Continued Investment in Outsourcing even in Economic Downturns

Amsterdam, The Netherlands, October 7, 2008 – The turn of the economic tide will tempt more and more companies to cut costs by outsourcing or offshoring activities. But failure to take into account some critical success factors of the cost cutting exercise may adversely impact the enterprise. Moreover companies won’t leverage other strategic benefits of outsourcing and offshoring, such as more flexibility for a faster time-to-market and access to expertise that is not available in-house. Businesses that respond to the economic situation by suspending outsourced/offshored projects in the innovation space will not be acting sensibly either. In both cases while the bottom line can be impacted positively in the short term, the businesses will lose out in the long term because they will forfeit knowledge and experience. So says a new white paper released today by ABeam Consulting entitled, “From Outsourcing to Crowdsourcing, Getting the Most out of your Offshoring Initiatives by Building Collaborative Software Development Networks,” which sets out guidelines for successful outsourcing and offshoring engagements.

The white paper is the result of a joint study by ABeam Consulting, Massachusetts Institute of Technology (MIT) and Helsinki University of Technology. Interviews were held with CIOs, COOs, VPs and Directors of multinationals who are responsible for outsourcing and offshoring to Eastern Europe, India and China. The European-based companies came from different sectors, ranging from banking, manufacturing & distribution, and technology to consumer business and the services sector.

The main conclusion of the study is that the success of outsourcing and offshoring is more than a question of signing “water-tight” contracts and coordinating resources. The way in which the enterprise and the offshore provider communicate and work together plays a crucial role in realizing the promised benefits. They need to be up to speed with each other's business processes, understand cultural differences and work towards a partnership for the long term:

• Build a network: Instead of “dumping” tasks or activities on external players, both partners should build a networked organization with two-way communication that works at different levels and through a multitude of (traditional and Internet-based) channels. It is also important to involve people at all levels from the shop floor to senior management.
• Define new roles and relationships: New roles need to be defined to ensure that the new relationships are steered in the right direction. One key role is, for example, the liaison officer, who acts as the link between the client and the provider and optimizes the interaction and reciprocal knowledge transfer, not only within the project team, but also on a broader stage, between the companies.
• Form long-lasting teams, as part of the company: Personnel from outsourcing or offshoring providers must not be regarded as “hired help” but should be treated as part of the organization. Special HR procedures should be developed to meet the client’s requirements and take account of local conditions and culture.
• Move offshoring partners up the value chain: Instead of looking for outsourcing or offshoring partners at even cheaper locations (at the expense of quality) it is far more beneficial to move offshoring partners up the value chain. This benefits both sides and makes for even better cooperation.

“Such close, networked cooperation, which the white paper equates with the phenomenon of ‘Crowdsourcing,*’ enables businesses to reap more benefits from their outsourcing and offshoring activities and, at the same time, makes them less vulnerable to the loss of specific expertise in the event of reorganizations,” said Deepak Kini, head of Systems Integration and IT Advisory practice at ABeam Consulting, Europe.

ABeam and outsourcing
ABeam helps companies to optimize their outsourcing processes. It also supports clients by acting as their outsourcing partner in the development, implementation and maintenance of software applications and products from its Application Maintenance Outsourcing (AMO) and Global Development Centers in Malaysia and China.

The white paper can be downloaded here.

^*Crowdsourcing is a trend in which large groups of people solve complex problems by working together in unstructured teams and by leveraging Internet-based communication.

About ABeam Consulting ABeam Consulting provides operational consulting services that create strategic advantage, improve business processes, leverage technology innovation, and enhance organisational performance for leading multinational and domestic companies worldwide. ABeam partners with clients to diagnose and solve their real challenges with solutions that combine industry and operational best practices with technical expertise. Pragmatic approaches ensure that clients gain measurable value more quickly. Headquartered in Tokyo, ABeam’s more than 3,500 professionals serve more than 700 clients throughout Europe, the Americas and Asia. For more information, please visit http://www.abeam.com.