Offshoring as a Service

What is a “mature” sourcing organisation? What are the criterias that define a “mature” sourcing organisation?

By “mature” I mean learning through experience. Getting better and growing through continous learning.

There are a number of tools to help measure the growth. For e.g. Outshore Maturity Model  (OMM) targets at the measurement of the company’s outsourcing capability with respect to its suitability for the vendor and the suitability of the project to be outsourced.

A well established vendor management group:  delivers sourcing expertise and services to the rest of the company, creating standards and best practices for vendor selection, performance measurement, and governance and managing relationships at the corporate level.

A global sourcing strategy. Reduce the current number of vendors and create strategic partnerships with a small but select group of Tier-1 companies with deep industry experience. Evolve beyound just focus on pure cost cutting through offshore labour market arbitrage. The strategy is well-known and supported within the organisation.

What other criterias define a mature sourcing organisation?

I spoke about Managed Services earlier on which I believe will increase in the coming years. Working actively right now to define managed services.
- Have a deep understanding of the suppliers managed process. How will the supplier deliver the service?
- Define the process. What needs to be added/changed to fit into the process that you follow. Your process and the suppliers process have to be synched.
- Define the routines, roles & responsibilities
- Select a POC to test and improve this as time goes by
- Add more responsibility & services on the supplier as time goes by
- Build up a partnership

Here is a great article with more information: How innovators are changing IT offshoring.

Managed services is the practice of transferring day-to-day related management responsibility as a strategic method for improved effective and efficient operations. The person or organization who owns or has direct oversight of the organization or system being managed is referred to as the offerer, client, or customer. The person or organization that accepts and provides the managed service is regarded as the service provider.

Typically, the offerer remains accountable for the functionality and performance of managed service and does not relinquish the overall management responsibility of the organization or system.

Consider having non-core application support & maintenance being offshored to the vendor as managed services.  Application Service Provider (ASP) is is a business that provides computer-based services to customers over a network. Software offered using an ASP model is also sometimes called On-demand software or software as a service (SaaS).

Some points to take into consideration:
- Re-use resources that have built customer capability in the offshoring development center ODC.
- Have the vendor resources onsite time-to-time to minimize enployee turnover.
- Have an infrastructure that makes this service possible.
- The price model can vary from fixed monthly rate to time & material model as well as price per desktop, server or network device. Important to use the correct model depending the type of managed service to be used.
- Important for the customer to be a good orderer. Besides support & maintenance activities, it is important to take into consideration proactive activities that also need to be  performed.
- Follow up of SLA’s & KPI’s are important. If there is a requiremet for 99,96% uptime it is vital that this has be fullfilled.
- Make sure that the process is in place that defines the roles & responsibilities.
- Make also sure that the Master Service Agreement covers the terms & conditions.

There are a number of advantages such as
- Redeploying IT staff and tools to focus on strategic technology projects that impact the enterprise’s bottom line
- Access to product and technology experts dedicated to available products
- A provider’s service level agreement guarantees a certain level of service

Disadvantages are
- Loss of control: resource & knowlegde will be build up at the vendor.
- Loss of control of corporate data
But since non-core services are managed by vendor it should not be a problem.

So look at each assignment and instead of resource augmentation maybe this can be packaged as managed service?

I have posted a couple of thoughts earlier on importance of change management & governance. They are important factors for offshoring success.  

Here is a article, “The Top 10 Problems With Outsourcing Implementation (And How To Overcome Them” that will help you in your offshoring venture.

I have been working on Key Performance Indicator and here are some lessons learned:

- Base KPIs on strategy, SLAs and expectations that have been discussed, promised and delivered.
- Have “Numeric” evaluators (for e.g. 1: very satisfied, 2:satisfied, 3:not satisfied)
- Have a column so that the person can motivate the number given above.
- Make sure that the expectations being evaluated had been discussed either in the beginning or on the way, promised & thereby delivered. Take into consideration any factors that can have impacted the outcome that the vendor is not responsible for.
- Compare historically to see if performance has improved or deteriorated.

KPIs can become complicated and difficult to manage in the end. Have a good enough KPI in order to capture the problem areas and bring about improvements.

When I lived in India during the late 80’s and early 90’s, I avoided watching Bollywood movies. The storyline was always the same – a lot of family drama with action and songs. Heroic acts and actions that were difficult to understand even after having stretched my unlimited imagination.

