A crisis of credibility for India Inc.

February 1, 2009

Last year was indeed a turbulent year for Indian service providers. First the  World Bank banned Satyam Computer Services from providing it software services for eight years alleging malpractices, including bribery, and and then, beginning this year, an avalanche of troubles fell on the beleaguered company, when the promoter Ramalingam Raju “confessed” to having siphoned off millions from the listed to two unlisted companies floated by his sons.

Earlier, three generic drug manufacturers, Ranbaxy, Sun Pharmaceuticals and Lupin got ticked off by the FDA, the apex drug regulatory authority in the US for alleged manufacturing deficiencies at their respective plants.


All this and more beg following questions:
Is there a pattern in these events?
Do norms tighten in a recession-hit market, when it’s hard for vendors to attract fresh business?
Could this be a tactic at re-negotiating contracts to drive down now unaffordable pricing?

Whatever be the implicit or the non-implicit cause of this malice, the more important issue to address here is, even if there is a pattern in these events, what can vendors and outsourcers do to prevent such skirmishes, when they are both battling hard to retain their market shares. Some of the possibilities include:
Take One Step at a Time
Not all vendors force clients into “all or nothing” engagements. Many indeed offer flexible engagement models that allow clients to start with one to two contractors. This is a smart thing to do even in established client-vendor relationships, especially during a time of flux.
Vendors at this point are eager to demonstrate that they have the means and resources to provide real benefits to their clients. They would readily agree to breaking big contracts into small manageable chunks that can easily be monitored for quality.

With New vendors Pilot Before Going Full Steam Ahead
It may be a good idea to initially kick off the partnership with a pilot project, something that gives you a clear, defined outline of the client expectations and deliverables see how it goes before launching into something bigger. It is always easier to set time and quality boundaries into smaller projects. Devise Scope Statements
Seems obvious? You will be amazed at how many offshore projects get kicked-off without a review and comment on the scope of the project.

Devising scope statements mainly involves:
• The appointment of a final, decision-making authority to arbitrate on major contentious issues, if and when they arise
• Monitoring pricing and contract negotiations with clear-eyed expectations and strategic resource planning
• Issuing a statement on the exact resource requirement and not just furnishing an inventory of material requirement
• Identifying the extent of the user involvement. Remember, more the involvement, better the product
• Assessing the bandwidth of offshore infrastructure availability. Checking the strength of telecommunication equipment that is the lifeline of any offshore delivery. If it’s less than adequate, you need to build spare capacity to de-risk your business.
• Checking whether a portion of your human and material resources can be “sub-sourced” from a third destination to further bring down the cost structure. Ideally, in outsourcing, you must choose more than one offshore location, split, and spread the work around in small, manageable units. Likewise, make sure that your vendor also has multiple teams to juggle around.
• Dismantle bureaucracy and substitute it with transparent processes and systems. Establish norms to streamline operations.
• Put to paper a detailed proposal for risk management, thrashing out all major contingency plans, well in advance.
• When a project is getting executed offshore, it’s a good idea to maintain a small, onshore component at the vendor site. He or she would be good at maintaining regular contact with the vendor and contain damage during site-specific disruptions. He/she can also be trusted to present a more accurate picture to the employer back home.
• Chalk out functional and design specifics on what you expect to be delivered from the project. If you want the offshore team to improvise on the initial design plan, give them the authority to do this, within the formal framework of the SLA. Otherwise, the offshore team will deliver exactly what you had asked them to and this can lead to needless finger pointing on skills and competencies in the end, when the real issue is that of communications.
• Finally, work out all the schedules and modes of delivery. Also discuss time and cost escalations in case of emergencies.

Doing all this and more can easily save a lot of heartburn and hardship later.


Comments

2 Responses to “A crisis of credibility for India Inc.”

  1. Good points on February 13th, 2009 8:14 pm

    Nice blog, lot of good points and basic things to do before outsourcing work to vendors.

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