Feature

Executive Champion: Offshoring IT Work Isn't Just for the Big Guys

The debate about whether offshoring IT work is good or bad for the U.S. economy focuses on the wrong issue. Companies should be concerned about their competitiveness and whether offshoring can improve their performance. Only by remaining competitive can a company maintain or create jobs. So the question isn't whether offshoring is beneficial, but rather how it can create competitive edge for your company.

Most offshoring news has centered on the big IT deals. General Motors and the global bank ABN Amro have both announced that they will move portions of their application development work to India. Some of these offshoring deals approach $1 billion.

But offshoring isn't just for the big guys. Small and midsized businesses can also take advantage of offshoring. But moving IT work to a distant country is not like throwing a design spec over the wall. Offshoring requires savvy management.

So you need to assess the processes and work that you want to send offshore: How well do you perform this work? What improvements do you expect from offshoring? Don't send an IT mess to a distant land for someone else to fix. You'll just get back a bigger mess.

The best offshoring relationships start with choosing a service provider that delivers more than just cost savings. But finding the right one is a challenge; your provider will be thousands of miles away and vested with your intellectual property. Your company's operations will be dependent on the quality of your provider's work. Here's what to look for in your search.

Industry expertise. Your partner must know your industry's processes intimately. Your offshoring objective should be to improve IT and business processes: procurement, manufacturing, logistics and service. If you are a manufacturing company and want to improve supply chain management, your partner should operate multiple enterprise resource planning initiatives and have close ties with software providers.

Unless you're a very large company, you probably don't track how IT can improve your business performance. Will technology, for example, allow consolidation and improvements in your customer help desks? Big companies can assert technology leadership in their industry. The right partner can help you assert yours.

The right fit. As offshoring grows, so does the size of offshore service providers. How will you get the attention and service that your company requires? You could choose a mid-tier provider, but it may not grow with you or provide the geographic coverage you require. Ask your partner about its plans for growth.

Whatever the size of your partner, test its openness and executive-level accessibility. Are your potential partner's operations transparent? Will your provider expose its real costs to help you choose your service levels? Can you reach your partner's CEO on weekends?

Every relationship has breakdowns. Because you will be at a distance from your offshore partner, you may not always experience these breakdowns directly. So the cultural compatibility between you and your partner is crucial: You need assurance that your business interests will be treated as you would treat them. And you and your partner must share business values, such as integrity and a commitment to quality.

With the right partner, offshoring can yield significant business benefits -- improved processes and increased operational competitiveness -- and can serve as much more than a means to save money.

James Champy is chairman of Perot Systems Corp.'s consulting practice and head of strategy for the company. He is also the author of the best-selling books Reengineering the Corporation, Reengineering Management, The Arc of Ambition and X-Engineering the Corporation.

This was first published in April 2006

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