The planning and preliminary implementation processes for shifting IT-enabled work to offshore locations are similar for back office work, customer service operations, and knowledge process outsourcing, or KPO.
Here we map out the process of offshoring in a manner that allows firms to choose between outsourcing and opening a captive facility once they have completed an assessment of the types of work that could beshifted.
Offshoring is presented here as a series of tasks and deliverables. Key decision points are identified — to enable them to be recognized and formally presented to a senior management authority. Describingoffshoring in a workplan format enables it to be quickly translated into an implementation document.
Time frames for a new offshore operation to “go live” vary according to the size of the project and the complexity of the infrastructure and training required. Once the initial research and planning tasks havebeen completed (Tasks 1 through 4), between six and eight months may reasonably be needed to formally establish an offshore presence and have transferred operations begin ramping up.
A common pitfall encountered in both captive and outsourced operations originates from unrealistic ramp-up expectations, whereby project planners try to start up too many new offshore seats too quickly.Quality is sacrificed for quantity. The most important offshore lesson that new project managers have to learn is that quality has be achieved before ramping up large numbers of seats — or quality will never be achieved.
Workplan for Offshoring
The six tasks in this workplan are presented as assignments that a project principal will be responsible for completing. Deliverables roughly parallel each task.
- Task 1: Catalog and baseline work that could be shifted offshore
Assess volumes according to skill types and skill levels, requirements for subject-matter expertise, process design and workflow logic. Examine metrics and set minimum performance levels to be achievedduring training, ramp up and normal operations. No work will be shifted that cannot be measured.
- Task 2: Assess infrastructure requirements
Assess infrastructure requirements for work being considered for offshore migration. Infrastructure includes telecommunications systems, IT systems and data security requirements. What reliabilityand quality levels will need to be maintained?
- Deliverable 1: Decision paper on options for shifting work offshore
A decision support document shall be prepared to enable determinations to be made regarding schedules for shifting work, offshore recruiting projections, offshore training strategies, quality assurance andquality control (QA/QC) procedures and data security policies.
Options for phased migrations and ramp-ups may be preferred. Minimum performance standards for operations to remain offshore may also be set. Additional factors that would prompt a pull back may also be designated.
- Deliverable 2: Summary of capacity and infrastructure requirements
Prepare a summary of offshore needs for office space, infrastructure, staffing and skill levels, personnel training and support needs. QA/QC and data security policies for offshore operations will also becodified.
- Task 3: Develop tax and other compliance strategies
Conduct research in the designated offshore destination(s) to support the development of tax and other legal compliance strategies. Compliance strategies can encompass:
- Labor laws
- Import tariffs
- Restrictions on the use of VoIP (Voice over Internet Protocol) in captive operations
- Regulation of special economic zones and other areas where tax incentives may be available
- Options for expanding into domestic markets offshore
- Visa issues in both the originating country and offshore destination
- Establishment of a registered office
- Rules regarding foreign exchange and bank accounts
Companies operating in India are generally barred from maintaining more than one bank account in that country.
India’s tax climate is changing quickly for both domestic and non-Indian IT enabled services firms, as described in this article on higher costs for outsourcing suppliers.
Findings from Task 3 will be presented in a decision-support document.
- Mainstream outsourcing arrangements, as described in the article “How to Outsource”
- An arms-length strategy of wet-lease arrangements, with local personnel hired by an offshore contractor, enabling the client to operate without a permanent local presence
- A dry-lease approach with a limited or temporary presence — the facility lessor providing equipment and possibly telecommunications services, but only a small number of support staff
- The establishment of a permanent presence, as described in this article on captive facilities
Preferred options from the deliverable above shall be restated in a strategy document that will govern subsequent activities. A confidential addendum can be prepared that outlines strategies forcontrolling risks for the originating entity. A go/no-go decision can be made at this stage.
A forward-looking labor market analysis can be conducted to guide recruitment and compensation policies. Recruitment and personnel policies will be developed, based on the findings of the labor market analysis. Deliverable 4 will contain the results of this task.
Decisions made in previous tasks will be implemented to establish an offshore entity (with corresponding tax implications), a wet-lease or fully outsourced arrangement. If a presence is being established, thenthe following actions may be undertaken:
- Apply for government registrations and approvals in the offshore destination.
- Obtain government or central bank approval for opening a bank account.
- Execute contracts for office space and telecommunications services.
- Initiate recruitment activities.
- Establish a telecommunications and IT infrastructure.
- Begin QA/QC and oversight activities.
Weekly written progress reports, supplemented by teleconferences are conducted at least twice a week. Once ramp up begins, formal teleconferences will be conducted on a daily basis.
Training can be conducted by personnel from the originating location going offshore for periods of 1-2 months or more, reinforced by offshore managers coming to the originating location for cohorttraining and management development. An accelerated schedule could be implemented by having trainers from the originating location participate in the personnel selection process and then immediatelybegin training new hires offshore.
Risks from offshore staff failing to meet onshore quality standards, especially in call center operations, can be controlled by deploying some of those staff for domestic overseas customer service work untilthey meet onshore performance standards. Some offshore training programs focus exclusively on classroom training, while others provide trainees with real-world experience early in the training process.
One of the biggest surprises from offshoring is how incredibly motivated offshore personnel can be to meet or exceed expectations. If properly recruited, trained, managed and incentivized, this motivationcan be a powerful force for corporate growth and individual transformation — at both sides of an offshoring arrangement.
Anthony Mitchell , an ECT News Network columnist, has been involved with the Indian IT industry since 1987, specializing through InternationalStaff.net in offshore process migration, call center program management, turnkey software development and help desk management.