Key Success Factors for Outsourcing to India

In today s sourcing business, many companies are outsourcing IT services and projects to India, some as a Captive Center (employment of own Indian staff), others choose external service providers for delivery.

While a few years ago such offshore decisions have primarily been made to save costs, today these decisions are more often included into a global multi-sourcing strategy, where overall sourcing goals determine the right sourcing method. And, offshore outsourcing (e.g. to India), is still a good solution for specific situations.

A challenge for decision makers is to profit from lessons learned other companies have experienced, since companies are typically not willing to openly admit and share their failures.

The underlying article comprises a series of key success factors that can be observed in almost any mid-size to large-size outsourcing project focusing on India. The question is: how is success measurable?

The answer to this is very simple: from the very beginning, KPIs should be defined to measure the success of the project. In addition, it is advisable to institutionalize regular satisfaction surveys that measure the perception of the engagement across several stakeholder levels.

The success of an offshore outsourcing engagement should be pro-actively addressed. The following list is a key collection of criteria to ensure a successful outsourcing engagement:

2. Strong Management & Sponsorship: For offshore outsourcing projects, a strong management team (onshore and offshore) and a fully dedicated sponsorship are crucial to enable fast decisions and clear directions. The continuous drive and proactive attitude must come from the service recipient. For large-size projects, it is inevitable to have a Program Management Office (PMO) in place that ensures all communication is bundled, interpreted and available. The PMO ensures that respective rigor is given throughout the overall engagement, that the right communication is done in time and that problems are de-escalated appropriately.

3. Governance Framework: Watching the market, it has proven that most India outsourcing initiatives fail with their goals unsatisfied because of the fact that a clear governance framework has not been defined. The governance framework ensures that all managerial rules, regulations and processes are explicitly stated and will be followed by all stakeholders. It is considered as the backbone for an engagement. Typically, it is aligned to internationally accepted quality models and adjusted to the project needs.

4. Outsourcing Readiness: Several questions need to be addressed in order to evaluate outsourcing readiness. Is the internal staff ready for outsourcing? Extensive knowledge and training are required prior to transfers and need to be consistently supported; strong resistance might adversely affect a company s success. Are processes mature enough to be outsourced? Have the processes been scanned and evaluated carefully, considering maturity and risks to ensure they are suitable? What is the documentation level of the processes? In most cases, this question will be answered with "90% documentation done" while the reality shows that instead "30% documentation is done". Documentation is a time intense activity and mostly underestimated.

5. Experience: The bigger the offshore outsourcing initiative the more important it is to have the right experience available. Identification of risks and foresights are crucial to ensure a successful engagement offshore. Wrong decisions and wrong expectations can easily result in a back transfer of the services to onshore.

6. Quality Adherence: Services are typically outsourced to save costs. Although most experienced consultancy companies today discourage this perspective, nevertheless, many offshore businesses are motivated primarily by cost advantages. It is often realized late in the process that quality is one of the top two to three driving factors for a successful offshore engagement. Lacking qualities have an impact on performance and reputation of the engagement. Poor qualities can cause considerable follow-up costs, which in turn have a negative impact on the business case.
A close adherence to Industry Standards, such as ITIL, ISO9000, SixSigma, CMM, etc. is highly recommended, as well as regular quality audits and continuous quality improvements. Quality initiatives should be a standard asset for successful delivery.

A good expectation management will ease communication and sets expectations right. This can be accompanied by innovative approaches - initiations by quality management, for example.

8. Contract: In case the services are handed out to an external service provider, a respective contract management is needed. If there is no in-house legal department available, external legal advice is inevitable to ensure that the business is built on a stable base.
Over the past several years it has proven that "built for change" contracts are most suitable. More and more companies are starting to negotiate penalties for lacking service quality or specific situations.
Offshore outsourcing is seen now as one out of several sourcing options. It can be selected in alignment with the overall company Multi-Sourcing strategy. India, as one of the choices for outsourcing, is constantly becoming more and more expensive. While it is not clear when stagnation can be expected, India has a few advantages to offer. Today, the key players in India can offer very good experience, skilled management staff, a good infrastructure and a decent understanding of the Western IT market and needs.

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