto providetaxsavings to the US businesses. Traditional IT

outsourcing is done for

help

deskapplications, and both development and

maintenance infrastructures.

1.2

Why

Consider Outsourcing?

More and more businessesare

looking

at_outsourcing to meettheirneeds. The

notion of offshore_{outsourcing is appealing} as a _wayto:

Reduce expenses

Solve resource issues

Shrinkor offload

legacy

systems

Acquire newtechnologiesortechnicalexpertise

Accesstalented resources _{(with English competency}forease of

communication)

Attaintaxincentives

Accelerate the time tomarket

Shared risks

Improve

Company

focus

Flexibility

exists

by having

the outsourcee do the joband the _company

(outsourcer)

can reducethe cost and time associated with

finding

the right

resources or_{re-training in-house} resources. This allowsthe US companiesto

focus on otherbusiness matterswithin theirorganization orinnovative ideas for

future projects.

Some respondentstoan

Outsourcing

_{survey believed} thatthe_outsourcing

suppliers would be

fulfilling

an immediate need ratherthan a _{long-term strategy}

(Epner,

2000). While this perception haschanged _quicklyoverthe pastfive

years, many people _maystill have thatmisconception. _{Epner thought that the}

outsourcing project organization looks to thesubcontractorto

bring

the expertise

1.3

Outsourcing

in Today's Environment

Forrester Research statistics reportthat 27,121 computerand mathematicaljobs

moved offUS shore in 2000 and theirprediction was that 108,991 ofthesetypes

ofjobs would leave the US

by

2005,

276,954

by

2010 and472,632

by

2015

(McLaughlin, 2003,

pp.114-117). IDC statistics reported in October 2004 the

top

3functionsoutsourced were: customer application development($2.8

billion),

systems integration ($2.4

billion)

and application management ($1.5

billion)

(Staff, Computerworld,

2004). This report based on 2003 dataalso indicatedthat

India held 72.4% ofthe market share of worldwide outsourcing.

A United States Department ofState 2003 report, based upon March 2000data

from the Bureau ofSouth Asian

Affairs,

indicated that India'sworkforce was 416

million and not one ofthosejobswere IT

(State.gov,

2003). Thisshowsthat the

movementto offshore_outsourcingwas not evident priorto 2000.

Basing

the

report on 2000 data did not capturethe recent growth of offshore_outsourcing

The US GovernmentOffice of Managementand Budget simplifiedthe process

forprivate companies to bid for public sectorjobs in

May

2003. This wasthe

result ofthe US Government determination that the private sector was able to

streamline processes betterthan them. Therewere 850,000 federalemployees

providing services and with this new _policy, itallowed 425,000 jobsto be bid from

Incentivestodowork outside the US have been a concernforyears. President

Kennedy

in 1962 signed off on the firstTrade ReadjustmentAllowance

(TRA)

to

provide governmentassistance (job

training)

to manufacturing workers who lost

theirjobs due to nationaltrade policies. TRAwas furtherupdated in 1974. The

Program

Summary

The TradeActof 1974 providesforclassroom _training,

on-the-job

training,

job search _allowance, relocation allowance, and Trade

ReadjustmentAllowances

(TRA)

for individuals certified

by

the Federal

Government as

having

losttheirjobs dueto the more competitive nature of

goods produced outside the United States. Trade Adjustment Assistance

(TAA)

benefits exist if there arethree ormore eligible employees. This loophole

involving

only manufacturing jobs isstill in existence today. In _many cases it

does not provide assistanceto individualswho lose theirjob due to _outsourcing

(Hall,

2004).

The unemployment rate isa hotissue with politicians today. Politicians have a

difficult time

defending

_policysituations when governmentjobsare outsourced

(Welsh,

2004).

They

are caught between

trying

todo a goodjob fortheir

constituents

by

_maintainingthefederal/state orlocal budgetsand

trying

to save

moneywhile not

losing

United States jobs

(Emery,

2004). Senator Chris Dodd's

legislation would ban offshore _outsourcing unlessthework was _{previously done}

overseas orif that isthe onlyplacethat it isavailable. Education and _retraining

due to job loses related to offshore_outsourcing needs to beaddressed

by

both

Anthony

Pellicano,

Director for Resource

Management,

US

Army

Communications-Electronics

Command

(CECOM)

at Fort

Monmouth,

NJ stated

thoughwork is _outsourced, some Federal government contracts prohibit work

being

sent overseas atthe direction ofthe Federal customer. There are

situations where information is deemed classified and evenwith signed non

disclosure agreements Federal work is not allowed toleave the United States

(Pellicano,

personal _{communication,}

July

16,

2004).

Outsourcing

has led to thedisplacementof workers and resulted in

organizational culture changesthatare not always embraced

by

theemployees.

These are some ofthe issues raised

by

the offshore _outsourcing arrangements.

It is important to find the right partnerfor the project. The Indian government is

working to improvethe infrastructure and build fiberoptic networks in cities

where software _{activity is} occurring.

Outsourcing

offshore in India has

advantages dueto the _{English speaking} resources and lowsalaries.

Thefocus ofthis paper will beon offshore _outsourcing to India. India hasthree

major_{outsourcing houses: Wipro in}

Bangalore,

Tata

Consultancy

Services in

Bombay,

InfosysTechnologies also in Bangalore. All provide both onshore and

India has become a preferred sitefor outsourcing fora multitude ofservices

including

development,

call _{centers, payroll,} claims _processing, medical

transcription and medical image _{reading to} name afew. Due tothe timezone

difference,

it is almost like

having

employees _{working 24 hours}a

day

(personal

account). Thisworks totheadvantagefor both the US companies and the Indian

vendorbecauseof responsetime and _{in many}cases24-7 support

depending

on

the circumstances

(Pattabiraman,

personal _{communication,} October

22,

2003).

India is knownfortheirskilled _manpower,

training

centers, developed

infrastructure,

and tax incentives.

