Deploy Offshoring & Outsourcing Success: Define Metrics

Times are, indeed, challenging. The entire economy is obviously mired in uncertainty, which never bodes well for our industry. This has been such a tough decade, and many are calling our current industry situation worse than the aftermath of 9/11. Looking ahead to 2009, there is no doubt that the impact of the recent financial collapse and the potential for a global recession are front of our minds. Credit is tightening everywhere, consumers will be spending less, and businesses will have a harder time raising capital. This may well translate to cuts in capital spending and widescale efforts by our clients to cut spending. Most important, it will be difficult but crucial for business leaders to recognize the opportunities in a changing landscape and to maintain long-term discipline while addressing short-term challenges.

I am sure that Cost Control, Value Addition Services, Customer Sensitivity, Right sizing, exploring business options would be some of the top 10 to-do’s on every CXO’s list for 2009.
They're striving to see through the economic and political fog of today to what the post-meltdown future holds. They're discussing new and evolving ideas such as "joint accountability" and "collaborative partnering" the critical role technology can play in defining and managing outsourcing success, business and community development through public-private partnerships, outsourcing as a vehicle for corporate social investment and how outsourcing professionals can become blackbelts for a flat world. One major focus is on increasing process efficiencies across the entire spectrum of their offshoring operations — from call centers, Technology Development to Research & innovation work.

First let's revisit the often talked topic : Why is Outsourcing necessary ?

I am sure; everyone must have read about the term "Opportunity Cost". An Opportunity Cost is the value of a product that is forgone when pursuing another product. Let us take an example: If a CTO/CEO of a company spends 2/3 hours everyday on problem solving everyday issues on an existing customer facing technology service platform or Web Application, which could have been easily outsourced, the opportunity cost is the time lost in fire fighting redundant or trivial issues. That time could have been used to take important strategic decisions about your company's future technology roadmap or defining a new technology service or it could have been time well spent playing baseball with your kids. Either way, the time represents an opportunity cost, or you may call it an opportunity lost. Now let us try to understand how to make outsourcing a beneficial experience for both you and your customer. Cutting cost is the first thing most of the companies think about while outsourcing their business needs. Now this is the problem.

As a company planning to outsource your services you should focus on these 3 things:

1) Leveraging Cost/Skill Advantages
2) Quality of work desired.
3) Customer satisfaction.

Preparing a business case weighing on the above 3 factors gives you enough reasons on WHAT- WHERE- HOW -WHEN to Outsource questions.

More importantly the success criteria of offshoring or Outsourcing would be measured by the following metrics:

Prior to Outsourcing-

1. Political, Business and Economic Atmosphere of the Region
2. Country Demographics- Language & Cultural Neutrality
3. Talent Pool of the Vendor
4. Customer Credentials
5. Domain Expertise
6. Infrastructure & Business Continuity Engagement & Procedures
7. Process Adherence and Quality Standards Frameworks
8. Employee Engagement & Employee Turnover rate
9. Internal Business Engagement and Offshoring repurcussions

Now that you've shortlisted a suitable vendor, the following would be the post offshoring factors which you should consider

1. Service Level Agreements and Service Level Deliverables
2. Turnaround Time for Issue Resolutions
3. Transition Plans, Project Plans, Resourcing Plans, Communication Plans
4. Risk Management.
5. Business Value Propositions

Develop a Cost v/s Benefit Analysis during the term of the engagement to monitor the benefits arising of the engagement in terms of customer satisfaction scores(C-SAT), Increase of Business Revenue, Reduction of Issues, Sales Figures, Saving of Annual spending on Marketing or Development budgets etc whatever are the direct impacts or percieved benefits from the offshoring engagement. These would be healthy indicators which would define the success of the engagement and finally to the business.

I would welcome more suggestions on what are the benefits you've encountered from your offshoring engagements.

-Mustafa Balsara-PMP