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Update on India Part 2: Five Things You Need to Know about Offshoring

By January 26, 2010May 13th, 2014No Comments

When I went to India in November of 2009 my mission was to gather information from the counterparts of my North American clients. After all, to build bridges between two cultures you must hear both sides of the story. In today’s market, even the words “offshore” and “onshore” have become blurred. Global/virtual collaboration is the only way that companies will thrive nowadays, and many leaders I work with strive for more than just low-cost labor in offshore relationships. They strive for a truly global organization.

One of the main reasons I travel to India is to share what I have learned first hand with others. Here I would like to offer you “Five Things You Need to Know About Offshoring” in the form of commonly asked questions from clients and colleagues. If you have other questions please reply to this blog via comments, or e-mail me, and I will answer them!

1.) Some companies say they are offshoring jobs to India to increase their global talent pool. Is that true or is it just an excuse to lay off onshore workers?

Some companies may throw phrases like “global capability” and “access to talent” around to gloss over a downsizing of onshore workers, but recent surveys of offshore trends show a great deal of validity in these statements. Offshoring is not what it used to be. According to a study conducted by Duke University and Booz Allen Consulting, offshoring is “no longer about moving jobs elsewhere; increasingly it’s about sourcing talent everywhere.”

According to their research, many high-skill jobs are being added offshore because the talent pool onshore has not kept pace with the demand. In fact, says the report, the higher-skilled the job function, the lower the impact on home country employment. What does this mean for organizations? It means that more and more, talent will be sought from worldwide sources and companies without a global strategy will be left behind. It also means that the ability to collaborate across cultures is and will be one of the most important skills leaders can develop in their teams. For many of my clients, laying off US workers has not been their objective nor their action. They choose an offshore relationship with India for cost savings, but also for potential market share, a 24 hour work cycle, and numerous other reasons. However, lower-skilled jobs offshore do result more often in the downsizing of onshore workers and I feel these concerns need to be openly addressed. I often participate in difficult conversations about this topic with my clients and I see great value in these discussions.

2.) I hear that salaries in India are increasing and the cost of living is going up. Does that mean offshoring in India will move to other countries?

Though the move to other shores may happen in small degrees, India is leagues ahead when it comes to high-skilled offshore work. For example, the same Duke study shows that India leads China by 38% in back office work and 22% in product development. India’s enormous skilled English-speaking middle class, pool of qualified engineers and scientists, and expertise in offshore partnerships will keep the country in the front-running for years to come. While the Philippines and Eastern Europe are emerging as competitors for certain offshore functions, organizations should count on India as a major player on the world stage and plan accordingly. How much do you know about India? What capabilities are you tapping into there? How will you collaborate?

3.) Though offshoring is supposed to save money, is it really worth it? Between all of the back and forth with misunderstood instructions, language barriers, and the time it takes to review everything multiple times, are we really saving?

The answer is likely “yes” even with all of those factors in place. Your ramp-up-to-capability time, however, might get extended if the offshore set-up is not done properly. This could then lead to a delay in savings. Keep in mind that approaching offshore work with a short-term, cost-savings-only mentality will only delay both efficient work flow and cost reduction. Two of the primary reasons I see so much pain in offshore start-ups (and even relationships that have been in place for a year or more) is a lack of framework for the ramp-up and a lack of defined work processes for the ongoing relationship. Research shows the same, but I have seen it with my own eyes time and again.

We’ve all worked for a company where a process or procedure we performed was simply “understood” rather than defined or written down. When you are working in the same room and with people of roughly similar backgrounds or experience that might work well. Now add in cultural and language differences, time zone gaps, differences in technical expertise, and lack of face to face time. Without a solid framework and standard operating procedures to work with, gaps in understanding on both sides quickly become apparent.

I would like to offer a guideline from the great Erran Carmel, author of two incredible books on global software teams: Formalize what is normally informal and create more opportunities for informal interaction with your offshore team.

4.) What are some of the success factors in offshore teams between the US or Europe and India?

Luckily I get to work with some companies who see the offshore process as the building of a global virtual team, and this is success factor number one. Trust is a key component to any high performing team, and the lack of it can slow or prevent the flow of information which impacts results. Teams who kick off their relationship with formalized efforts such as welcome events, games, teambuilding, and getting-to-know-you exercises have greater and faster success as they work together toward the same objectives. This is especially important when the teams may never meet face to face. I have seen companies create virtual bulletin boards with pictures, bios, and fun facts that rotate every month. India/U.S. teams will often post each other’s holidays and learn something about each one.

Other success factors include developing standard operating procedures even for non-critical processes, addressing cultural differences through coaching and mentoring, and regular internal audits of both sides to ensure accountability and uncover any problem areas.

5.) Where can I learn more about offshoring or building a global team?

The Duke/Booz Allen study is a great primer for understanding current offshore trends. You can find it here:

I also recommend any books by Erran Carmel, including Global Software Teams.

And of course you can always call me! I hope to continue this dialogue with you.

Vicki Flier Hudson

Vicki Flier Hudson, Chief Collaboration Officer for Highroad Global Services, Inc. inspires people to leverage the full power of differences. She has helped countless large-sized corporations establish successful operations across the globe and build bridges across cultures, distance, and time.

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