In an interview done

by

eweek, Vivek

Paul,

vice chairman ofWipro

Ltd.,

was

quoted _stating thatWipro has 26,000 employees in 24 locations and the

company isworth one billion dollars

(Staff,

eweek, 2004). Wipro has made an

investment in process _qualityand was proactive in preparing forSarbanes

Oxley

compliance. VivekPaul believestheirprocesses are structured and _repeatable,

thus _givingsoftware developmentmore of a

factory

type environment(Staff

eweek, 2004). There are _manyother nations_{coming forward} with _many

highly

qualified and skilled IT professionals. Forexample: Pakistan focuses on

software _quality and processes and

they

have better English skillsthan India

1.4

Outsourcing

Models

Onshore outsourcingoften called outsourcing, iswhen a _companyobtains

servicesfrom an outside _{company but}within the same country. Forexample,

GM outsourcesto AC/Delcoforparts.

Offshore models rangefrom

having

the subcontractoronsite, offsite, offshore, or

a combination of_{onsite/offshore,} offsite/offshore.

1.4.1

Outsourcing

modeltypes

The Onsite model is when the service provideris on the premises ofthe

requestingcompany.

The Offsite model is when the providerison thesame soil as the _company

requesting thework. This model worksforshort-term projects and when there

are minimal changes in the business process. An example: fulfillment of

literature requests.

The Offshore model entailsthat all project-related activities are doneatthe

offshore provider's location. The United States companywill interactwith the

offshore _group without_anyoffshore providers onshore. _This model is successful

in _providing high qualityworkdonewith low laborcosts. An example: would be

The Offshore-Offsite model isoften used when there are well-defined

requirements_upfront, minimal changes in process or when the UScustomer

doesnot have spaceformore peopleto work. The Offshore model is also used

to utilize the time zone differencesand reduce costs with high quality. The risks

associated with this model are tied tocommunication gaps between thecustomer

and vendor and

improperly

documented requirements. An example: offsite

gathering/interviewing forcustomerrequirements and offshorethe development.

The Onsite/Offshore model is known to be the bestmodel. This model provides

the United _{States company}the _abilityto communicate with the_outsourcing

companyvia the onsite _outsourcingteam. Itprovides24x7 work cycles and low

costsforresources. An example: Onsite customer acceptance with offshore

testing.

More successful models are the combination of offshore/onsite and

offshore/offsite. Theseapproaches are the most cost effective in termsof

time,

communication and cost. These approaches also provide the skills setsto deliver

on-time and high quality deliverables towork24x7 (24hours per

day,

7days per

week)

(Pellicano,

personalcommunication

July

16, 2004;

Drescher,

personal

2. Benefits

Ofthe 800+ executives in US and Europe surveyed

by

Accenture,

86% ofthe

respondents stated _outsourcing provided themwith more control overtheir

business results

(Byrne,

2004).

During

thefirst year, mostITorganizations save betweenfifteen and twenty-five

percent.

By

yearstwo and

three,

the

learning

curve has gone _upforboth the

customer and thevendor andthe savings can be as high asa

forty

percent

(Davison,

2004).

Forresterinterviewed vice presidents and directors ofITwith offshore

subcontractorsfrom 145 North American

firms,

with 20 in depth

follow-up

interviews. 88% felt

they

were _receivingsomewhat betteror much bettervalue,

while 71% feltthat

they

were _receiving somewhat betteror much betterquality.

The mostcommon benefits received from _outsourcing is an increase in profits,

scalable resource management, improve service

levels,

reduction in timeto

market, speed in data gathering, increased reliabilityof_{the product/quality,} and

the abilitytofocus resources on core competencies.

Other benefits include:

Standardizationand repeatabletasks increase the likelihood forerror

important/highly

visible clients and have acquired more

knowledge,

experience and best practicesthan the US companies. The organization is

looking

forthe equal orimproved quality. The goal is to receive high _quality

deliverables withfewererrors, better featureswith a shorterturnaround time.

Cost reduction- _{provides a predictable} costbudgetyear over year based on the contract

ImprovedTime tomarket/speed - faster

deployment,

minimal

dependency

on

internal staff

Expansion of staff roles into more management roles and cross

training

into

new roles. Much ofthe _{US manufacturing jobs}outsourced in the 1 980s and 1990s resulted in re-training.

Outsourcing

has the same impact.

Competitors using Offshore Staff-_{use to maintain competitiveness}

Flexibility

of

bringing

in resourcestoworkforshort periods oftimewithout the

administrative paperwork

The US Corporation no longer_solelyowns all ofthe risks. There are shared

risks and itwould be the outsourcee's _{responsibility}todeliverthe product. Resource availability is no longeran issuesincethere is thesub

3.

Risks

3.1 Risk to the Outsourcer

While outsourcing is

becoming

normal business practiceforall project sizes

disadvantages include: cultural

differences,

employee morale, riskof intellectual

capital, riskthatprocess non-conformance _may not be followed and unplanned

costs.

Due to poor process controls with theoffshore_vendors, a medical transcription

service in

India,

doing

workforthe

University

ofCalifornia atSan Francisco Medical Centerencountered a serious issue. An employeethreatened toupload

ontothe Internet confidential patient information unlessshe was paidformedical

transcription she believed she was owed. The disputed transcription amount was

threecents per

line,

which was subcontractedfourtimes _{before reaching}the

Indian company. Theoriginal _outsourcing price was eighteen cents perline.

Oddsare the

University

ofCalifornia atSan Francisco had no ideathat theirwork

wassubcontracted so _{many times.}

They

_maynot have even been awaretheir

patientinformation leftthe United States (Rasmussen &

Moore,

2004).

Consumerconfidencecan be marred when _securityincidentsoccur. People

hesitateto do businesswith companiesthatsend theirdataoffshore

fearing

their

personal information could be compromised.

Theabove example is an _outsourcing risk. _{While outsourcing is}

becoming

Contractor going out ofbusiness and the in-house staffnot

being

ableto

pick _upthe pieces.

Cost reduction expectations are not met

Data protection and _security

Not

following

CMM processes orcustomer's _{existing internal} processes

Culture/Language barriers and differences

Intellectual property: potential data leaks

Communication barriers dueto distance.

Lossof Business Knowledge

Scope

Creep

Government Oversight and Regulation

Location/TimeZone Differences

Turnoverof

Key

Personnel

Knowledge Transfer

Staff Turnover

Perception

Software Licenses

Unexpected amount oftime and effort required to maintain the _outsourcing

relationship

Project Risks

Geopolitical

Someofthese in detailare:

Communication barriers due to distance: Noteveryonefeels thetime zone

differences are a benefit.

