Off shoring - Why bother?

by Marco Tapia

in management-it-consulting,

November 24, 2009

Looking a bit further than the “rate” provided by off shoring services, you find a very deep pool of other issues that need to be considered before off shoring… and then you wonder, why bother?

Unless your project is huge and demands enough resources and skills not available in the country, the cost of off shoring that appears low on the surface can potentially send you broke or at least send your project backwards big time.

Let’s start the list of issues (tangible and intangibles) that you might need to consider:

  • Legal fees – Your agreement needs much more extra protection that if the work is done locally.
  • FTE rates, they appear low but in many developing countries they are rising.
  • Security – is your system, IP and data well protected from internal or external sources.
  • Communication – a big one, can you and your customers communicate well with the off shore provider? Will you need to write all instructions and interpret the answers? Will you lose customers because they don’t want to deal with the off shoring service provider?
  • Infrastructure – Will you have access to robust infrastructure.
  • Risk Mitigation – what insurances and extra plan B you need to develop
  • Productivity – will be as per your expectations.
  • Staff turnover – will the same people carry the project all the way to completion (a huge problem in developing economies).
  • Overseas travel – what will you spend in travelling and accommodation, insurance, etc.
  • Governance – is the system development/project governance as per your standard? What about regulatory governance?
  • Cultural training – how much will you need to spend training the provider to meet your cultural expectations and sound natural.
  • Language – see communication above.
  • Due diligence – Can you talk to failed ventures/projects?
  • Losing customers – can you afford to lose customers that may not like your decision to offshore?
  • Quality – will it be to your expectation?
  • Resources – will they really be available as you have been “sold”
  • Shadow staff – how much extra you need to pay to have shadow staff to backfill for rotations and turnover?
  • Consistency of delivery – will you get consistency in the service – if not, what will you do about it?
  • Political – Will you be able to continue operations should a sudden political change occur in that country.
  • Enterprise tolerance – how much your internal employees will support dealing with all these issues?
  • Complexity – all the overheads and extra considerations will create complexity.
  • Disaster recovery / BCP/ Plan B?
  • SLA Management – extra burden?
  • Frustration
  • Applicable law?
  • Resources and cost required for legal proceedings.
  • Terrorism considerations
  • Data privacy
  • Trust – Cost to control and manage that trust.
  • Hand over plans on termination.
  • Source code management/ IP?
  • Accounting standards applied?
  • Responsiveness?
  • Time zones?
  • After Hours support.
  • Public holidays not aligned.
  • Who to call when problems?
  • Visa availability – time required to obtain them/restrictions?
  • Software licence issues?
  • Project Management overheads.
  • National security issues – see below.

National Security implications of not having local skills.
The following is an extract from my previous post on offshoring:

It’s fascinating to see company after company send IT work off shore in search of “cost savings” that many times result in the opposite:

Information Technology is evolving as the greatest new frontier with what new powers and control will be defined. The penetration of corporate networks, country networks, systems and people’s systems can be impacted so dramatically by viruses, intrusion, performance degradation, intellectual property appropriation, identity theft; that government services, corporate services and individual activities could be grounded to a halt.

Not having sufficient local developed skills to prepare for these eventualities could prove to be a disaster. If we continue off shoring, our young people will not study IT degrees because the jobs are available in other countries and not locally. Not having a healthy pool of senior and sophisticated IT skills in the country is not like not making cars or t-shirts in the country. There is no national security implications by not having skills to make cars or t-shirts, however the implications for our national security for generations to come by not having IT skills is huge.

Government overhauls national cyber security arrangements:
“Systems of national interest today go beyond traditional notions of electricity grids, water supply, transport and telecommunications to include networks of high economic value, such as those that support electronic transactions, hold sensitive intellectual property such as patents or commercial data associated with international trade negotiations.”

Ref. Government overhauls national cyber security arrangements Karen Dearne From: The Australian November 24, 2009

Marco Tapia
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