Customer Reviews

Offshore Outsourcing: Path to New Efficiencies in It and Business Processes

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A plethora of books on offshore outsourcing have been released in the last two years, periodically I take a look at them looking for a great handbook for companies looking to get started offshoring. The authors of Offshore Outsourcing - Path to New Efficiencies in IT and Business Processes, start defining the reasoning behind offshoring. Probably anyone picking up this book will have decided that offshoring is necessary. Chapter 2 takes a good look at the costs of offshoring and more specifically the costs beyond labor. Most vendors stick to the labor differential so this is a good breakdown of the other costs involved including recurring costs in management and control and the one time costs of determining what to offshore in the first place.

Chapter 3 looks at the short-sighted strategy of not offshoring. The authors spend quite a bit of time talking about the costs of not offshoring; being left behind. It will not be possible to move from a fixed to a variable cost structure, running the risk of under-using capital resources during a slowdown, and the inability to ramp up quickly enough when the need arises (intermittent needs for professional services or field engineers - those that configure per customer requirements may not always be used if sales are not high enough).

To illustrate the costs to companies not outsourcing, they provided two examples: an R&D Tale and a tale from an insurance company. While examples would normally be a good thing, both examples make the assumption that onshore management and processes cannot be executed (for reasons other than high cost of labor) and offshore processes execute perfectly. This is a bad assumption even if you are dealing with companies certified at CMM level 5.

Chapter 4 reviews the offshore movement. According to the authors, offshore outsourcing began only in 1994 with the offshoring of information technology. I would say that that is debatable. Offshore outsourcing of information technology started as early as the 70's, with some of the larger companies and overall offshore outsourcing has been around for centuries. The authors try to put a timeline to the progression from onshore to offshore outsourcing, the exact years they use are debatable, but you will get the idea.

The beneficial part of this chapter for some readers is that in addition to look at the various aspects of IT outsourcing; e-commerce work, application maintenance outsourcing, etc., they also go in to human resources outsourcing, business process outsourcing, and contact center outsourcing - both inbound and outbound calls. Some of these areas, a reader, may be unaware that it is possible to outsource these activities.

Chapters six and seven define the largest individual companies involved in the market and the most widely used offshore location, India. With the exception of two companies, all mentioned were primarily Indian based. Also only two multi-national firms, EDS and IBM were mentioned, nothing, for example, on Accenture in India and the Czech Republic. Good stats were provided on the countries discussed; India, Russia, China and the Philippines. However, even though this book was published only in 2004, more updated information can be found via articles online.

Chapter 8 finally gets in to the meat of offshoring and defines what they consider to be the four phases of offshoring:

1. Finding a champion to sell the idea of outsourcing.
2. Identifying and prioritizing the processes to be outsourced.
3. Finding an offshore vendor.
4. Executing the contract.

Phase 1 is defined as having someone in top management sell the idea. If they are not on board, it will not get pushed throughout the company. I would add to this that:
1. If top management changes and they are not believers of offshoring, offshoring can change in an instant. Processes can be brought back in house.
2. If top management does not get others on board, offshoring is going no where. For example if top management cannot get the VP of engineering on board with offshoring, either through motivation through bonuses for cost cutting measures or a push to get more product functionality out sooner so the company can get revenue sooner, then offshoring software development will go nowhere as well. The VP of engineering may have had bad experiences before or he/she may not want to deal with the intricacies of distributed development. Top management has to be able to sell their idea internally and see that it gets in place and works. Expecting the vendor to sell the idea internally will not get you too far.

Phase 2 is identifying and prioritizing processes to be outsourced. This is a key issue. One item I believe is missing in their process is to look at what type of a company you are. It seems they are writing the book only for the large corporations, not for small and medium sized businesses which can also benefit from offshore outsourcing. For example on page 93 the authors refer to a typical outsourcing agreement lasting 7 to 10 years, clearly these are the large IT management contracts undertaken by the larger firms. If a firm is smaller, this is not the case, they will be able to change more frequently, or by going with a smaller vendor, be able to influence their vendor much more.