They

feel that the timedifferencesand the lack ofthe

coordination between the twostaffsformeetings _alongwith the

inability

topick

upa phone to havean immediateanswer_{negatively impacts} communication

(personal account). If there are code

issues,

not

being

able to resolve the

problem in

timely

mannercan createfurther issues. Forexample, ifa customer

in United States wantsto complete a software build

they

are dependentonthe

offshore developers to have checked in the required code priorto them

leaving

at

the end oftheir_{workday (personal} account). If thecode is not checked in itcould impactthedeliverable

by

an additional

day,

unless the offshore _{group has}

questions. If

they

have questionsand itrequires the United States customer or

some other onshore person to respond tothe questions, it could extend the

process

by

additional time.

According

to Forrestercertain projects should not be

sent offshore becauseofthe need towork_{synchronously}forcertain

development and maintenancetype projects

(McCarthy,

Martorelli, Moore,

Agosta &

Ross,

2004).

Software Licenses and Multi-site Licenses: As_{previouslystated,} when Forrester interviewed vice presidents and IT directorswith offshore subcontractors. Some

had issueswith multi-site licenses.

They

reported delayswere incurredwhen

softwarelicenseswere not valid in _{India. Software licenses may}be invalid

result in a tremendous unplanned expense. Foran_example, North American

licenses purchased Cognos Tools license are not valid offshore in India (personal

account).

Depending

on the contractwith theoffshore _company, the United

States customer could _easilybe responsiblefor the software licenses oftheiron

and offshore subcontractor (personal account). This unforeseen risk can be

quite costly.

Staff Turnover: Elimination of currenttechnical staff orthe change intheir roles

when _outsourcing occurs causes concerns when all the expertiseleaves the US

orthe company. Some companies_maywant toconsider retention bonusesto

retain knowledgeable staff untilthe_outsourcing venture proves successful

(Muto,

personal _{communication,} December

20,

2004).

Cultural/Language Barriers: The cultural language differencecan cause

miscommunication and improperassumptions. Ifan employeefrom India were

to_say

"Yes, Yes",

it does not confirm understanding. When

they

_say"Yes

Yes",

itmeans I heard you communicate, not

"Yes,

I agree to do thejob".

There have been _manyissuesdocumented related to cultural differencesand

language barriers. Thecultural differences and language barriers can be a large

enough risk to

destroy

a project. Communication is key.

Knowledge Transfer: Thereare also risks _{regarding knowledge}transferand the

understand the customer requirementsforwhat knowledge has totransfer. If the

requirements are not_clearlyand _completelyunderstood, unnecessarychanges

will result.

Project risks: This includesthe lackof project managementand productivity.

Risks associated withthe offshoreoutsourcee involve thesuccessfultransition of

the work and the limited lackof on-site management. There may be a perceived

or real loss of control overInformation Managementfunctions: increased

expenses ifthe _{outsourcing relationship is} not managed closely,

dependency

on

thesubcontractorformissioncritical items.There _mayalso be the

inability

to

revert back to in-house development.

Project Management/Performance Metrics: The largest issue was project

managementand accurate performance metricsfor the subcontractor. In

interviews,

two otherissues thatwerefound werethat 31% ofinterviewees

thoughtthat there was some challenge with not

having

good processes for

specifying theworkand 37% believed thatcultural differencesexisted between

the twostaffs

(McCarthy, Martorelli,

Moore,

Agosta &

Ross,

2004 pp. 9-10).

Data Protection and Security: Thereare also_security risksthat need to be

identified,

mitigated or controlled. Asstated in the _opening ofthis section, issues

with data

being

misused and shared have been a problem. Medical transcription

areas where offshore _outsourcing ofwork isnow

being

done (Rasmussen &

Moore,

2004).

CMM Processes: There is a risk in configuration managementfor the projectif

the offshoreteam does notfollowthe standard configuration management

procedures used

by

the Unites Statesteam.

Naming

conventions agreed upon

by

theteam should be usedand ifthere are corporate standards, theoffshore team should followthem. Theoffshoreteam also needsto follow their

customers processes (e.g.the check-in/checkoutprocedure forcode,

environment_security, and documentation standards). Withoutall team members

following

the established processor

determining

if there is a risk priorto the

project

beginning,

itwill resultin unexpected complications, delays and the

potential oflost

data,

_repositorycorruption and elongation ofthe project.

According

toWatts

Humphrey,

halfofthe

Capability Maturity

Model Level 5 rated

companies are located in India

(Willoughby,

2003). Although the _outsourcing

company has CMM Level 5certification thatdoes not guaranteethat the

individuals assignedto the US project possess Level 5 work practices. A CMM

certification is a snapshotin time and there is no guarantee that the organization

has maintained their CMM level. The lackofknowledge can be a risk.

Geopolitical: From the geopolitical perspective another risk isthe

instability

of a

concern isthatalthough the offshore _{company has}signed a non-disclosure

agreement

they

_may not maintain the confidentiality. The legal recourse _{may be} unavailable or _{unsatisfactoryif any}recourse is even available. This is notjusta risk with _{India but for anyoutsourcing} arrangement. Other issues center around legal _concerns, threatsof_war,

terrorism,

tax

laws,

changing import/export rules,

work_visas, international travel and acts ofGod.

Anotherriskdue to_{outsourcing is}when callersdo not wantto be connected with

someone with aforeign accent. Some situationsareworsened when frustrated callers escalatedtheiroffshore

help

desk problems to Hewlett Packard _onlyto be

routed back to India to lodge theirconcerns (Barbara

G.,

personal

communication, April

2,

2004). Theiroffshore _{group did} not have afull

understanding ofthe English

language,

which resulted in the call center's

database

becoming

a disaster. Nameswere keyed in forthe customerwho

called from adifferent phone number(e.g.

home,

work, cellular) aboutthesame

issue/product. Even though

they

could sort

by

the phone _{numbers, the} names

were so _{grossly distorted the HP} staff could not alwaysfollow thecommunication thread to knowthat itwasthe same customer.

