The Challenge of Managing Offshore Outsourcing

Monday 12th January 2004
In discussions about outsourcing, most of the attention has been paid to the performance of the offshore supplier rather than on managing the outsourcing relationship once the contract is signed. Management of offshore outsourced activities is difficult because they are not under one roof and under single management control. Offshore outsourcing is an even bigger problem when the other party is many thousands of miles and several time zones away and has a different culture.

When the dust has settled after the conclusion of the large offshore outsourcing contract organisations cannot relax, as there is much work to be done to establish effective cooperation with their outsourcer. Cooperation of offshore outsourcing needs to be based on well-defined management principles with clear accountabilities and have unambiguous processes to deliver the promised benefits.

Offshore Outsourcing Principles
Principles in offshore outsourcing are crucial for setting the tone of the relationship. They describe the rights and responsibilities of each party to share information and the limits of each party's decision-making authority. Despite the vast improvement in global communications, contact with offshore outsourcing suppliers is often constrained by time differences. Well-designed principles are doubly important in these circumstances, as they ensure decisions are made that are informed by and align with the principles of the agreement.

Joint Management Structure
An offshore outsourcing project needs a joint management structure to manage operational, tactical and strategic liaison. The management structure will define the roles and responsibilities of each party and the management committees that direct and control the outsourced activity.

New processes will be required to manage the contract and the outsourcer's performance. Existing IT management processes will need to be modified to handle the new arms-length relationship. Additional communications and liaison processes will be needed to resolve issues that will inevitably arise between the partners.

These processes need to be developed and agreed in partnership with the offshore outsourcer - a significant challenge when the outsourcer is on another continent. Even minor differences between business cultures can lead to many more misunderstandings in agreeing business practices and assumptions. In offshore outsourcing a shared information workspace is crucial to ensure that all crucial information is in fact shared so that the playing field stays level.

Management Style
Offshore outsourcing customers will find it challenging to select the right people to manage these contracts. Managers who have a hands-on approach to solving problems may be perfectly effective when an activity is in-house. They will need a different management style when managing an outsourcing contract where much has to be accomplished with phone calls and written instructions. When offshore outsourcings contracts encompass geographical and cultural differences, the task becomes very challenging indeed.

Organisations will need staff who can rapidly learn new management skills - people who can develop clear and comprehensive plans and communicate them well while being sensitive to cultural differences. Organisations are unlikely to staff these positions from the remnants of the IT department but one source of good candidates could be IT workers with expatriate experience.

Customers of offshore outsourcers need to provide a realistic level of resources to handle this challenging task. Only customers who invest wisely and well in the management of the offshore outsourcing relationship will obtain the promised benefits.

Source: http://www.it-analysis.com

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