Published on November 18, 2013
OFFSHORING IS NOT OUTSOURCING hey clueless managers – stop being lame!!!!! http://www.flickr.com/photos/55984616@N00/
PART ONE OFFSHORING
What is Offshoring?
Let’s divide the world into 3 zones: 1) Americas 2) Europe, Middle-East & Africa 3) Asia Pacific
Offshoring happens when a delivery manager has team members based in more than 1 of those 3 zones
Nearshoring, happens when a delivery manager has team members in more than one location, but within a single zone
EXAMPLE a software development manager is offshoring if she has 4 developers in Zurich and 12 in Mumbai and/or 6 in Weehawken
EXAMPLE An operations manager is nearshoring if he has 6 people in Tokyo & 20 people in Singapore.
REASON ONE Reduce the cost of operations (potentially by far the most important) by location-specific, loaded salary arbitrage
REASON TWO To support our clients or other business units where (or when) they are
REASON THREE Access global talent pools where they exist
what do you need to know to be a good offshoring manager?
managing nearshore & offshore teams requires many of the same skills
unfortunately nearshoring managers often fail to receive training
which is annoying for Singaporeans and Indians supporting managers in Tokyo and Hong Kong who only 'think' they know how to manage a nearshore team
so nearshoring and offshoring managers both need to do some training
Being good at Shoring requires 7 core competencies
SHORING CORE COMPETENCY ONE Cultural Awareness / Sensitivity
SHORING CORE COMPETENCY TWO Using Communications tools effectively / Knowledge Transfer
SHORING CORE COMPETENCY THREE Managing and architecting distributed workload (how do you effectively divvy up work across locations and time)
SHORING CORE COMPETENCY FOUR Matrix Management
SHORING CORE COMPETENCY FIVE Virtual-Team administration & talent management
SHORING CORE COMPETENCY SIX Jurisdictional compliance
SHORING CORE COMPETENCY SEVEN Geo-political macro-economic trend / strategic risk management & site selection (only at leadership level, really)
CAVEAT ALERT You can define Offshore, Nearshore, and Onshore around differences between cultures as opposed to geographical zone. I think geographical zones is more effective in practice though....
PART TWO OUTSOURCING
What is outsourcing?
Outsourcing, happens when you enter into a contractual relationship with a third-party company to deliver a product or process
outsourcing may or may not include offshoring
so a manager in London would be outsourcing if she worked with IBM in London or Infosys in Chennai
Insourcing happens when you enter into a contractual relationship with a subsidiary to deliver a product or process
insourcing also may or may not involve offshoring
Note that many regulators (especially after 'Too Big To Fail') require the same operational controls for Insource as well as Outsource relationships even though Insourcing is through parent/child legal entities. So it is important to deal with them both in any internal curriculum
REASON ONE Acquire specialized skills
REASON TWO Transfer costs and risk to third party who enjoys economies of scope or scale
REASON THREE Transfer out non core-competencies so that we can focus on our core competencies
REASON FOUR Move semi-variable balance sheet costs (salary) to fully-variable costs
REASON FIVE Move very fast
REASON SIX Handle short-term demand peak
REASON SEVEN Reduce costs
what do you need to know if you are managing outsourcing?
being good at sourcing requires 8 core competencies
SOURCING CORE COMPETENCY ONE Service-Level Agreements & Management
SOURCING CORE COMPETENCY TWO Negotiation
SOURCING CORE COMPETENCY THREE Contract Management
SOURCING CORE COMPETENCY FOUR Vendor Discovery & Selection
SOURCING CORE COMPETENCY FIVE Transition Management (in and out) and Knowledge
SOURCING CORE COMPETENCY SIX Invoice Management
SOURCING CORE COMPETENCY SEVEN Supply Chain Management Controls (Supplier Risk Management) Execution
SOURCING CORE COMPETENCY EIGHT Competitive Core Competency Strategy (what do we outsource and what do we keep. Leadership skill mainly)
PART THREE FINAL WORDZ
you are now warned
so you can stop shooting yourself in the foot
with immature management practices
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