Also,

by

not _capturing and

3.2 Mitigation ofthe Risks

Although there are _manyrisks to _outsourcingthere are ways to mitigatethem.

Maintaining

a _contingencyplan bothto take thework back in-houseand to

expand the outsourced responsibilities is important

(Martorelli,

2003).

Simple,

clearcommunication can mitigate theriskof poorcommunication

and can also mitigate the risks caused

by

cultural and language

differences.

By

_stating the _necessaryinformation without _{slang language}

and obtuse _{meaning, this} helpsto mitigate the risk ofmisinterpretation.

Including

someonethat knows both cultureswhen _{negotiating is} crucial to

ensuring thatinformation received equals that information thatwas

delivered

by

both parties.

Working

withthe providerto obtain their bestresources on the projectwill

ensurethatyou havethe technical _capabilityyou require.

Change management metricsforthe project are crucial to understand

changes bothfor legitimate reasons and thoseforrequirementsthatwere

not_clearly communicated or understood. This willallowthe _companyto

make _necessarychanges.

Include performance metrics in the contracttoaid _{in meeting} the

objectives and goalsfor both parties

(Washington,

1999).

Metrics should be reviewed _monthlyfor both performance and

comparability measures. Cost measures should be separated

by

tasks

wheneverpossible to_clearly

identify

areas of_opportunityand prices of

4.

Transitioning

to

an

Outsourcing

Arrangement

Transitional changes include

determining

all ofthe required work to be done

upfront and

during

thetransition to assure the team'ssuccess.

The organization's goal _{for negotiating} the contract and the Service Level

Agreement

(SLA)

mustinclude detailsof requirements, processes and

procedures, howand when deliverablesshould be received all while _maintaining

an eye on the internal goal to drive costs down and increase savings

(Benton,

personal _{communication,} June

7,

2004).

Costconsiderations should include personnel,

telecommunications,

software

licenses,

management_oversight, infrastructure and travel. Travel considerations

should include resource_availabilityand their travel between shores.

Before outsourcing, an organization should preparefor the transitional

challenges, cultural

factors,

human factorsand customerknowledge.

4.1 Whattodopriorto

transitioning

Prior to outsourcing, an organization's managementteam needsto determine

what functionswill be _{outsourced, why}

they

need tobeoutsourced, and if internal

resources/employees are preparedto take on managementof offshore

outsourcing so the organization iswell prepared and versed on thevernacular

used with outsourcing. Offshore outsourcingtakes a lotofworkto establish and

maintain. Coordination and communications between theteams _may require

additional staff andtime to achievethe desired goal. An organization should not

outsourcefor the sole purpose of_unloading undesirable work.

It is importantto speak with otherorganizations and othercompanies that have

alreadyoutsourced. Theirexperiences, bestpracticesand lessons learned are

invaluable resources. Aswith _any newventure, theoutsourcees often does not

knowwhatto be concerned about. People should notbe afraid to ask questions

(Benton,

personal _{communication,} June

7,

2004). Bentonfeels it is importantto

leverage global resources i.e. (resourcesavailable around theworld both on and

offshore)to maximizethe_relationship and getthe desired results.

Mike

Epner,

a seniorconsultant at Cutter

Consortium,

determined thata team

should possess certain skills to _effectivelyoutsource. Skills requires tobe

effective include: good project management, _qualitycontrol _plans, configuration

management, qualitycontrol and an _{understanding} of risk and theirmitigation

(Epner,

2000. p. 3). Of the businesses surveyed

by

Cutterin

January

2000,

56.1%thought

they

had theskills in houseto manage outsourced activities,

30.4% thought that

they

did not possessthe _necessaryskill while 13.5% did not

Someofthe respondents believed thatthe _outsourcing supplierswould be

fulfilling

an immediate need ratherthan a long-term _strategy

(Epner,

2000).

While this perception has changed overthe pastfive years, many people _may

still have that misconception. This lackof project_planning can cause the

organization/team to not be preparedto handlethe subcontractor'sexpectations

and cause unexpected delays. Epnerthoughtthatthe _outsourcing project

organization looks to thesubcontractorto

bring

theexpertise in detailed project

management and risk mitigation.

It is importantto havean overall _{outsourcing strategy in} placefor the

organization

(Duffy,

2004). There needs to be adetailed plan in place in orderto

be successful. The plan should coverthe following:

Soliciting

bids

Crafting

a contract

Outlining

transition tasks

Determining

operational metrics

Reallocating

resources

Creating

an escalation processto resolve issues

Developing

afinancial plan

Maintaining

employee morale

during

the transition

4.1.1 Solicit bids

The companies that are solicited for bids should first be confirmed as

being

suitable for the job. It is important that the organization find a provider

(subcontractor)

that has knowledge of the company/organization and has

experience in similar projects. It is also _{important to only do business} with a

politically and

financially

stable country. Ifthe _{country is} not stable, there will not

be _any cost _savings, and you could be adding a tremendous risk to the project.

Work visas need to be _easily obtained, and a determination needsto be made if

there is _uncertaintywith people

being

able totravel between the countries for the

project.

The team leaders must perform due diligence to ensure that both parties can do

the_{job before signing the} contract. It is important_{that the company}talkto others

who have outsourced offshore. Whenever possible,

they

should obtain

references of subcontract team members. The team needs to _{have already}

determined what

they

want and not assume the subcontractor will be able to fill

their needs. Needs should be _{clearly documented} and communicated. Lack of

understanding of business and business processes introduce defects into the

solution. This risk is true _{for any} project notjust outsourced projects. The plan

requires the team to knowwhat to expect and whatto ask

for;

these become the

objectives of outsourcing. This can be accomplished easier if the right people

Some questions toask are:

How_{easy is it to setup} an operation?

Whatarethe labor laws?

How_easy is itto exit?

4.1.2

Crafting

a contract

One question to ask priorto_signing a subcontractoragreementis howwill the

provider handle unforeseen changes? An agreement must include ifadditional

fees would be charged (variable contract) orifthecontract agreement is fixed

and no added costs are

incurred,

even ifthe project_{may be delayed. Even}

though the outsourcedteam members are not United States company

employees, theircontributions _{significantly impact}the corporate mission and

goals.

