Posts Tagged 'LinkedIn'

Poll:Top reasons for offshoring IT services

What are the top compelling reasons for your organization to work with offshore IT service providers.

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Labor arbitrage business model has inbuilt sunset

India based IT service providers are largely banking on wage arbitrage
rather than on efficiency or productivity or excellence as the business driver. While labor arbitrage is good starter to attract business, it is a flawed business model with inbuilt sunset to it. It is a ticking time bomb in other words.

Just throwing low cost resources to a problem is no longer impresses customers. Customers are expecting vertical solutions from providers. End to end integrated solutions with outcome based measures rather than effort based measures are going to be the future business model.

Very thoughtful perspective by Peter Allen in an interview published in IT Business Edge. I completely agree with this view point.

Top challenges during transition

WarningThere are several challenges while transitioning-out a service from the in-house team to the offshore IT vendor. From my experience below are the top challenges that need to be recognized and managed from the start.

  1. Boiler plate transition approach
  2. Customers need to be wary of boiler-plate transition approach presented by the IT service providers. Most of the customers demand the best outcomes within shortest transition time based on the industry benchmark. However, benchmarks can be misleading. Customer usually award the contract to the vendor quoting the lowest cost and transition time. Usually the well reputed vendors have predefined transition approaches and past transition experiences. However, due to winning pressure, most of the vendors do not fine tune the transition approach to the current context and ground realities to make it pragmatic. This leads to committing to the most optimistic and aggressive schedule and outcome.

    Every organization’s characteristic, capacity and capability is unique. As I said earlier transition is a joint responsibility and so the transition approach need to be fine tuned by considering these unique parameters.

  3. Hostile team
  4. During transition, cooperation of the incumbent team is vital in sharing the information on various facets of the project including application functionality, design, coding and process. Hostile incumbent team may not willfully cooperate in sharing the information thereby increasing the risk of the transition. Besides, there is a high chance of political and/or emotional issues cropping up which need to be managed carefully.

  5. Poor knowledge management practices
  6. Lack of documentation and knowledge management practices would increase the learning curve, complexity and length of the transition.

  7. Low process maturity
  8. If the organization has matured processes, the transition would benefit in terms of shorted duration and learning curve. However, if the process culture and maturity is at low level, it would impact the transition time and results.

  9. Soft issues
  10. Soft issues, primarily cultural and communication issues, are one of the major hurdles in efficient offshoring. These challenges are amplified and pronounced during transition process than other phases of the project and need to be managed effectively.

  11. Senior management commitment
  12. Usually most of the transition projects go through turbulent times due to the multi party involvement and the complexity. Lack of commitment from senior management means low tolerance level for risks and the probability of pulling the plug is higher. So, it is essential the senior management is appraised and their buy-in obtained in advance.

Quick tips to handle soft issues during transition

TipsSoft issues – like communication and cross cultural issues – are the most overlooked and hardest ones to deal while transitioning the services to an offshore IT service provider. These issues create communication challenges, breeds misunderstanding/mistrust, increases the overall risk level and jeopardize the entire engagement.

Here are few quick tips to effectively deal with these issues:

  • Cultural training
    • Arrange cross cultural training for both vendor and customer teams. This should be done in the initial stages of the transition itself to lessen the risk and reap more benefits.
  • Right team mix
    • Transition phase has huge learning curve and is a heavy pulling exercise. The team need to have more heavy weights(read senior persons with the right skills) to ensure smooth sailing in this phase.
    • Availability of the business analyst as part of the team is a must at this stage of the project.
    • Apart from the technical skillsets, ensure the team has people that have prior transition experience. At the manager and tech lead levels, people need to have international experience and direct customer facing experiece.
  • Team building
    • Conduct regular team building activities to foster better understanding, open communication and working relationship. Most of the transition engagements have varied degree of hostility from the incumbent team. Open communication of the future plans and team building measures would help to reduce “they vs Us” and help to build effective and unified “one team”.
  • Focus on knowledge management
    • Encourage more documentation and better knowledge management practices
  • Perform reviews diligently
    • Ensure review/inspection is done regularly at each stage of the transition
  • Make it interactive
    • Don’t make the transition a one way street where the incumbent team is the only one sharing knowledge. Encourage the tranistion-in team to share their learnings at regular intervals to gauge how effective the learning process is. These playback sessions may include the transition-in team making a presentation explaining the application, business processes and flows, use cases, operations etc. The team can use PPT’s and/or walkthrough the application screens/reports/data objects during the presentation to make it more useful and effective.

