By Mark Brunelli, News Writer
26 Oct 2004 | SearchCIO.com
ORLANDO, Fla. -- Proper planning and honest communication with employees and suppliers are two of the biggest keys to launching a successful overseas outsourcing project, according to experts.
Speaking at the Gartner Symposium ITxpo, Michael Montonen, vice president of consulting for the Stamford, Conn.-based analyst firm, said companies that are considering going offshore should first conduct a risk and readiness assessment of their organization and decide exactly what kind of work should be outsourced.
The person in charge of the outsourcing program should then communicate those goals directly to employees and to potential suppliers of overseas staff. It's also important to get visible support from high-level company executives early on. Support from upper management can be a big help when the outsourcing plan runs into "natural resistance" from employees who are concerned about their future.
"A lot of offshore engagements actually get into trouble because of a lack of communication," Montonen said. "Be honest and upfront about what you're doing, and be honest about the business reason for doing it."
Before shopping around for overseas suppliers, companies should to develop a business plan that clearly explains the business drivers for the initiative. To get the information needed for the business plan, conduct thorough risk and readiness assessments, Montonen said.
The assessment process will help companies determine what skills they have in-house, what skills are needed from a third-party source and the cost implications of outsourcing. Using this information, companies can then decide what the nature of the outsourcing relationship should be, and thus the type of supplier they need.
Outsourcing relationships come in three forms, Montonen explained. A utility relationship is highly transactional and basically consists of a supplier handling a small amount of work for a short period of time. An enhancement relationship is when the supplier actually helps the customer add some new capability to its infrastructure. In a transformational relationship, the offshore supplier is a true partner and enables a complete change in the way that the customer company does business.
When planning for outsourcing, companies should also assess their change management capabilities. Specifically, they should determine if they are ready to manage the changes that will be required when work begins moving offshore. These changes may be in the areas of technology, business processes and staffing. If employees are to be laid off or retrained as a result of offshoring, it's important to clearly communicate those plans, the analyst said.
"You have to basically bring people on board and you have to do it through a very clear communications strategy," Montonen said. "You also have to enlist the support of senior management."
In creating a business plan for outsourcing, companies should also consider governance, or the process of managing a global sourcing relationship. The skills needed to manage such a relationship generally fall into categories of IT leadership, architecture, vendor management and IT and business alignment, Montonen said.
The first things to consider when picking an overseas supplier are the geopolitical and other risks associated with the country where the supplier operates. Look at the infrastructure of the country, the overall business conditions, and most importantly, the legal system.
For example, think twice before going to China because the judicial system doesn't support foreign companies in intellectual property cases, Montonen said.
When looking at individual service providers, consider the viability of their company and the availability of disaster recovery services. Also, think through the cultural, language, time and communications differences between the two firms.
"Be aware of the cultural differences," Montonen said. "There are different ways of communicating and you have to be aware of them in order to be successful."
Conference attendee Ed Pisula, director of corporate IT for Respironics Inc., a manufacturer of respiratory devices based in Murrysville, Pa., said during his company's recent outsourcing project, cultural differences actually worked to his advantage.
Pisula said his company outsourced the implementation of an SAP enterprise application to an Indian firm after deciding that the cost to work with local consultants was just too high.
Pisula worked with the Indian firm to get the project under way, and because of the time differences, he would often show up to the office in the morning to find out that a lot of work had been accomplished the night before. In the end, Respironics saved money and time.
"I'd recommend outsourcing," Pisula said. "Just understand exactly what it is that you want to outsource."
One final word of caution came from Montonen, who said that when picking a service provider, be sure to examine the company's record as well as their rhetoric.
"When dealing with service providers, we recommend that you always look under the hood and not only listen to the marketing presentation," he said.