They

need to _{be sufficiently involved to know how important}their

contribution is to the corporate/organization goal. The offshore_outsourcing

company hasa vested interest in

having

the_outsourcing venture prove

successful.

Intellectual

Property

rights needto be enforced, as well as personal data

security. There is much discussionabout_sending Social

Security

numbers,

health history/recordsand dates ofbirthoffshore. US citizensdo notfeel

comfortable with the personal information

being

in the hands ofunknown

It is importanttovalidate and inspect the physical locationoffshore where the

work will be performed. It is within a domestic (United

States)

company's rightto

validate that thework will be performed in a secure

building

andthatthere isa

private network

(Pellicano,

personal communication,

January

21,

2004).

4.1.3

Outlining

transition tasks

It is importanttoset a realistic scheduletodetermine the rough order of

magnitude

(ROM)

ofthe projectto be sure the critical path items are on target.

The critical path _{includes: estimating} and _planningforprocess changes,

gathering the

data,

negotiating a pricefor_{the project,}

identifying

requirementsfor

the proposed solution. Time needsto be factored in_{for pricing} and contract

preparation. This includes the buy-in

by

thefunctional process owners and the

business partners ofthe outsourcess.

Security

access mustbe given to the offshoreteam. US Companies need to be

sure that

they

retain access control and grantthe appropriate permissions. This

is especially truewiththe Sarbanes

Oxley

law,

which includesthe segregation of

duties. The ownership forSarbanes

Oxley

belongsto the UScompany. It is

important to monitor activitiesto be sure the US _companyis _getting what

they

expectfrom the offshore provider.

There isa need for_on-going pertinentcommunication and planning. With

send pertinent emailsto besure the communication is received and processed.

Face-to-face meetings with an agenda and _concluding with _meeting notes and a

listofagreements are essential toa common _{understanding between} parties.

Clearly,

well-defined objectives are needed priorto outsourcing. Written

objectives and processes with sign-offand buy-in are needed on both sides of

the _relationshipto be successful. Standards should _alreadybe in place, but if

they

are not it is important toget buy-in/agreementfrom both sides.

Training

is

requiredforsome employees of_{the United States company in} ordertomanage

the sub-contractor effectively.

Someadditional issuesare theease and speed of_gettingdomestic import licenses ifapplicable and how_easy is it toobtain _{the necessary}work visasfor

anyoffshore workers _coming onshoretoworkforan extended period oftime.

4.1.4

Determining

operational metrics

A plan needstobe in place tovalidatethat corporatedata is secure and

intellectual property is protected. Expectadecline in _productivitythe firstyear

andthe plan should include timefora

learning

curve. Othersignificant itemsto

keep

a watch on are hidden costs and _educating the staff about cultural

differences

(Emery,

2004).

Process capabilityplans should include all the processes both on and offshore

4.1.5

Reallocating

resources

The consideration here is to understand if the Unites States is allowed to export

the

technology

planned foroperations in thatcountry.

It needsto bedetermined whichfunctional areas mustto be involved from the

initial contract developmentto the production and maintenance phase.

Theroles/responsibilities of each functional area needto be determined and

accountability needsto be establishedforeachdeliverable. In addition, the

key

dependencies needto be determined and based on thecritical path who will

monitorthe

"project

activities.

4.1.6

Creating

anescalation process

Theescalation process is used toensure critical itemsare raised to upper

management/affected parties _earlyenough to prevent impacts to the project. It

also ensuresthatthe appropriate parties are informed and involved in critical decision-making. The projectteam should make _everyeffortto make decisions

and address issueson theirown.

However,

when a resolution cannot bemade, the items should be escalated toupper management ensure a decision is made

before it impacts the project.

It is importantto determine the company's level oftolerance for risk, readiness to

communication,

July

14,

2004). To assistin this area, an escalation process

needsto be developed to be able to address issues as

they

arise.

4.1.7

Developing

a financial plan

It isa known factthata developer in India _{may be} paid $12 an hourcompared to

$60

in the United States.

Therefore,

it importantto not compare laborrates, but

to look atthe total picture

(Benton,

personal communication, June

7,

2004).

There are additional personnel and _monetarycosts associated with

having

an

offshore team: vendorselection, additional _scheduling and _planning tasks

including

thetransition plan and thedisposition plan of current_staff,

licensing,

technology

improvement,

securitychanges, process management and _offshoring

management

(Clinton,

2004).

Some job positions _{may already}exist within the organization, butoften,

additional resources are needed tosupportthe offshore workto oversee and

projectmanage theoutsourced project.

Frequently

the programmers whosejob

is outsourced cannotfillthese positions since

they

do not possessthe _necessary

project or process management skill set. While cost savings are

important, they

cannotbe the _onlyconsideration (personal _account;

Pattabiraman,

personal

communication, October

22,

2003). Other financial considerations include:

customs,

duties,

software

licensing

requirements and the overhead is needed to

4.1.8

Maintaining

employee morale

Employee morale should also be considered asjobsare moved offshore.

Staffing

issueswill arise and cooperation will be minimal ifthe perception is that

onshore employees are no longervalued

(Pellicano,

personal communication,

January

21,

2004).

Transitioning

to an_outsourcing arrangement _mayhave a huge impacton

employees, both inthe United States companyand in the Offshore company.

Poorcommunication and employee relations could result in alienation ofthe

employees and a strained _relationshipwith the offshoreteam priorto the project

kick-off. As jobsmoveoffshore, peoplewill bethreatened with a loss oftheir

livelihood and

they

will not be veryreceptive toward knowledgetransfer. Prior to

an announcement ofthe offshore _project,work should be doneto re-train and re

assign the Unites Stateemployees, ifpossible.

Changes in team dynamics

including

offshore

turnover,

cannotbe plannedfor

entirely. People need to be receptive and adaptto the changes whether staff

changes occuror not. Backupsshould be trained in the eventthere are

personnel shifts.

Barriers can also include peoplethat

intentionally

go out of_{their way to} resist

change. Ifpeople cannot acceptthe offshore _arrangement, perhaps

they

needto

be reassigned orlet go sincetheirbarriers are_costing the _companytime and

Corporations can also hireconsultantstoteach people about change and how it

isgood forthem. Books were given to

help

understand the situation, (i.e.Who

Moved Mv Cheese? An Amazing Wayto Deal with Chance in Your Work and in

YourLife) (Muto personal communication, December

20,

2004).

