I have been running oursourcing arrangements over the past few years and one thing that continues to nag me is; What is wrong with outsourcing? I mean why is outsourcing not living up to the hype and promise of it? Nearly every company that I have worked with considers their outsourcing arrangement a failure. Sure we have a a number of project level successes but they generally see the overall relationship as a failure.
The factors that have contributed to this view of outsourcing are:
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Lack of savings
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Poor delivery quality
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Too much rework / lack of efficiency
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Lack of Accountability
I have taken a good look at some of the successes and some of the failures in the companies that I have worked with to try to understand why these things are happening.
Lack of Savings
The problem here comes from the fundamental differences in the business philosophy between the American businessmen and the Indian outsourcer. The American businessman will generally charge a bit more per hour but not charge for all of the hours spent on a project as a gesture. The Indian businessman will charge a lower price for services but expects to be paid for every hour. This sets up a problem in perception; each believing that they are doing a good thing but each receiving an entirely different message.
The american believes that they are being taken advantage of or that the bill is being padded because there is no discounting on the bill. The Indian businessman believes that their work is not being valued because the client desires a discount. This situation sets up animosity between the two companies.
Poor Delivery
Almost every single technical director that I have worked with complain about the quality of the delivery of the outsourcer. Common complaints are, "they don't understand the business problem" and "they are good coders but they simply don't think about the problem they are trying to solve". I believe that both sides of the business relationship have some culpability here. Many times the requirements are not clear enough to provide the developers with proper direction and focus. Other times the requirements are clear but the developers just don't read the documentation or don't understand what they are suppose to be doing.
Rework / Lack of Accountability
One of the biggest problems that executives have told me that they experience is a lack of accountability. Most of the executives say that when they have outsourced relationships they are constantly frustrated by statements like "we will fix that" or "yes I understand". Now on the surface these seem to be quite reasonable responses. When you apply them to the context of a problem in the delivery quality and the fact that 99% of American businessmen expect their service provider to make things right but the outsourcer generally will not offer compensation for problems.
What can we do to realize the promise of outsourcing relationships?
I believe that it falls to the Outsourcing Engagement Manager to assure that each of these problems are addressed early and often in the project. I have been able to realize more and more success in the use of outsouring by addressing these situations and assuring consistent communication through governance.
JD
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