Human factor is decisive when choosing offshore destination

Prejudices and perceptions are bad directions
For most companies outsourcing is a logical and strategic choice. The choice of where to consequently place the work is not so simple. A common perception is that India is suitable for quantity and eastern Europe for quality. This prejudice (and many others) are difficult to overcome for outsource countries. By looking beyond project size and cost it seems that the right outsource is not dependent on the region, but on the people.

Research by the online platform Focus has shown that in 2010 the starting point for the choice of whether or not to outsource is still cost saving. That is regrettable because that is why outsourcing still leads to frustration and disappointment with regard to meeting expectations. The most popular low wage countries are not nearly as cheap as they used to be. Ten years ago one could appoint an experienced and highly trained engineer in India for a fraction of the employment cost of a Dutch ICT employee. Those times have long gone. The wages in India increase as the Indian economy grows. Also wages in eastern Europe, especially the new EU countries, have risen significantly the last few years.

MANPOWER
Outsourcing projects are more successful when companies decide to outsource because the work is not part of the core competence. Companies like software developers profit from outsourcing because people in western Europe do not have the manpower for the work. This makes the choice of outsource destination dependent on other factors than wages. For example, in The Netherlands there is a chronic and lasting deficit of highly trained ICT people. In India and eastern Europe thousands of ICT people graduate every year. That is the reason to execute ICT projects in those regions. Ukraine is a good example here. Every year tens of thousands of youths offer their services on the labour market with degrees in software engineering, website development, architecture and design. Many of them posses the knowledge and skill to start work immediately. India, with its 4 million employees in the offshore outsourcing industry, is the back office of the world. Some outsourcing projects require teams of 50 to 100 people. These projects are best suited to India rather than other offshore countries. However, the manpower that is available in India is also under pressure, especially in the largest ICT centres like Bangalore. Because of the popularity of these offshore destinations, less people are available for new projects. It is better not to put one’s eggs in one basket. Bringing the best people together for each individual project will not work if the expectations are purely based on business aspects. The first step in selecting an offshore country is to create a list of wishes, demands and conditions.

TIME DIFFERENCE
This wish list should not only contain service levels, key performance indicators or possible cost saving. For example, is time difference an important factor? If people communicate via Skype or other online communication solutions the time difference could be less of a problem than previously thought. Especially in India people can organize around the time difference in a very effective way. The time difference can even be an advantage because the team members in India keep working while the Dutch organization enjoys a night’s sleep. And the other way around. Besides, the time difference with India is only four hours so there is enough overlap to communicate daily when it is morning in The Netherlands. If the communication has to take place in the afternoon eastern Europe is the only option. There is only an hour time difference with eastern Europe and most teams adapt their working hours to the Dutch ones.

MANAGING
Does the country have to be accessible in a fast and easy way for the Dutch team members or leaders? If companies want to visit their team every month, eastern Europe would be a better choice. If the management of a team is handled by a partner company in the outsourcing country it would be relevant to know how long this partner has been active in that country. Does the partner also invest in the local people and society? Where is the headquarters of the purveyor situated? From ethical or juridical perspectives these factors can be decisive in a decision. If the main establishment is not situated in The Netherlands, how will the client be supported in The Netherlands? Most international companies have offices in eastern European countries where they can recruit people themselves. However, medium and small sized companies are usually unable to find the funds to open an establishment in Ukraine or Russia. They try to find the right employees on the internet. Then it becomes clear quite quickly that hiring people in far away countries is not so different from hiring people in The Netherlands. Companies want to know all about a future employee and they want to be able to look them in the eye. It is beneficial for these companies to have a Dutch partner to represent them from an establishment in the outsourcing country. This partner can create a team of experienced and specialized people that is a perfect match to the company. This perfect match is only possible when there is a close relationship during the team formation process, based on understanding of the companies’ goals and processes. Because not only the spoken and written word needs to be translated, but also the companies’ goals, culture and application. The biggest success factor of each outsourcing project is the team that does the work. The team members need to fit the organization’s culture because they are in reality part of the Dutch team.

CULTURE
In which country can this cultural match be found? Several prejudices need to be excluded in this matter because this is about people and it is impossible to judge a book by its cover. Is it true that people in eastern Europe dare to ask questions to test the level of understanding regarding the project and to challenge expectations? Certainly, but that is also true for India. Employees all over the world want to supply the best possible work so that those accomplishments generate work in the long term and provide possibilities of expanding the business. The work ethic in India is thought to be very hierarchical and therefore highly structured. A common thought is that the Indian way of working requires detailed specifications and does not leave any room for personal interpretation of team members. Another common prejudice which is hard to get rid of is the thought that teams in India simply stop working to wait for further instruction or the answer of a question. That is however not the case. A hierarchical way of working is only used when the work requires team members to be managed in a strict way. That is not the case in India. Employees who are stimulated and motivated will always show their own initiative. When pro-activity is encouraged projects finish faster and are more successful. The team members in India and eastern Europe are very proud that their insight and input improves the client’s results.

THEE P’S
The conclusion is that offshore and near shore outsourcing is primarily the work of man. Research conducted by Ordina among Dutch ICT and business managers shows the same conclusion. They believe that outsourcing projects are more likely to end successfully if enough attention is paid to the human side of the business. This is also true for the people in The Netherlands. To make outsourcing work there also needs to be an internal basis. The employees have to understand the initiative and see the advantages for themselves and the organization. Then it is important to bring the right people together and to invest in a pleasant cooperation. If the employees from outsourcing countries are treated as equals they will quickly see past the cultural differences. That is why it is essential to note which values the outsourcing supplier finds important. Any offshore outsourcing project is only successful when it has met the following criteria of the three P’s: people, process and performance. Finding and keeping the right people is just as essential as a well functioning and documented work process and those people are the best measuring instruments for the accomplishments. Because people go through this process together with their Dutch team members. If they are motivated and stimulated they will keep improving this process through a strong feeling of involvement. This will lead to people accomplishing more and therefore the project and the products will also accomplish more. It does not matter in which country the project takes place.
Hugo Messer is the founder of Bridge Outsourcing, a company that has software development centres in India, Ukraine and Moldova.

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