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March 18, 2009
King's Corner

Read My Lips: Offshore is NOT a Strategic Imperative

Wow. There was quite a backlash to my last blog entry titled “Offshore Outsourcing – How Come I Haven’t Saved Any Money?”. Many emails poured in questioning my commitment to the use of offshore. Some readers said, “how can you argue with offshore?…it’s the future” and “if you’re right, then why is my company telling me that it’s a Strategic Imperative?”. That one got me.

Well, to all the readers out there, one point I need to make clear. I have orchestrated, managed and witnessed dozens of successful implementations through the use of offshore. By successful I mean reductions in costs while not adversely impacting scope, quality and speed. So, let me go on the record now and say that I am not against the use of offshore. Through the use of inclusive language, I will restate it. I am FOR the use of offshore. But there is a caveat. When It Makes Sense!

Let’s discuss the point one of my readers made, regarding their company conveying that the use of offshore is a strategic imperative. No offense to those leaders who would state such a thing, but you may need to get a new role if you would say that offshore is a strategic imperative. Let’s boil it down in simple terms. To make your company more profitable, two things can be addressed. Firstly, you can increase revenues. Secondly, you can decrease costs. It really is as simple as that. To satisfy either of those two goals, there is a myriad of tactics you can take. You can increase brand recognition. You can introduce new product lines. You can consolidate disparate systems that essentially do the same thing. A whole host of tactics are at your disposal to satisfy either of those strategic imperatives, increase revenues or decrease costs. But to simply say that the use of offshore is a strategic imperative is shortsighted.

A further look at my aforementioned article shows samples of offshore implementations that actually INCREASED costs. What is strategic about that? Without belaboring the point, a strategic imperative may read as follows: Reduce Costs through the Optimization of Development and Operations Staff, Systems and Procedures. A ha! Strategy speaks. So now, tactically we can determine what are the tactics to address that strategic goal. Items jump out at me. We could:

  1. identify systems that have significant overlapping functionality and redundant data entry/maintenance and consolidate these systems and the teams that support them
  2. identify high-support-cost systems and streamline support processes through advanced technology and improved methodology
  3. and yes, slowly increase an offshore presence to reduce costs while maintaining consistent support levels with no impact to quality or deadlines

There you have it. The use of offshore CAN HELP you achieve a strategic imperative. It is NOT however, a strategic imperative unto itself. If I implement the use of offshore and by doing so, create additional opportunity costs by increasing time to market and see an increase in real costs because I don’t train resources and manage change correctly, what’s strategic about that?

Remember, the change to an offshore model is significant. Don’t get hung up looking at hourly rates and conclude that you reduced costs. Look at ALL costs, real and opportunity, and make sure it’s worth the investment.

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