Outsourcing to India - Beware of pitfalls

Outsourcing is not the new word in IT anymore. Roughly $300bn was spent in 2015 on global IT sourcing services. Out of which total contract value was around $70bn so stats speak for itself. But size of industry has nothing to do with the individual success though it clearly emphasize the needs of dos and dont of outsourcing industry.

My experience with Norway says that here the trend is to integrate one business service to another business service. In other words more B2B integration is being sought for. B2C is not the area where Norwegian companies are outsourcing but B2B.As norwegian companies are concerned about the long term commitments and lack of comprehensive development and maintenance expenditure so companies prefer to try outsourcing B2B model and select the IT service provider which has been tested and succeeded in nordic market.Norwegian companies does not believe in relinquishing control to IT outsourcing provider and so mainly keep their own key people and also invite key members of outsourcing team for onsite experience. Surely it helps in understanding as cultural gaps can be minimized. 

Sometimes IT outsourcing works and sometimes it does not work.When it doesn't work then usual biggest reason is delayed project delivery(i.e lack of project mgmt) on vendor's side and cultural differences.Here is the example Tomra production ( https://www.tomra.com ) which failed in its outsourcing venture. Here is how it story : 

 Tomra offers food shop and customers advanced solutions for monitoring and operation of 75000 reverse vending machines around the world.Tomra outsourced development of a new computer system to an Indian IT company. For 2 years they kept the Indian company on the project, dozens of employees worked in both India and Norway.After two years of collaboration Tomra canceled the outsourcing agreement. While reflecting upon the failure, Tomra management gave following 4 prime reasons :

Failure-1: Tomra thought they would get access to unique IT expertise and increased capacity using outsourcing. Which they could not manage.
Failure-2: Tomra couldn't document the requirements in such a way that could manage the ambiguity and rework( and consequently delay in delivery)
Failure-3: Tomra believes that geographical distance in addition made cooperation difficult.
Failure-4: Outsourcing provider's staff had a different attitude to ask critical questions about bosses and customers. They said yes to suggestions and input from Tomra when they should have said no.

Post failure statements from Ole Aleksander Mortensen, TOMRA :
We were not comfortable with continuing the process with the Indians. We had lost confidence.
We have made further progress in five months with a small team here at home than we did during the two years of the Indian company,

"The mistake companies make is that they do not see differences in the work culture in other countries and the problems it causes" - Steinar Koffeld, Vivende(which helped Tamara)

Post failure, Tomra has following advice for others  :
- Understand requirements for formality in the agreements in the current low-cost countries
- Use a lot of time on the agreement with the company you outsource to.
- Use extreme with time specification of the agreement.
- Important to have enough 'onsite' resources so that the communication flows between the company and the supplier. Have earmarked employees who work closely with the company you have outsourced to.
- Anchor solution internally, so that everyone who will work with the process understand why the outsourcer and that they support this.

So is it all about work culture or cultural gap ? No, it is not. And of course it is not about Indians too. It is ALL about project management.


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