LinkedIn Etiquette: Dos and Don’ts

Every one in this age has a LinkedIn presence. But, the question is how many are aware of the LinkedIn Etiquette and leveraging the LinkedIn reach to the fullest?.

I came across this CIO article, which is interesting and useful.
LinkedIn Etiquette: Five Dos and Don’ts

Is offshoring poised for slow death? – II

Since I have written the post “Is offshoring poised for slow death?”, President Obama made budget speech in the joint session of US congress on ending tax breaks for corporations that ship jobs to offshore. This is apparently keeping in line with Obama’s long standing promise from his campaign days to help encourage local job creation and to improve the negative public sentiments in the US.

Some of my friends and I was discussing the impact of this “taxing offshore” policy few days back. Some were of the opinion that it is more “taxing” for the manufacturing sector and since China is exporting most of the manufacturing goods it would be the most affected. Some were of the opinion that the “taxing” is same for both service industry and manufacturing industry and Indian IT service providers would see the same impact as well.

Here is my take on this:

  • While the broad policy statement is made, the exact structuring and modality of the tax is not yet worked out
  • At a broad level, it seems to be negative for IT offshoring. The quantification of the negativity can be ascertained only after the detailed policies evolve
  • I am hoping that this policy would not be too restictive and deprive corporations of having choices in efficient sourcing
  • Americans and American corporations are one of the most globalized. Most of the American corporates global source goods/services in one form or the others. The global sourcing is prevalent from the small mom and pop stores to burger joints to retail giants to Oil companies to IT behemoths. I am not sure how this policy would be strutcured so as not to create side effects to the US economy in the process.

I am no economist. There are many questions than answers at this stage and it is better to wait and watch for further clarity.

Will Rural Sourcing catch up?

Several organizations in US are pioneering the rural IT sourcing initiatives over the last few years. These companies are typically located in low cost rural American towns. Prominent locations include states like Nebraska, North Dakota, South Dakota and Arkansas. The rural sourcing industry is still at a very nascent stage though and has a long long way to go before maturing.

Why would American corporates interested in them? What are the benefits of rural sourcing? The benefits of rural sourcing compared to cities like New York or San Francisco include:

  • Lower operating cost
  • Lower salary levels due to lower living costs
  • Close proximity to customer
  • Less travel time
  • Cultural affinity (thus no cross cultural and communication issues)
  • Same time zone and so easy to reach and better availability of staff
  • Under same legal framework and no cross-country legal issues
  • Lower overall risk

The threats /negatives of rural sourcing include:

  • Unproven
  • As the industry is still nascent and maturing, there is no management depth and experience in managing large and complex outsourcing engagements with stringent service levels.

  • Challenge in attracting highly qualified technical people
  • Attracting highly qualified techies to rural areas will be a challenge. The salary levels offered by rural sourcing organization would be far less than one would make in the city based organizations. Though this is compensated by low living expenses, this would call for life style adjustments for many people and may be a stumbling block.

  • Small size and Ramping up may be an issue
  • Most of the rural IT sourcing organizations are very small. The biggest of the lot have not more than hundred employees. So, the rural sourcing will work only for small projects. Rural sourcing organizations have not demonstrated their ability to quickly ramp up projects thus far. So, it is best to avoid any complex/large projects and/or projects that may need ramp up in future. Besides, other veteran onsite and offshore providers have experience, execution stealth and can quickly ramp up their rural delivery capability if required.

  • No compelling wage differences
  • The wage differences are in the realm of 10% to 20% which may not enable the rural service providers to offer compelling value propositions to the clients.

Outsourcing is not just having bunch of technical geeks. The service provider needs to build capabilities in processes, infrastructure, business solutions and technical competencies and management. There is no rural sourcing player that has matured as a complete outsourcing organization at this stage. However, one cannot rule them out completely and it would be interesting to watch how this industry would be evolving over the next few years. If this clicks, sourcing managers will have the choice of mixing between various service providers – onsite, offshore and rural.


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© Dhandapani Ammasai, 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given with appropriate and specific direction to the original content.
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