Browse > Home / Outsource Blogs / Top Three Hurdles of Offshore Outsourcing

Top Three Hurdles of Offshore Outsourcing

September 5, 2008

In the recent IBM Rational Software Development Conference, executives from several companies discussed about major hurdles of sending and managing projects to offshore locations like India and China. Following are the three major obstacles of offshore outsourcing:

  1. Attrition Rate
  2. Communication
  3. Metrics & Measurements

1. Attrition Rate
With growing economies in China, Israel and India, workers in the IT industry are finding several employment opportunities. Specifically in India, most of the junior level programmers want to double their annual salary year over year by jumping companies. In fact to a certain extent they’ve been successful in achieving their goal of doubling the salary within a year or so. Multinational companies like IBM, Accenture, and EDS are opening development centers in India and hiring IT professionals in thousands to compete with other Indian IT majors like TCS, Infosys, and Wipro.

IBM Rational conference panel suggested that companies can mange the attrition problem by sending high-value projects to offshore locations. One of the conference panelists Cisco Systems started seeing the attrition problem in maintenance type projects. Once they started sending high-end projects IT professionals in offshore locations felt the importance and the attrition rate reduced significantly. According to ASSOCHAM study maximum attrition rate is taking place among the IT professionals in the age group of 26-30 and experience of 2-4 years. This clearly suggests that junior level IT professionals and middle managers are jumping companies. So following Cisco’s strategy by sending high-end projects it is possible to reduce the attrition rate in the middle management levels. The attrition rate among 2-4 years experience group is happening mostly in BPO projects and in application development or maintenance projects. There are plenty of jobs in this category compared to other system level projects. So it is easy for junior level programmers to switch jobs.

Phil Fersht gives some nice information about Attrition Rate in Indian companies in his blog, Check it out.

2. Communication & Coordination
Communication is a major issue with all the offshore outsourced projects. Cultural and time zone differences are critical issues companies face in working with the offshore teams. IBM Rational conference panel’s advice is to use Rational ClearCase version control tool, Rational ClearQuest bug tracking tool, and other testing tools to communicate and coordinate with the offshore team. All these tools definitively helps to overcome the communication issues, but companies need to pay for these tools. Better choice is to use the following open source software as your offshore outsourcing tools:

Wiki This tool can be used by both in-house and the offshore teams to communicate and collaborate all the project related issues.

Geeklog Using this tool project member can discuss issues with one another. This tool will be valuable for the project members to discuss on various projects related issues.

CVS: It is a version control tool similar to ClearCase, the main difference is this tool is free and ClearCase is not.

Bugzilla: Bug tracking tool is critical to any project, both onshore and offshore teams can use this tool to log all the bugs and take various reports on the bugs. Fore more information visit

The tools Wiki, Geeklog, CVS, and Bugzilla will significantly reduce the communication, coordination, and collaboration issues related to the offshore projects. Generally these tools are used only in IT projects but companies can use these tools in their BPO projects as well.

3. Metrics & Measurements
The IBM Rational Software Development panel discussed about having a standard metrics to measure offshore worker’s performance. It is true that we need to measure offshore work, it is important companies should ask following questions:

Can you measure the work performed by the offshore worker?
It might be easy to measure IT related work. For example companies can set several different benchmarks for software code like  Source lines of code and Function Points.

How do you measure software analysis, design, and architecture?
In software you can measure the source code and number of bugs but not other items.

The issue is even more complex for BPO projects in which there is no standard measurement for business processes. Even if you have one, you cannot compare the quality of offshore worker with your own worker? Say you’re outsourcing your order processing work to an offshore vendor, how do you know the offshore vendor is doing better than your own employee? Without business process standardization it is difficult to measure it.

For IT or BPO projects, first companies should have a scheme to properly measure the work so they can find the value of their offshore projects. For any reasons if you can’t measure IT or a BPO project then it is better not to offshore those projects.

Companies gain several benefits from using offshore outsourcing works. Like any initiative there are risks associated with offshore outsourcing and these three are on the top of the list for many executives. But by carefully using the tools and technologies companies can overcome the hurdles and have success in their offshore initiatives.

Share and Enjoy:
  • LinkedIn
  • TwitThis

Related posts:

  1. Current trends in offshore outsourcing
  2. Risks of Offshore Outsourcing
  3. Managing Teamwork – Key to Successful Offshore Operations
  4. Offshore Outsourcing Commoditization
  5. High skilled IT and BPO jobs are going offshore


Written by Mani Malarvannan · Filed Under Outsource Blogs 

Comments

One Response to “Top Three Hurdles of Offshore Outsourcing”

  1. tcagley on September 8th, 2008 5:50 am

    I would suggest that software analysis, design, and architecture done as part of a project (development or enhancement) are part of the metrics one creates using function points. Project productivity would include those steps if you collect time accounting data for them at the project level (productivity = function points / total project effort). Difficulties can occur if time accounting is not granular enough.

    Tom Cagley

Got something to say?