Outsourcing offshore is going to be the key for companies to maintain their profitability. Trends indicate that there is going to be growth in outsourcing in spite of the recession / slow down.

Most offshore outsourcing failures are due to the challenges and risks not being mitigated properly . Let us look at some common challenges and risks involved in outsourcing offshore and ways that these can be mitigated.

Challenges and Risks

1. Managing expectations
   • Are you clear on the reasons behind the decision to outsource?

     Companies usually use outsourcing as an attempt to get quick fixes. Quick fixes tend to backfire. One needs to understand the underlying reasons and arrive at a medium to long time strategy for outsourcing.

   • Are you familiar with important cultural aspects of the country you want to outsource to?

     Cultural aspects like communication style, work habits and practices, values and norms are some of things which you need to keep in mind. For example, the developers (especially with lesser experience) from India are usually reluctant to questions, if you are dealing with the developers directly you need to keep this in mind and make sure that they have actually understood even though they might say yes.

   • Is cost benefit you are looking at realistic?

     The Offshore 2005 research warns against unrealistic cost saving expectations. When the successful and failed offshore projects were taken into account the average saving was found to be less than 10 per cent, although when the just the successful projects are taken into account the average saving is around 19 per cent. " If you are anticipating off shoring savings of 50 per cent or more, you are not being realistic." the report said.

Offshore outsourcing is a complex process with political, social, cultural, ethical and economic implications.

2. Communication
   • Communication Strategy (including frequency, escalation process, tools to be used, reporting mechanism, managing time zones etc.)
   • Etiquette
   • Language barriers

Ensure communication at all levels and at appropriate frequency so that all concerned are in sync. You need to arrive at clarity on the following aspects:

3. Managing Triple Constraint

Projects need to be delivered with the three constraints of Scope, Time and Cost . Quality by default should be honoured .

It is advisable to think of an offshore relationship as an offshore partner, an integral part of your own organization versus an offshore vendor someone contracted for only cost benefit . The right perspective will help in handling the project challenges including decision related to triple constraint that keep surfacing ever so often.

The software should be tested as the project progresses and testing should not be left for the end. The sooner the issues are identified the cheaper and easier it is to fix them and it will make sure Quality product is delivered.

4. Project Management / Project Co-ordination

It is usually beneficial to have one person contact in your offshore team - a Project Manager or a Project Coordinator, a person who will keep the project on track. This takes care of scope creep and change management also.

5. User Requirements
   • Does the outsourcing partner have a requirement analysis process?
   • What kind of documentation do they provide?
   • Do you know the communication abilities of the team working on your project? Have you spoken to them?
   • What is their response time to your queries / feedback?

Understanding user requirements is the exploratory, developmental activity of helping users figure out what they want. Few questions you need to ask yourself are:

6. Contracts

This is an entire topic in itself. Let me just say that think Win-Win.