Offshoring and outsourcing best practice

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Information about Offshoring and outsourcing best practice
Business & Mgmt

Published on November 18, 2013

Author: selenasol


OFFSHORING IS NOT OUTSOURCING hey clueless managers – stop being lame!!!!!


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.

why offshore?

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 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....


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

why outsource?

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 FOUR Vendor Discovery & Selection

SOURCING CORE COMPETENCY FIVE Transition Management (in and out) and Knowledge


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)


OK, managers

you are now warned

skill up!

so you can stop shooting yourself in the foot

with immature management practices

Selena Sol asks….. SHARE THIS DECK & FOLLOW ME (please-oh-please-oh-please-oh-please) stay up to date with my future slideshare posts


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