Saw recently two bollywood movies, that I highly recommend. “Taare Zameen Par” is a beautiful story of a dyslectic boy and a teacher realising the situation and adjusting the teaching practise to meet this boys needs. Maybe this will help parents bring forward the “right” potential and see each child as an individual. The same applies to schools too.

Of course its common knowledge that the Swedish princess Victoria is dyslectic. When visiting India she invited Amir Khan, the actor from Taare Zameen Par for dinner.

The second movie is called “3 Idiots“  about 3 collage students going for their dreams. Success naturally follows. Not everyone is meant to be an engineer or a doctor. Another great movie with Amir Khan in the main role.

Hopefully these type of movies are eye-openers that will help us in India to look at each other as individuals than “engineer” or “doctor” making machines.

The Indian IT market has turned up. Companies have started hiring again in India. This means that the employee turnover that was low will start going up again.

Have you ensured that the resources deployed offshore are secure?

I feel like starting 2010 on a positive note.

TCS reported a third quarter profit of $384m on revenue of $1.64bn for its third financial quarter 2009. This represented 38.9% and 10.3% increases on the previous year respectively. It also recruited almost 13,000 workers. Complete story at Tata results confirm Indian strength.

We are seeing a recovery in the US market to be followed by Europe. The downturn has shown the following:
- Companies using offshoring services have increased the number of Indian consultants than the consultants from local market.
- BRIC countries i.e. Brazil, Russia, India and China are a strong market despite the downturn.

2009 hasn’t been all downhill with exception of Satyam mess. This was of course recovered under new brand Mahindra Satyam. I found a great list – “That was IT in the Year 2009″ with a lot of Indian news.

Media portrait India differently in Sweden today than for 5 years ago. A number of strong business women have been mentioned.
- http://www.e24.se/kvinna/karriar/har-ar-indiens-mediedrottning_1778667.e24
- http://www.e24.se/kvinna/karriar/banbrytaren-nadde-toppen_1764179.e24

India and China will dominate global 2010. We will also hear a lot of the Indian companies opening in China and vice-versa during 2010.

A great year to look forward to.

I am taking a break from this hectic year. A new company www.offshoring.se, started blogging & my responsibilities at work increased by 200%. 

Hope 2009 has fulfilled your expectations and dreams. All the best for 2010

Employees who would otherwise face layoffs from their North American jobs at IBM are being given the chance to work abroad through ‘Project Match’. There are a number of options and India is one of them. Will it be Indian wages with local labour laws is not yet sure.  There are many parameters needed to take into consideration for an North American to move to India.

But what about Swedes wanting to move to India? I am not taking up the discussion about layoffs here. Just looking at basic differences such as wages & taxes for e.g. – is there a huge difference?

According to Payscale median self-reported hourly wage is Rs 1,000 (USD $20.50) for an Indian Sr. Software Engineer/Developer/Programer.

According to Lönebarometern median self-reported monthly wage for a programmer in Sweden  is SEK 28061 (USD $3941,15). My crude calculation below and I apologies.
Around 278 working days per year (including 5 weeks vacation).
278days/12months= 23 working days per month. 
23d * 8h = 184h per month
$3941,15/184h = $21,41 hourly wage

I have just looked at programmer but there are many categories at Lönebarometern. I have also taken into consideration 8 working hours per day.

Tax in India
Personal income tax is levied by Central Government and is administered by Central Board of Direct taxes under Ministry of Finance in accordance with the provisions of the Income Tax Act. The rates for personal income tax are as follows:-
Income range (Rupee) Tax Rate (%)
0-100,000 Nil
1,00,000-1,50,000Rs 10%
1,50,000-2,50,000Rs 20%
2,50,000 and aboveRs 30%
Surcharges of 10% on total tax is levied if income exceeds Rs. 8,50,000

Tax in Sweden
Taxalbe earned income/Local income tax (average rate = 31.60%)
For other taxes see the link.

Other considerations such as labour laws, working conditions, living conditions, moving family, etc. etc. needs to be taken into consideration. Well, I wouldn’t mind 25+ warmth right now.

Of course I have it easy and the actual decision is much more tough especially for a person who has never been to India. Morgan Spurlock, from “Super Size Me”, has a TV show called 30 Days where he documents 30 days of a laid-off US IT worker finding employment in India.  It’s also available at Amazon: 30 Days: The Complete Second Season

So, what do you think?