A great suggestion from the author is that an organization should determine its immediate and medium-term tactical goals. Including a chart here would have been helpful.

Under phase 3, finding an offshore vendor, I could find nothing that was specific to offshore outsourcing versus standard outsourcing contracts. In any outsourcing contract, even within the US a company should still be interested in the use of freelancers (contractors), the number of part-time people, how the vendor will protect your assets, how they protect against industrial espionage, intrusion, etc.

The authors provide a good section, albeit only a page and a half, on meeting the challenges of offshoring.

1. Losing control over a process. Look at the software that is being written; define quality measures for any BPO processes.
2. Integrating business processes, direct reporting between vendor management and the company's management.
3. If a company does not have a set of repeatable processes; clear directions, specs, objectives, time frames, quality level and communications process.
4. Create accurate, clear and concise specs.
5. Build-and-release management. Define how you will handle configuration management, defect tracking and management, and release control and how this will be replicated offshore.
6. Cross-border communication. How will your company deal with any cultural issues and distance communication?
7. Geopolitical stability. How will your company manage this potential risk?

The list of challenges is good, the readers would be better served if the authors had expanded on how a company deals with these issues in more detail.

Chapter 9 on Offshoring and shifting jobs is an interesting chapter. It is not clear the purpose of this chapter. It almost seems like we should feel bad that the process a company has to go through to get worker in the US on an H1B visa is so difficult. Having hired workers from Russia and the US to work in Ukraine, I do not think that the process to get an H1B visa is any more complicate than what Ukraine makes a company go through to hire a foreign worker. The authors argue that it would be better to bring the foreign workers here, better because they will pay taxes and spend money here. But this seems to go against the very premise of the book which is to help companies explore the benefits of offshore outsourcing.

Chapter 10 is attempting to point the US towards possible trade barriers that could be created on the basis of educational subsidies. They mention that US education has to be paid for and is quite expensive, especially in highly specialized fields such as software engineering. This is somewhat strange. Certainly there are a high number of private universities in the US, but there are also many state schools with excellent reputations for their computer science and engineering programs, where on average a student pays for only 24% of the cost of their education, the rest is paid for by tax payers. In California, a resident can attend the University of California Berkeley or San Louis Obisbo, and have the state (or the tax payers) pay $20,000 per year towards their education, the student would pay approximately $5000 per year.

To a company looking in to how they get started offshoring for the first time, there are three relevant chapters in this book in addition to the case studies. Chapter 2 for its detailing of the total costs involved in offshoring, Chapter 4 for the types of activities which a company can offshore and Chapter 8 for the phases of offshoring and the challenges. The other chapters would be interesting only of the reader has never read anything about offshore outsourcing.

The book has some big names associated with it. This lends the book a great deal of credibility and offers a practical view to outsourcing.

Having lived through the journey of outsourcing, I almost felt that I was re-living the experience while reading the book.
Scott Bayman, President & CEO of GE's India Operations, has written the preface , which is particularly educative. It lends a good insight into how GE "persuaded" its managers to cut costs & enhance quality by outsourcing globally. The book clearly shows that Global Outsourcing cannot be done without a whole deal of planning, thought...& most important of all, leadership support. The thought of having a " champion" in the business to facilitate outsourcing & smoothen obstacles, is very appropriate. Case studies of Citibank, ABN Amro & Northwestern Mutual show how each business chose different paths for outsourcing based on their individual business goals & business situations. Read the Book. Outsourcing is here to stay & this book tells the reader how to outsource !!!

Having worked for 11 years in the IT oursourcing industry inthe US, I felt there is nothing new the book could tell me. However, I found the book very informative, especially the case studies. It is well researched. It is a good information kit for people wanting to leverage offshore IT services.
I agree with the book's forecast that more high-value functions will move offshore.

