Author: Menzo de Muinck Keizer
This isn’t the first article about offshore IT or BPO mistakes, but recent changes in the offshore business require an update.
1. Expectations Mismatching expectations is main reason for disappointing offshore operations. Example: the client expects to get rid of some operational issues, while the supplier expects to be judged based on the availability of skilled resources. Solution: discuss, agree and write down your high level expectations and evaluate regularly.
2. Incomplete Business Case Many offshore business cases miss important cost elements, like start-up cost, increased overhead cost, transition cost, rate changes, Leading to optimistic expectations and disappointing results. Solution: get your business case reviewed by an experienced offshore manager, before taking brave decisions.
3. Salary Inflation Cost differences between locations aren’t ‘static’ but changing. Salary inflation (defined as the annual increase of a specific skilled person may vary from +25% in certain areas in Romania and China to <0% in some areas in Spain. Country averages don’t tell the whole story. Solution: get informed about salary inflation and take it into account in your business case.
4. Wrong Location Offshore IT and BPO started more than 25 years ago in India, which went well for some types of operations, but for others the Indian culture appeared to be less suitable, for instance customer contact centers. Nowadays, we recognize offshore destinations on all continents, all having their specific strengths and weaknesses. Solution: get informed about the cultures suitable for your operation and availability of resources.
5. Juniorisation Large suppliers have full time dedicated ‘juniorisation managers’ replacing senior resources by juniors. What you see: the manager/architect/software engineer that you trusted so much, has suddenly disappeared, because he was urgently needed somewhere else. According to the supplier this has no impact on the quality. The reality is often very different. Solution: add seniority KPI’s to the contract and monitor it.
6. Governance The number of engaged managers at the client’s side is often too high. This may cause confusion, supplier frustration delays and unnecessary cost. Solution: a radical change of the governance structure, although many managers won’t like it.
7. Empowerment Business analysts on the client side and executors on the supplier side is the common distribution of tasks in offshore operations, not utilizing the valuable experience of the suppliers’ seniors. Solution: put the seniors of the supplier into a powerful position and give him/her full responsibility for making it success. Don’t forget to assess the capabilities of the suppliers’ senior and monitor it.
8. Inexperienced Client In a football match the experienced team is likely to defeat the inexperienced team. In offshore operations the supplier is often the most experienced. The inexperienced client pays for his loss by an uneconomic contract and disappointing results. Solution: get some people in your team who played the game before.
9. Cultural Differences ‘Underestimating cultural differences’ is often recognized but hard to solve, because most people are unaware of their own culture. In their view they are just ‘acting normal’, while the other side is ‘acting weird’. Please don’t think cultural barriers only exist between Europe and Asia. They also exist between Western-, Eastern, Southern and Northern Europe. Solution: engage at least one manager in a key role, who is familiar with both cultures.
10. Personal Relations Even the best contract, detailed requirements and set of KPI’s won’t guarantee a proper cooperation. To really understand each other, personal relations are needed. They can’t can be built via email or Skype: the minimum is a face to face meeting twice a year. The solution is simple and should be included in the budget.
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