The safer bet to offshoring

Last week, I told a story of a quality-assurance automation outsourcing project gone bad. Two major issues led to the demise of the outsourcing deal: lack of domain knowledge and little or no local presence at the client site. A third less obvious problem was lack of depth in the provider organization.

I have felt for some time that effective outsourcing of knowledge-work such as development and quality-assuranc functions was tied to the ease of interacting with the provider. When the provider is half a world away; time zone, language and cultural issues can add stress to the vendor/client relationship.

Outsourcing knowledge-work can be successful if three critical factors are addressed:

* Local presence.

* Domain knowledge.

* Structured, repeatable processes.

Local presence is not a requirement, but it will certainly make the outsourcing process easier when done right. Having a local project manager and some of the key design and decision-making resources available on-site or at least nearby for frequent face-to-face meetings can increase the odds of a successful outsourcing relationship. It is as simple as this – more accessibility means more communication. And face-to-face means better communication. More and better communication means every problem, delay, or other bump in the project road can be discovered more quickly and resolved faster. Let the local vendor staff deal with the remote staff. They are from the same company and have some history together and can more easily overcome the communication and coordination challenges introduced by geography.

Domain knowledge is a requirement unless you want your staff taking the extra time to train the vendor’s staff. Not every resource assigned to your project needs to have domain knowledge, but key design and decision-making resources should have experience in both the tasks to be performed and the nature of your company’s business. If you are in the insurance business, your outsourcer will do a much better job if they understand the ebb and flow of the insurance business. What are the sales cycles like? What is important to customers? How complicated is the billing process? How sensitive is client data? These business-experience questions are not directly related to coding or testing a new application, but there are subtleties in every business that become important when technology is unleashed on the workers and the customers.

Structured, repeatable processes lead to consistency. Time and cost estimates will be more accurate. Work will get done right the first time, avoiding costly rework cycles. Whether the structure is represented by Capability Maturity Model (CMM) certification, ISO 9001, Six Sigma, Control Objectives for Information and related Technology (COBIT), or Information Technology Infrastructure Library (ITIL), there is a discipline introduced into organizations that have trained their staff and documented their processes to these standards. This is no guarantee of success, but it raises the odds significantly.

Some vendors have gotten this mix right. One company that has focused on these three elements is Kanbay, a global systems integrator providing development, testing, managed services and consulting. Kanbay has approximately 4,700 employees, 80% in India, but 20% at or near customer locations. It has put a priority on the local presence as part of a successful engagement. Kanbay focuses only on the financial services industry including insurance, banking, lending, credit card, and capital markets, so its staff has deep domain knowledge. And Kanbay has taken standards and certifications seriously, including CMM Level 5 and ISO 9001:2000.

When selecting an outsourcing provider, particularly for knowledge work where significant interaction must take place between your employees and the vendor, look for local presence, domain knowledge and organization depth that includes the appropriate certifications. You can decrease your costs and stay competitive by taking advantage of offshore resources, but still work with your vendor by having competent resources right down the hall.