Nobody gets fired for outsourcing to India, but they should

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Jon-Butler_100.jpgBy Jon Butler, an expert in technology operations, outsourcing, offshoring and nearshoring

For many years India was the jewel of the American outsourcer's eye. English speaking resources coupled with a flashy rate card proved hard for companies to resist. In fact, outsourcing to India had developed into such a standard solution that it recalled another era, during which everyone bought standard IBM solutions. This happened so frequently that it was not uncommon to hear the expression "no one ever got fired for buying IBM".

But as Forbes writer, Duena Blomstrom, explains in her well-crafted article on fear-induced purchasing, Nobody Gets Fired For Buying IBM. But They Should, this risk-aversion strategy is fraught with a false sense of security.

Blomstrom explains that frequent IBM buyers did not feel entitled to purchase anything different from the status quo - even if there were better options. In fact, not falling in line with prior purchasing history would always make them look like risk-takers and irresponsible stewards of company resources. So, they repeat the same safe behaviours even when they know there are better options.

Today, many people see 'buying India' as a safe bet for those same flawed reasons.

Blomstrom points out that buying something so as not to get fired - especially when buyers know that they are not purchasing the best solution or service - is very wrong. They know that they are mismanaging resources that the company has entrusted to them, and that mismanagement should be the thing that causes fear.

With the advent of the COVID-19 crisis many companies have been forced to adopt a 'nearshore model' - or what some call work-from-home (WFH). Essentially, people who used to congregate in offices are now working remotely in the same time zones, collaborating more frequently on video chats (at 10am or 2pm during the day with no need to wait late into the night for offshore to come in) and increasing productivity. Yes, increasing productivity.

This model has proven to be so successful that many groups are considering moving previously offshored work to nearshore locations. They still enjoy labour arbitrage advantages, but they now have evidence that the nearshore model is simple and straightforward. The Hackett Group recently posed a COVID poll to 250 of its clients. Surprisingly, 94% of respondents said they would increase WFH after the crisis. Something here is working well.

So, for those India-only outsourcing die-hards, let us go over ten reasons why buying India is not always the best solution:

1. Cost
We will get to this later, but for now just think about that shiny rate card that causes visions of sugarplum fairies dancing in your head!

2. Location
When you are 9.5 or 13.5 hours away it is very difficult to have meaningful conversations that last for more than a few minutes. Work simply stops when questions arise - which always happens. Days can be lost in the process of answering simple questions. Even more time is lost when questions are complex. Oh, and then there is 'guessing the answer' (because no one wants client confrontation) and so issues are buried only to be discovered later and cause significantly longer delays. (See #1, Cost)

3. Executive time
No one has ever gone to India just for a day. Because the travel is so far and so costly, executives that make the trip feel compelled to spend more time there than really required. There is also the severe jet-lag and recuperation (in both directions) as well as a weakened body's higher risk of food poisoning (which is nothing more than the body getting used to a new set of bacteria, but still a real pain when it happens). Additionally, executives who spend unnecessary time abroad risk becoming detached from work back home. (See #1, Cost)

4. Culture
Does "yes" mean "yes"? The corollary: does "no" mean "no" is probably not as applicable because of an overwhelming cultural aversion to confrontation. So, you will likely hear "yes" ten times before you get to your first "no". Is that a good thing? You need people who have the fortitude to tell you "no" and why. (See #1, Cost)

5. US English communication
Heavy Indian accents in the Queen's English heard over long-distance cables can be nearly impossible to understand. When the listener is overly-focussed on understanding just words, the meaning of what is being said can be elusive. (See #1, Cost)

6. Indian attrition
Those working with Indian outsourcers have grown accustomed to the 20% to 25% annual attrition levels. There is nothing like training yet another new resource after a key employee leaves for a new job with a higher salary just down the road. Retraining resources takes considerable time just to get them to 'good enough', while getting them to the level of the person they are replacing takes considerably more. This, of course, inevitably always causes schedule delays. (See #1, Cost)

7. Company attrition - your own
That is right, it is not only the outsourcers who lose people. Sure, you can create retention payments for those key onshore company personnel that you do not want to lose. But after they have retrained yet another group of new team members, stayed up for 1am or 3am conference calls to 'accommodate the offshore team' and watched service levels slowly slacken, most of those key company personnel see what a grinding, grating and, usually, unrewarding work environment they now own and the smart ones choose to vote with their feet...and leave! (See #1, Cost)

8. Change orders and contract renegotiations
This is a tactic that some shrewd outsourcers employ:
- Purposely flash the shiny rate card and underbid the work in order to win the contract.
- Low-ball key volumetrics that are used to determine what the real price should be.
- Create contract language to raise monthly fees based on the volumes that are processed.
- Commence the work and soon thereafter engage in the never-ending saga of change order after change order after change order! (See #1, Cost)

9. Infrastructure
Can Indian centres navigate monsoon season without outages? Can they and do they practice fail overs to remote systems? Are high-speed Internet services available to people working from home? Can new recruits easily find transportation to their work location? How vulnerable are undersea communication cables? (See #1, Cost)

10. Agile
If you are promised that your Indian team will work the night shift with you as you run through your sprints and scrums, do you really think you are going to get the 'A' team talent that the service provider promised? In reality, you are not. That is because those same people can walk down the block and work for a competitor during daylight hours. Yes, there is a war for talent and it is a global war! Your outsourcer will find itself balancing its obligations to you with keeping its best employees and will often not be able to retain the very best. Welcome to the 'B' and 'C' teams! (See #1, Cost)

11. Cost
Yes, we are going over the ten reasons we previously promised...but I assume that you have grown accustomed to missing numbers and dates. But, going over also has costs...

Consider the missed return on investment associated with missed delivery dates. It is simple mathematics: if a project whose completion gains/saves $10 000/day is 30 days late, then our delay has cost us $300 000. Of course, it will not be that expensive to fix: just look at the rates in this new changed order...and see #1, Cost.

12. Lowered expectations are required to accept mediocrity
And just when I thought I had completed my list, a former colleague reminded me of 'deliverable mediocrity'. Per his experience, the initial high expectations that were, of course, going to be met and surpassed were slowly whittled down to the point that clients on the receiving end just gave up with the jello punching and learned to live with the just good enough deliverables. Not to be confused with true agile methodology, where only what is really needed is built, this new acceptance mentality came into existence as a result of wanting to avoid the pain of having to state exactly what was wrong, showing exactly what to do and exactly how to fix it, and then resetting the due date. Perhaps the fact that this does not always initially reveal itself as a continual problem explains why it was not on the original list. However, just give the project a few years and you will see just how much more effort is required to be exasperated - as opposed to simply lowering expectations. But at least lowering expectations is free!

India is not always right, nor is it always wrong. Often a hybrid shoring approach is optimal. Regardless, your approach should always be strategy first on how and where to source work functions, and then to shore.

Nearshore Americas

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