Ifyou cannot change the people's

behavior,

changethe people

by

reassignment/transfer and/orattrition. Ifthereare people so opposed to

outsourcing,

they

may notbe able towork _successfullywith theoffshore team. If

a bias is

formed,

this could lead touncooperative

behavior,

which could impact

the team's deliverables.

The corporate or global _strategy needsto be shared with all team members.

People need to understandhow importantit isforeveryoneto pull togetheras a

team. Managementmust communicate

buy-in,

asthe United States employees

will want and needto know howthe offshore _relationshipwill impactthem. The

uncertaintyof not

knowing

if

they

have jobs can causethegreatestdiscomfort in

the workplace

(Muto,

personal communication, December

20,

2004).

The communication plan is ofthe utmostimportance. All affected parties needto

be continuously informed and kept informed on all relevant project

facts,

details

By tying

messagesto the vision statement(communicate information and how it

ties to the_goal), people needtosee thatwhat

they

are

doing

hasvalue and is

part ofthe corporate goal.

Communicate successesto the

team,

so everyoneshares in the success instead

ofjust the problems. _{Communication is important in providing} and _receiving

timely

information. Conflictcan result ifcommunication is notshared. Before the

transition phase, there needstobe open and honestcommunication with the

employees before their trust _{is broken. There is nothing} worsethan the staff

learning

oftheoffshore _outsourcing through impropercommunication channels.

There are resources and tips onthe

Internet,

from colleaguesand publications,

that mayadvise an organization on cultural

tips,

butgood communication and

common sense seem to be

key

in _any business dealing.

4.1.9

Summary

There needs tobe upfront_planning and

training

_{before going}fora software

subcontractormanagement arrangement(pre-work).

By

doing

this,

the team is

setting expectations in plans, schedules and knowledgetransfer. If the proper

project managementfoundation is not

done,

the projecttimeframe could be off

course _{resulting in} thetalentpool/resource _availability not

being

available when

needed.

By

not

having

the most experienced resources assignedto _{the project,}

Poorproject management and controls have resulted in _manyfailures

(Drescher,

personal _{communication, December}

12,

2004;

Anthony

Pellicano,

personal

communication,

July

17,

2004.)

If the United Statesteam

hiring

theoffshore

group hasunclear objectives and expectations,

they

could be

heading

for

disaster.

Many

groups believethe_outsourcing will solve alltheirproblems. This

Utopia vision could result in poor management and greatdisappointment

throughoutthe project. Ifexpectations are notrealistic, the results will be an

inferior deliverablewith anger on both sides.

4.2 Thecontract

The organization's goalfor negotiating the contract and service level agreements

must betoensure all aspects ofthe requirements are met while _achieving the

internal goal todecrease costsdown and increase savings.

Computerworld reportsthe _{best way to begin contracting is}to hold ajoint

debriefing

session toreviewthe contract with _{stakeholders,} those responsiblefor

the executionofthe contract, and the

key

functional areas(e.g. requirements,

DBAs,

qualityassurance, qualitycontrol, configuration and project management).

Involving

both sides iscriticalto create a manageable_working relationship. The

contract is the foundation forthe _{outsourcing relationship} and needsto_clearly

define assumptions, scope_creep

limits,

_{metrics, risks,} potential

issues,

and

processes

including

review, escalation, and touch points (handoffs between the

for both parties. The

debriefing

should include the highlightsofthecontract

(obviously

the financial arrangementshould not be shared with all parties), and

the intention or common goal

they

are_striving to achieve. Although both sidesof

the arrangement have a common goal, each side has a differentviewpoint

including

making the mostlucrative deal (Ertel &

Parker,

2004).

Sincethe customer outsourcesthe work,

they

do not _{have the ability}to control

the contractor staff resource levels. This includes resourcesthatare undesirable

by

the _{United States company}and since

they

have outsourced the project,

they

cannot control staffing. Aclause can be written in the contractforthe_{ability to}

provide input _regarding the removal of a specific resource. This needs to be in

the contract _{up front}to besure the service isat an acceptable standard.

Both the United Statesandthe offshore companies need todetermine which

cost/service trade-offs

they

are _willing to make and howmuch risk

they

can

tolerate.

Determining

how decisions are _made, how issues will be resolved,

disputessettled with theoffshore _company needsto be documented and

followed

by

all parties

(Perkins,

2004). The resolution_{to these items}should be

includedin the contract between the two parties.

The contract should include the right to withdraw if the _{security is} weak.

Inadequate security should result in the removal of access. This ties to the

balances not just for Sarbanes

Oxley,

but also for good project management.

Passwordsand access controls need to be in place to maintainthe balance.

Before _signing a contractforoffshore_outsourcing or_anyother_outsourcing

relationship, a plan forwhat will happen attheconclusion ofthecontract is

needed. _{A contingency} plan and a risk mitigation plan are essential. In addition,

the financial health and _stabilityoftheoffshore _company needsto be

investigated tobe sure that

they

will remain agoing-concern.

Security

is a _primaryconcern with offshore outsourcing. Forresterresearch

indicatesthat63% of161 users stated_{that security} concernsarethe reason that

they

are not _outsourcingoffshore (Rasmussen &

Moore,

2004).

From a _securitystandpoint it is important to be aware ofthedata theoffshore

companyusesfortesting. Test data should not contain _{any company proprietary}

orpersonal information. United Statescompanies need to determine if

they

want

to provide actualdata or give the outsourcees accessto theirdata mine.

Contractsshould prohibitthe use of subcontractors or reserve the rightto

approve subcontractors. Theorganization needs to knowwheretheirinformation

is and who hasaccessto it

(Pellicano,

personal _{communication,}

January

21,

Security

includes the customer

data,

serveraccess, as well as the code/solution

being

developed offshore.

Having

checkpoints in the United States company's

system willallowthemto audit and inspectwhat

during

the project phases and to

minimize whatthe end ofthe projects

(Duffy,

2004).

