The Top 10 Pitfalls of

Offshore Outsourcing





and how to avoid them.
























Amritt Ventures, Inc.
Gunjan Bagla, www.amritt.com 9/2006



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The Top 10 Pitfalls of Offshore Outsourcing

10) Be Aware of Time Zones

Its 9 am in Los Angeles and you need a quick answer from your vendor in Mumbai. But its
10:30 pm already at your vendors location and now you have to wait until the next morning.
This situation is easily avoidable by requiring some overlap in your working schedule; Indian
vendors can have some staff work a staggered schedule to provide you overlap in both early
morning and late afternoon hours as needed. Vendors in China sometimes find it easier to
overlap schedules with the late afternoon on the West Coast. Many of our clients find it
convenient to use SMS text messaging and Instant Messaging to get quick status updates from
offshore vendors

9) Avoid the lowest bidder

If you plan correctly, you will add plenty to your bottom line by deploying resources from China,
India or the Ukraine. There are many vendors for any conceivable service and some of the low-
end operators are not running on a sustainable business model. Low bidders may often (but not
always) lack critical overhead resources like management, power backup, working capital,
quality processes, etc. They may put up a good act to win your business, but cannot sustain it for
long. Dont be too greedy, and you will be happier in the long run.

8) Maintain good communication with your onshore employees

Frank, clear and consistent communications with your in-house staff are crucial to the success of
any outsourcing effort. If your company has not been through a wrenching transformation in
recent years, this communication often gets postponed until the last minute. Innuendo and rumor
are going to fill the information vacuum and misinformation usually has a worse effect than the
hard truths. Ask for help from an outside professional if you are unsure how to handle such
communications.

7) Retain some core in-house staff

New types of customers, new products, or other business changes may suddenly require you to
be more actively involved in some outsourced functions. If your head counts are large enough,
consider keep a core group in house so that you can react quickly to market changes.
Experienced players will tell you that retaining a core group also gives them a laboratory to try
new processes and a continuing benchmark by which to evaluate the external group.



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The Top 10 Pitfalls of Offshore Outsourcing
6) Plan very, very, carefully for the transition to outsourcing

Have your team draw up thorough checklist of all possible issues to deal with during the
transition from an in-sourced to an out-sourced operation. The team should include key members
of your staff and your vendors. Some companies include third parties to assist in the transition
and you should budget resources for this transition period. This is a stage where many companies
falter; it is not rocket science to anticipate most problems but the excitement to jump in and
enjoy the benefits of outsourcing often overtakes the need for due process. Make sure the vendor
has adequate plans to execute full knowledge transfer; else you might find yourself under duress.

5) Consider the full costs of outsourcing

Costs during the planning include possible travel, fees to advisors, opportunity costs of
management attention. Costs during the transition include payments for layoffs, retention
incentives for key staff to stay until a certain date, overage payments on unused leases and other
contracts, possible training costs. Ongoing expenses may include some oversight staff on your
payroll and possible domain-specific onsite staff provided by the outsourcer for better
communication with your team.

4) Ferret out intangible differences among possible vendors

On the surface Wipro may seem just like Infosys for your purposes. This is more the case when
the contenders are smaller players. Vendors will boast about CMM 5 certification, ISO 9000
processes, 6-sigma quality, and state of the art facilities but dont be dazzled by this. There are
invariably major differences in the way vendors will relate to you. How important is your
business to them? Do they work closely with your competitors already? Do they have other
customers in the same American cities as your locations? What is your chemistry with the key
people who will communicate with you? How often will upper management at the vendor visit
you? You get the idea.

3) Dont panic at the first sign of trouble

When grizzled veterans of outsourcing get together over a drink, they often share war stories of
the horrors during their transition periods. When the first trouble hits, and it surely will,
remember that you need a few good stories of your own. Rarely is an outsourcing project
trouble-free but with the proper planning and guidance and with the appropriate escalation
processes in place, and a sense of humor, you will find that your and your vendor partner will
overcome most early bumps on the road.



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The Top 10 Pitfalls of Offshore Outsourcing
2) Visit your vendor (or have independent evaluators visit)

Most initial and some intermediate evaluation can be carried out by phone and email and by
having the vendor visit you. At some point before signing on the dotted line, your due diligence
should include an onsite visit with a pointed and specific agenda to make you fully comfortable
with the kind of operation that the vendor claims to run. There is no substitute for this kind of
face-to-face interaction and there are few situations where such a visit is unwarranted or
unproductive. It helps to have someone familiar with the local culture who is on your side to
assist you with such a site visit.



1) Retain very tight control of budgets

Outsourcing and offshoring are painful and time-consuming processes. If you have the will to
carry them out, ensure that you and your investors get to reap the full rewards. Budget creep can
often start eating away the savings brought about by outsourcing. Dont let this happen to you!
Advances in information technology and management processes have made outsourcing a viable
strategy for companies of all sizes. But the need for fiscal discipline still present.


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Amritt Ventures, Inc. is an American advisory services company with expertise in guiding companies to
better utilize offshore outsourcing to China, India and other countries. The information in this white
paper is general and broad, and many exceptions apply. For an in depth analysis of your situation, please
contact us to schedule an evaluation. www.amritt.com . info@amritt.com