The ABC of a successful offshoringHet ABC van een succesvolle offshoringABC till framgångsrik offshoringThe ABC of a successful offshoring
The demand for offshoring is a keeper despite of the increasing costs (labour) in the supplier region. In our conversations with the product managers (manufacturing) and IT managers revealed that they are still planning and looking at the opportunities for offshore outsourcing.
The collapsing economy forces the companies to pay more attention to required capabilities for a successful offshoring strategy and that they have higher demands of offshoring service providers.
Our experience points out that three aspects determine the success of every offshoring strategy.
- Collaborate withother cultures;
- Bridge the gap with a Bridge SE;
- A well thought offshore outsourcing plan.
A. Think through the aspects of collaboating with other cultures
Najete M’Bata, partner of Slagkracht Management has developed an easy method for dealing with other cultures. By applying her six universal basic principles you are capable of thinking, looking and handle beyond the ‘borders’ of every culture. The six principles are:
- Be aware of the prejudices that exist in other cultures about the Netherlands and the Dutch existence and be aware of your own prejudices about the other culture.
- Learn about differences and similarities of cultures.
- Observe other viewpoints.
- Show respect. Respect if business is going different than you are used to. Different is not the same as ‘wrong’.
- Carefully choose a form of communication which helps to achieve your goal.
- Integrate, make a bridge on business level, relationship level, communication level, logistic level, cultural level, linguistic level.
Handling these universal basic principles will help you avoid or eliminate a lot of collaboration problems.
B. Bridge the gap with a ‘Bridge SE’
IT is an intensive knowledge market. IT development and remote management requires a perfect match between knowledge in Western Europe (the usual work flow, knowledge of the system environment, the requirements of the organization, etc.)
In addition, you can be sure there is a difference between your work method and the work method of your supplier. Formulated bluntly, we dare to say that most IT organizations work here on the CMMI level 1 or 2. The supplier in India, China or the Philippines will usually operate at level 5. This requires an effective coordination.
And then you have the earlier mentioned differences in cultures. Even if you are not aware of it right now, the fastest, most effective and in the end cheapest way of collaboration starts with turning to a Bridge SE.
A Brigde SE allows you to efficiently hit the nail on the head with the three aspects (knowledge, methodology and culture). A Bridge SE is a System Engineer with roots in technology and is a native resident of the supplying country, who completed his study at a university in the country of the outsourcer. Preferably, he or she gained several years of working experience here.
More information about the qualities and the added value of a Bridge SE can be found on the Outsourcing Blog.
C. Five less known ingredients of a successful offshoring plan
Make (or let it make) an offshoring plan with a least the following ingredients:
- Your desire to flourish your organization with offshoring has to be tempered by standing still and making a calculation of the costs of outsourcing. There are many ways to save costs using outsourcing, but the initial costs can be substantial. Also think about the traveling expenses your people will have regularly. The demand management organisation that you need to have to make a success of offshoring. The costs of the Bridge SE. Also make, before you start, an overview of the costs for public relations and personnel (severance, relocation costs, etc.) using offshoring.
- Analyse your costs structure and potential savings that you can realise internally. You can for example avoid investments for expansion of the office (building costs), or you can sell a building or rent it. You can save on energy, transmit costs and other HRM overhead costs. Are the assumptions real and executable or are these the kind of costs which after offshoring will still press the bill?
- Work closely together with your controller and managers on the working floor to determine how many hours are needed for certain services and production processes. Often, there is a ‘drain in the hours you are paying and you do not need to outsource this ‘drain’but outsourcing can eliminate this. If you know how much the gross wage (inclusive drain) and the net wage (exclusive drain) costs you for the work, you can negotiate better with your potential suppliers about the costs you charge.
- Avoid typical outsourcing mistakes like signing as first party a Service Level Agreement (SLA) and a quality agreement before you talked about a delivery contract, a project contract or an outsourcing contract. Turn to demand management and avoid the expensive mistake of thinking about demand management after you made the deal. Also avoid the mistake that suppliers of your colleagues or competition can be a good supplier to you as well. Every business situation is different even if you are operating in the same market and even if you work both with the same IT system.
- Present the possibility of offshoring outsourcing to the middle management, to the work council and the investors to see their reactions. Your presentation of cost-effectiveness in outsourcing can result in strong negative responses of some parties. Listen closely to these reactions, weigh all arguments and use their feedback to make the best possible decision and know how to communicate about it. With this ABC for successful offshoring, you have a good chance to work with a strategic business partner, which is on the same line with you if it comes to your method of managing and who is going to make your collaboration a success together with you.