Disaster recoveryand business continuityshould be required toassure that there

is nolossof informationor system access. Laws in India do not_currentlycover

trade theft. Forexample, when source code was stolen in

Bombay

and turned

up in New Delhiwith afired developer

during

a FBI _sting operation therewas no

lawtosupportthe theft ofintellectual _propertyofthe United States _company

(Rasmussen &

Moore,

2004).

Both parties need to _{be strategically}aligned and havethe _abilityto adapt_{to any}

changes in theproject. Achangein position

by

either _partycould wreak havoc if

there is not continuous communication in their positions. Not

being

_{strategically}

aligned could result in poor performance

by

the vendor and be reflected in their

4.2.1

Mitigating

contractissues

Software licenses and hardware requirements can be come an issue. The

outsourcing contract needsto_clearlystate who is responsiblefor_providing the

needed equipment and software.

Software licenses may not be available outside of North America.

Checking

software-licensing agreements priorto_signing the service level agreementis

importantto mitigatethe risk of a license problem. Ifthe licenseagreements are

not valid outside of North Americaand separate licenses need to be purchased,

this needs to be thoughtthrough since oncethe offshore agreementends, the

United Statescompanies _mayneverhave a useforthoselicenses again.

While creating the service level agreement, determine which _partywill purchase

thesoftware and hardware. Ifthere are"niceto haves"software versus required

software _{applications,}both parties needtoagree who will be _making the

purchases, aswell as additional applications thatarejob specific(e.g. MS

Visio,

MS

Project,

code compilers). These typesof applications _may not be _ordinarily

considered when _negotiating the service _{level agreement, but these} unforeseen

4.3 Service level agreements

Preparing

for outsourcing includes the Service LevelAgreement (SLA). Without

the proper

training,

companies _may not knowwhat to include in the SLAor how

to protectthemselves.

Objectives,

service levels and measures must be well

defined and approved. Thiswill prevent unrealisticexpectations. The more

detailed/defined processesthatare in place on the United States customer's

side, the easiertooutsource offshore. SLA's coverthe performance ofthe

vendor and the products and servicesthat

they

will provide. The SLAshould

contain quantifiable and specific goals/expectations. Itshould also include

penaltiesforwork not_{satisfactorilycompleted,} or rewards ifexpectations are

exceeded

(Pellicano,

personal _{communication,}

January

21,

2004). The SLA

should _{be clearly}stated and _{be easily} understood so thereis no misinterpretation

of expectations or loopholes. Metrics/performanceexpectations_{may include}

corporate standardsto be

followed,

delivery

schedule

by

_phases, and

performance/ service metrics.

There should bethoughts _regarding corporate culture

issues,

CMM or other

process expectations and project scope priortothe creation ofthe service level

agreement. Measurable and realistictargetsneed to be included inthe service

level agreement i.e. turnaround timeondefect resolution

(TechRepublic,

2002).

The SLAshould _clearlystate how the performance metricswould be reported,

The roles and responsibilities should be clearly identified on both sides. Thiswill

assist in _ensuring the proper allocation ofresources.

Thereshould be some give andtake

(negotiating

room) on each sideto be

successful. It isalso recommended to have in place a decision making protocol

to _{determine clearly} who needsto be involved in decisionsand who needs be

included in the communicationforthose decisions (Ertel &

Parker,

2004). For

example, if the offshore and United States customerdeterminesa need fora

software build to an environment overtheweekend, certain actions need to be

taken priorto the communication ofthis decision. Employees from configuration

management, build and release _management,

DBAs,

and _qualityassurance

management needto be involved in the decision tovalidate people resources as

well as theserverresources. This isessential forconcurrenttasksto be

completed. There needs tobe a continuous

dialog

about changes.

Coordination must occurfor planning and _managing change. A_strategyfor

communication procedures and

key

messages should be _{developed early}onto

ensure thatcommunicationsare sent and received effectively.

Since the SLA isa _contract, itshould _clearlystate_{escalations, exceptions,}

definitions

including

whatis acceptableforthe _{penalty/reward,} service level (e.g.

5 days aweek or

24-7),

time framesforthe

deliverables,

roles and

responsibilitiesand _any

key

assumptions. The United States company can hand

forthe results. _{The SLA is important}to protectthe parties

by

having

a reference

as a "checkpoint"formanagementto referto and be surethattheirobjectives are

being

met.

TechRepublic noted mistakes in some SLAs. These included a lackof

organizational _readiness, corporate culture, employee

flexibility

and their_willing

toacceptthe _necessarychanges.

However,

an _overly

lengthy

SLAwith

language thatwould require a teamof attorneys to decipher is not productive.

The document needsto bemeaningful and _clearly understood both

internally

and

externally. If it is not, this mayprovide a barrier thatcannot beovercome

(Staff,

2002).

The SLAshould be customerfocused. You do not wantthe customers to be

dissatisfied with the _outsourcing arrangement. TechRepubliccautioned notto

set unrealistic performance targets. Performance targetsmust be realistic and

measurable although

they

should notbe documented in the SLA

(Staff,TechRepublic,

2002). Toobtain the best price, ifprice is a major_concern,

in some instancesa longercontractual agreement _may be the bestapproach, but

4.4 Management Roles/Oversight

Priorto_signing aSLA both sides of_{the outsourcing} arrangement need to make a

decision and determine ifit is in their best interest tocommitto the agreement.

Determine whichfunctional areas need to be involved toresolve the issue

or risk.

Determinethe roles/responsibilities of eachfunctional area and be sure it

is documented and communicated.

Maintain a collection of bestpractices and lessons learnedthroughoutthe

project and review atthe project close out.

Since one of the goals of _{outsourcing is} to reduce _costs, it is important to

compare price _quotes, the vendors

themselves,

and lookto negotiate _pricing and

work/requirements before the SLA is finalized

(Behre,

personal communication,

July

21,

2004).

However,

once thecontract/SLA has beenfinalized it is not _easy

to address issues that should have been included in the SLA. Prior to the

conclusion ofthe project, lessons learned should be captured to further improve

the next SLA.

4.5

Managing

the outsourcedteam

The United States company needsto knowwhatto expectfrom the _outsourcing,

how tooverseethe outsourcing and howto provide directionto the outsourcees.

