A Balanced Approach to Offshore Outsourcing
Submitted by Cathy Welsh, Managing Director
Keane, Inc.
Based on discussions with dozens of client executives representing multiple industries, it is our belief that one of the most significant business trends over the next five years will be corporations leveraging application outsourcing, business process outsourcing, and offshore delivery to achieve dramatic cost reductions and business improvement.
Outsourcing Opportunities
Outsourcing delivers tremendous business value. It provides resource flexibility, process improvements, and cost advantages that drive major improvements in price/performance. Short-term, outsourcing reaps tactical advantage from cost reductions obtained through labor rate arbitrage.
Long-term, it brings process optimization, business-oriented measurements, and enhanced control over IT assets and activities. This drives higher levels of value-directed performance thereby delivering sustainable strategic advantage.
In combination application outsourcing (AO), business process outsourcing (BPO), and offshore delivery provides the optimal convergence of highest business performance and lowest operating costs. On their own, AO and BPO services provide customers with a 10-20% reduction in costs, along with improved performance and increased organizational flexibility. Offshore delivery significantly increases the cost benefit, and combining AO and BPO gains synergistic business benefits.
Outsourcing Challenges
Along with these benefits, offshore outsourcing brings organizational and performance management challenges that must be successfully managed and overcome to ensure bottom-line business results. Risks include global politics, security, and intellectual property protection. Furthermore, the HR, communications, and change management issues should not be underestimated.
Outsourcing is not about doing the same things in the same way with cheaper labor. Executive ownership and leadership is critical. Strong governance processes and meaningful performance metrics are essential. Be prepared to change your processes and organization to take full advantage of the capabilities of your outsourcing partner. Define upfront how your company will measure success and hold your partner accountable for its performance.
A Balanced Approach
Not everything can, or should, be done offshore. One method to mitigate risk and optimize performance is to distribute assignments across onshore, nearshore, and offshore delivery options. This approach allocates work to the organization and location that most effectively meets the risk, cost, and/or performance requirements of a given assignment. Companies can dynamically redistribute work as needed to handle shifting strategies and requirements.
Critical success factors for this approach are:
· Onsite, business-oriented Project Management Office (PMO) to provide a single point of contact and accountability
· Distributed team management approach that shares common management, process, and tools across all delivery organizations
· World-class processes to gain significant productivity improvements and ensure quality, predictability, and repeatability
· Effective sourcing options to provide cost and performance-optimized delivery
· Metrics to tie outsourcing performance to business results delivered and establish a foundation for long-term improvement
In Summary
Offshore outsourcing is rapidly becoming an economic necessity to maintain competitive parity. Despite its challenges, it offers tremendous opportunity to go beyond parity and gain strategic improvements in business performance. Gaining its advantages takes leadership and a balanced approach.
About Keane
Keane, Inc. (NYSE: KEA) optimizes business performance for clients through Application Outsourcing and Business Process Outsourcing services that generate measurable cost reductions, improved IT performance, and enhanced organizational flexibility. Keane’s innovative global delivery model comprises an integrated network of branch offices in North America and the UK, as well as SEI CMMI Level 5 evaluated Advanced Development Centers in Canada and India.
For additional information, contact:
Cathy Welsh, Keane Managing Directorat (312) 756-2222 or visit us on the Internet at www.keane.com.
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