Another concern revolves around communications and understanding. It is not enough to speak fluent English; you must communicate on the same cultural wavelength. Many far shore outsourcing vendors speak excellent English yet fail to communicate in an effective way. They may, for example, delay reporting that a project has slipped behind schedule in the hope that they will somehow be able to bring it back on schedule. Companies don’t want surprises.
David Shpilberg: Security is the top issue. Companies get nervous when their critical data sits outside the corporate firewall, and the farther the data goes, the more nervous they get. Some of this has to do with sheer distance, but some also has to do with culture and, especially, how straightforward the people on the outsourcing vendor’s side are.
When it comes to outsourcing a company’s IT operations to an offshore provider, risks abound. Global economic volatility, geopolitical issues, and at least one major scandal in India have some corporate finance executives asking their CIOs and sourcing teams to strengthen risk management around overseas IT outsourcing (ITO) efforts.
In fact, a single outsourcing vendor may not even be acceptable at the corporate governance level, where the trend is toward multiple providers, whether it is hardware, software, networks, or services, to avoid vendor lock-in and spread the risk.
David Shpilberg: Some of these I have already talked about, such as cultural affinity and straight talk. There are other factors that also affect the outsourcing relationship and can impact the results. These, again, might be considered cultural: flexibility, willingness to negotiate, willingness to innovate. In almost any outsourcing project, there are details that cannot be pinned down completely at the outset. This leaves the teams on each side to work out the details as they go. This is where flexibility, innovation, and the need to arrive at a consensus, which may take some negotiation, are required.
In cultures that are strictly hierarchical or where saving face is an important factor, this kind of negotiation and accommodation certainly doesn’t come naturally and may not be possible at all.
This means using different outsourcing providers in different geographies and with different skills and strengths and different approaches. Essentially, you want to avoid the getting into the all-your-eggs-in-one-basket trap. In that case, no matter how low a rate you may get from that single vendor, you have increased your risk substantially.
Here, David Shpilberg, vice chairman of CPM Braxis, the largest Brazil-based IT Services company, explains what risk means in terms of IT outsourcing and shares a checklist that companies considering a multicountry ITO approach can use to help manage risk.
Finally, customers are concerned about the quality of the relationship between the company staff and the offshore teams. Where outsourcing vendors are closer in terms of distance, as measured in time zones, and where there are more cultural affinities, it is more conducive to creating close relationships between the teams.
David Shpilberg: The key to risk mitigation as it applies to global IT outsourcing is to decentralize and diversify to reduce the overall risk or, to put it another way, to spread the risk around.
The Brazilian culture, however, is much more attuned with the North American business culture, so flexibility, innovation, and accommodation come naturally. Through straightforward communication, we can avoid the misunderstandings that can trip up an outsourcing project or at least catch any misunderstandings very early before they impact the project. ###
Eric Krell: What are your clients most concerned about when assessing the risks of their IT outsourcing operations?
Eric Krell: Geographical, governance, and security issues represent common ITO risk concerns. Are there other risks or concerns that companies with international ITO relationships should address?
Eric Krell: How do you define risk mitigation as it applies to global IT outsourcing?
Customers also are concerned about service. If they have a concern Big Fat Finance, they want to be able to pick up the phone, call someone, and have the person at the vendor there to answer the call. Waiting 12 hours for their outsourcing provider to come into work and return their call is not acceptable in many cases, especially if they may be home in bed by then.
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