Quality

includesmore than_coding and testing. There needs to be quality

requirements asthe

input,

or itwill _{be difficult to have quality}outputs.

Sizing,

estimating of

tasks,

determining

the predecessors and

determining

the project's

critical path are important.

They

require thoughtand cooperation

by

the team to

prepare and utilize the

information,

nottojust collect it. Agood configuration

management _processneeds to be followedto assure the

integrity

ofthe baseline

and the project artifacts. It isone ofthecritical areasfor_anyproject and this is

especiallytruewhen

being

involved in an _outsourcing relationship. Lackof a

solid configuration management background can resultin thefrustration of all

parties involved.

Key

functional areas (e.g. database administrators and

developers)

needto be trained in configuration management. All team members

need to havean overall _{understanding}of configuration management.

Scope _{creep is} an issue with on and offshore projects. Process managementis

important to besure processes and procedures are

being

_followed and that there

is the process _capabilityacross the projectto meetthe deliverables.

It is importantto be receptiveto and consider_adopting some ofthe offshore

team's best practices and lessons learned since

they

have accessto a wide

varietyof projects. Thistechnical expertise should be

leveraged,

keeping

in mind

thatpeople are not always _{willing to} change. Change takes _manypeople out of

theircomfort zone and others_may resist change_{simply because it}s caused

by

Processes tied tothe subcontractormanagementand their touch points need to

be modified or communicated and resourcestrained. Accurate and complete

communication is also important in _providing and _receiving

timely

information.

Without the proper_{communication,} people could make_{the wrong} decisions. The

Meta

Group,

Inc. recommends

having

a _contingencyplan in place in case the

offshore contractordoes not meetthe deliverables

It is important to trust the offshore _outsourcing subcontractorto provide solutions

thatmeetthe project and the customer's needs. This becomes more apparentto

all _parties, as

they

knowmore aboutthe customer's business and their business

objectives

(Hayes,

2004).

4.5

Mitigating

the management risk

Mitigate delays

by

having

the onshore and offshore office_set-up

including

passwords, securityclearances, securityaccess, and software requirements

done in advance. Therearetimes when requirements will need to be clarified as

the offshore team _{may have}questions on _wordingand need clarification ofthe

requirements priorto

beginning

the work. Hidden costs are _quicklyadded into

the projectforundocumented, personal expenses incurred

by

the team when

onshore.

To be effective, metricsshould beused _consistentlyacrossthe organization. Ifa

be keptwheneverpossible to allowforcomparison. The metrics should be

validated and notjustreviewed on a regularbasis. Themanagementteam

needstovalidate _{that the} subcontractor _{is maintaining the} metrics.

Therefore,

the metrics must be part ofthe contract/Service LevelAgreement. It is also

important to reviewthe metricsto be sure

they

are _providing an accurate picture

ofthe project. If there is no value in

tracking

a metric

long

term,

then itshould be

discontinued. Without collecting and _reviewing relevant metrics itis impossible to

improve or know thatthere is a process break down.

Measurements must be captured to determine ifthe projectis on trackand

successful. _{From task sizing} and estimationsto requirements

traceability

there

needsto bean end-to-end solution. This includesanychange requests and

ultimately to the production support metrics. Metricsmust becommunicated and

a good

leadership

team will act on sub-par metrics.

Risk mitigation should include the engagement and enablement ofthe entire

team/organization. It is important to remove barriersthatmake itdifficult for

people to performtheirjobs. Barriers include impractical _processes,

exceptionally

long

turnaround

times,

redundant/unnecessarysignature

authorizations, hardware and software issuesand purchases. _{Lost productivity}

can be tied to paperwork and poor processes. It is important to never

underestimatethe role of_{connectivity in} an offshore project. Often there is

creations (personal_account;

Natarajan,

personal communication, November

19,

2003). High levels of_{authority may}require additional levelsofsignature

authorityand therefore _{may be} required togain offshore access. Lead-time _may

vary

by

corporation or even

by

team.

Pinpointing

whatadditional requirements

are needed in advance (i.e. mother's maiden _name) can shorten the turnaround

time.

Offshore employees, required tocome to the United

States,

are suppliedwith a

document _explaining varioustopics about

traveling,

_working and

living

in

America. Tips both on-line and in these _companyspecificdocuments contain

information about the United Statestax

laws,

Social

Security,

telephone

courtesies and popularAmerican phases- _{which are}

in manycases

they

are

obsolete. Language is important. Certain words have different meanings in the

United Statesversusin India. These simple _everydaywords and phrases are a

Afewexamples are:

United States India

Okra

Lady

fingers

Potato chips Wafers

Undershirt Vest

Vest Waistcoat

IBM Compatible IBM Clone

Student hasGraduated Student has Passed Out

(Pattabiraman,

personal _{communication,} October

13, 2003; Natarajan,

personal communication, November

20, 2003; Sapp,

personal_{communication,} October

19, 2003; Revanur,

personal _{communication,} December

20,

2003)

4.6 HowtoTransition Out of an

Outsourcing

Arrangement

The besttime toplan forwhenthe_outsourcing arrangementwill end is

during

the

negotiations, preferably

during

theoriginal contract negotiations. Like _any other

contractthereshould be a buy-outclause, and a listof causesfor termination of

the contract

by

either party. Agreement should be made on howwork would be

taken back intothe company, outsourcedto another_group, and the roles and

responsibilitiesfor the hand-offs for

key

deliverablesfor the transition. There

could bea 14-30

day

_warrantyon thework

depending

onthe relationship. If

there aredefects thatare found afterthatperiod, the offshore _{group is} not

responsible.

The perception of_why people dislikeoffshore _outsourcing is _{primarily due}to the

set oftheoffshore employees. The misrepresentation of skills is

frequently

not

apparent until afterthe _{business activity}has commenced.

Hewlett Packard had numerous complaints in 2003when

they

senttheir

help

desksoffshore. Theirconsumersfeltthe language barriers prohibited them from

gettingtheircustomer's service issues resolved. The Indian

help

desksupport

employeeshad

heavy

accents. In _{addition, the}use ofheadsets increasedthe

problems with _{understanding} the customer and

having

the customerunderstand

them (Barbara

G.,

personal _{communication,}