OFFSHORING IS NOT

OUTSOURCING

hey clueless managers – stop being lame!!!!!

http://www.flickr.com/photos/55984616@N00/

PART ONEOFFSHORING

What is Offshoring?

Let’s divide the world into 3 zones: 1) Americas2) 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 ONEReduce the cost of operations

(potentially by far the most important) by location-specific,

loaded salary arbitrage

REASON TWOTo support our clients or other business

units where (or when) they are

REASON THREEAccess 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 ONECultural Awareness / Sensitivity

SHORING CORE COMPETENCY TWOUsing Communications tools effectively

/ Knowledge Transfer

SHORING CORE COMPETENCY THREEManaging and architecting distributed workload (how do you effectively divvy

up work across locations and time)

SHORING CORE COMPETENCY FOURMatrix Management

SHORING CORE COMPETENCY FIVEVirtual-Team administration & talent

management

SHORING CORE COMPETENCY SIXJurisdictional compliance

SHORING CORE COMPETENCY SEVENGeo-political macro-economic trend /

strategic risk management & site selection (only at leadership level,

really)

CAVEAT ALERTYou 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 TWOOUTSOURCING

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 ONEAcquire specialized skills

REASON TWOTransfer costs and risk to third party who enjoys economies of scope or

scale

REASON THREETransfer out non core-competencies

so that we can focus on our core competencies

REASON FOURMove semi-variable balance sheet costs (salary) to fully-variable costs

REASON FIVEMove very fast

REASON SIXHandle short-term demand peak

REASON SEVENReduce costs

what do you need to know if you are managing outsourcing?

being good at sourcing requires 8 core competencies

SOURCING CORE COMPETENCY ONEService-Level Agreements &

Management

SOURCING CORE COMPETENCY TWONegotiation

SOURCING CORE COMPETENCY THREEContract Management

SOURCING CORE COMPETENCY FOURVendor Discovery & Selection

SOURCING CORE COMPETENCY FIVETransition Management (in and out)

and Knowledge

SOURCING CORE COMPETENCY SIXInvoice Management

SOURCING CORE COMPETENCY SEVENSupply Chain Management Controls

(Supplier Risk Management) Execution

SOURCING CORE COMPETENCY EIGHTCompetitive Core Competency

Strategy (what do we outsource and what do we keep. Leadership skill

mainly)

PART THREEFINAL WORDZ

OK, managers

you are now warned

skill up!

so you can stop shooting yourself in the foot

with immature management practices

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