A practical & relevant book. The book gives strong reasons to outsource globally. After reading the book, one clearly realises that the job market will never be the same. Competition for a job will now be global....& the need to constantly learn new skill sets will be important for survival & growth.

The book is simple to read. The case studies from GE, Northwestern Mutual & ABN Amro are very helpful to understand the different approaches to outsourcing. There are some Best practices in those case studies which a practicing manager could use. The chapter on possible countries for outsourcing is very informative.

All in all a good , practical & very relevant book. My only thought...I wish the authors had also included some examples of outsourcing gone sour. Those examples would help a practicing manager understand what he/ she should watch out for , while offshoring a process.

This is a good & timely book that joins the recent debate on outsourcing. The book is a practical guide to understand the various aspects & nuances that a corporation has to consider while it is outsourcing its processes.

The authors makes a compelling reason to outsource... but while doing so, they continue to remain balanced in their approach. Of particular significance , is the chapter on Costs of Outsourcing. It is important to keep a count of all the costs mentioned there, (especially the costs of loss of goodwill), while determining the final benefits of outsourcing.

The best practices of GE, ABN AMRO, etc. are good examples to share.

Overall a good book to read..&, of course, ultimately you will have to decide whether outsourcing is appropriate for your business or not !!!

This book gives an unbiased view of offshore outsourcing to a new reader. The reader new to the trend can leave the chapters on how the process works alone... it gets very detailed.

Dr Thondavadi's book is an important one for both executives and legislators who are confronted with strident voices fiercely advocating protectionist practices in regard to taking their information technologies offshore. This book brings a fresh rationality to the public debate regarding U.S. vis-a-vis offshoring practices and operations, especially as pertains to the use of IT systems. It is not intended to be an academic treatise on the subject; rather it is a practical playbook that can help decision-makers call the right plays from today's international scrimmage line. It's a quick read for busy people who need to learn the main issues of costs, quality and timing of "going off-shore" with their IT requirements.

The author descries that in today's business enviroment, competition is fierce. Costs must be kept down, productivity has to be increased, and profit expectations are consistently high. To remain ahead of the competition, complimentary services and products must be supplied to the customer base. For most companies doing this effectively this means forming alliances, partnerships and outsourcing to deal with non core operations.

Types of established outsourcing opportunities include: Help Desk Outsourcing, PC support and outsourcing, Call centre and Customer support outsourcing and Technical Outsourcing - However in todays competitive marketplace with technology advancing at an alarming rate, the only way to keep up is to outsource many of the technologies and operations required to stay in the game.

Outsourcing removes the need for subsidiary components to be introduced into the organisation, allowing the company to focus on what it does best while at the same time offering additional products and services to the customer base.

Application and software outsourcing has traditionally been one of the most popular types of BPO, In todays business world there are many other types of BPO however, from accountancy to manufacturing, however, all can be extremely difficult and complex. Luckily there are many companies and consultants available with considerable experience in these areas.

BPO (Business Process Outsourcing) - the business strategy of the future!

The case studies of GE, Northwestern Mutual and others give an amazing insight on how these companies achieved cost and quality goals. GE says it will achieve a cost savings of nearly $ 1 billion, which is stunning. It is also a good introduction to uninitiated to offshore outsourcing.
A well written and easy to read to book.

I started reading the book early in the afternoon on Saturday on April 17th, but I only got up when I finished reading the book. The rich-in content, content-flow, and relevant content of the case studies are simply superb. I also amazed transparency and balance in the subject as well other alternate countries to India on outsourcing. The chapter `Total cost of outsourcing' is another great attempt to educate the customers in pursuit of outsourcing. This is a definite resource book from project managers to CEO's who are in pursuit or practice of offshore outsourcing. The preface from Mr. Bayman is a good start to the book and the message is vital and clear to all the businesses - offshore outsourcing is a way to manage non-core (as well core) business processes to cut costs to compete head-head in the global markets.

Dr. Nandu's effort is worth spent on this book. I also congratulate George Albert who co-authored the book. I really enjoyed reading the book after all.