Introduction
Regardless of whether you are a general manager with profit-and-loss responsibility, or are in a managing function, such as finance or information technology, the maturing of offshore outsourcing will impact you because it changes the way organizations structure, operate, compete, and deploy resources.
Consequently, several organizations have stumbled while experimenting with offshore and outsourcing in the past, and will continue to do so in the future unless they use a methodology to develop an outsourcing process. Without an appropriate process, an offshore initiative can result in increased costs, loss of customers, and the attrition of employee morale.
Planning Before Execution Will Expose Major Pitfalls
The planning phase for the successful application of offshore outsourcing involves minimal expense upfront and allows for rapid return on investment (ROI).
The typical start-up costs for the planning phase include assigning resources for business planning. The benefits of business planning usually include lower cost structure, improved responsiveness, increased focus on core processes, higher margins, and cash for entry into new markets and these usually offset the upfront costs of an offshore outsourcing initiative when done right.
Jumping into a partnership with a provider without due diligence including a business, operational, financial, or risk and mitigation plan is highly risky. Without planning, the team will have no way of gauging progress and measuring the risk of strategic, cultural, and operational issues associated with jumping directly into execution. Ultimately, an organized planning phase is crucial.
Appointing an offshore outsourcing lead for program management for the planning phase is highly recommended to optimize benefits and avoid disruption to the ongoing operations and momentum of the organization.
The program management lead, in concert with the planning team, should develop and document a clear understanding of existing processes, owners, and costs. It is also important for the team to understand competitive, geopolitical, and pricing trends to ensure the team creates realistic targets for the initiative.
Successful implementers of offshore outsourcing typically take a phased approach. By breaking up the implementation into incremental phases that usually last between 12 to 24 months, organizations can manage risks and mitigations, and accelerate or decelerate their rollout appropriately.
Once a foundation of current processes, owners, and goals is in place, the team can start documenting requirements for the leading candidates in collaboration with stakeholders. This stage-gate approach allows teams to focus on candidates with the highest degree of leverage and on ROI because requirement planning is typically only done for leading offshore outsourcing candidates.
Based on the objectives developed during the early stages of planning, firms can focus on due diligence and negotiations with the appropriate short list of offshore partners to ensure that strategy, culture, operations, and execution are aligned.
Offshore outsourcing is a proven way of using resources from more than one country for lowering costs, entering new markets, and increasing capitalization. Organizations, both large and small, should consider applying offshore outsourcing to their processes pragmatically.
By adopting a proven methodology, organizations can achieve spectacular results. Offshore outsourcing allows organizations to reengineer their activities by focusing in-house personnel on the firm's core-competence, while outsourcing non-core functions to a shared service or third party organization whose personnel focus on developing the economies of scale and best practices in the function they provide.
Prior to consulting, Kapila served as a director of corporate development, product management, and product marketing for Inovis. He spent three years at MCI Telecommunications in product management and financial analysis positions. Kapila and his team from GRM Group, complement executive teams on assignments by leveraging business operations, offshore outsourcing, and corporate development experience.
Kapila holds an undergraduate degree in Electronics Engineering from Punjab University, an MBA from the American University, and has completed Executive Education at Harvard Business School.