Last week, CIO.com offered seven lessons of the IT offshoring pioneers who have navigated a changing IT offshoring terrain and learned what works--and what doesn't. This week we offer seven more bits of wisdom accrued over nearly 20 years.
1. Expand Your Horizons
Once upon a time, India was the only destination for offshore IT work. And it remained the premier location--in terms of maturity, skills, and scale--for years. But, as the offshore pioneers learned the hard way, geographic diversity is important. And today's CIOs have more viable options than ever before.
"Philippines and nearshore destinations in Latin America and Eastern Europe witnessing growth across IT and business process outsourcing," says says Jimit Arora, vice president of IT services research for Everest Group. "Within India, clients are getting comfortable with a combination of locations including tier two and tier three cities. Concentration, risk diversification, and access to talent are the primary drivers for this."
Smaller customer may find it difficult to diversify geographically, points out Esteban Herrera, partner with outsourcing consultancy Information Services Group (ISG). "But if you look at the large companies that have been successful, almost all of them will have multiple service providers across multiple geographies. Putting all your eggs in one basket is bad investment advice--and it its bad offshoring advice, too."
2. Focus on People First
Many offshore providers are tier one providers in their own right, but experienced offshore customers know your deal is only as good as the people the provider puts on your account. "The offshore market remains a primarily talent game, and a client's offshore experience will depend significantly on the people the provider brings to the table," says Arora of Everest Group.
"Getting a 'C team' from a brand-name leading tier one provider is not necessarily a better option if you can get the 'A team' from a tier two." Similarly , those establishing their own captive operations may find their ability to attract talent in Manila is more difficult than in Cebu. "Making portfolio choices that are correct for your situation is critical," Arora says.
3. Maintain a Healthy Onshore Presence
"Companies are more selective and reserved about what they send out, particularly offshore, and they have pulled some of it back in house," says Adam Strichman.
"I know many companies who use large offshore shops for work but require significant 'landed resources' here at home to ensure they have lots of butts in seats at their offices," Strichman says. "This is very different from the original models we did in the late 90s."
Mature users of offshoring might be comfortable having simple application maintenance tasks done entirely offshore, but staff more strategic projects with a mix of local in-house and outsourced professionals.
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