Outsourcing Toolkit

Statistician defends his outsourcing figures

Ed Frauenheim CNET News

Published: 10 Aug 2004 12:15 BST

What percentage of your clients in your surveys do you find that actually lost money in doing an offshore project?
About 2 percent. About a third of them say that it's too early to tell, about a third of them say that they have hit the savings that they expected. Twenty percent see savings, but not what they expected. Two percent see no savings at all.

So only a third are actually getting exactly what they wanted up till now.
Right. But, you know, this is an evolution that they go through. You do not wave a magic wand and suddenly 1000 people go offshore and you are saving 70 percent of their salary. You transition project by project. You have to put the governance structure in place. There are some initial ramp-up, due diligence efforts that you have to put in place.

So it's the learning curve, essentially, for these companies.
There is a learning curve. Also, to reach the ultimate level of offshore experience -- what we would define as "full exploiter" -- the client ultimately ends up upgrading and modifying and improving their own internal IT practices in order to better manage work offshore and to move more work offshore

It's a classic example of "outside-in adoption," where as a result of seeing the more disciplined processes of the Indian vendors in particular in action, the client ultimately adopts those capabilities themselves, which then allows them to better manage their own IT and better manage their outsource provider at the same time.

And that's kind of similar to the way the Japanese economy kind of adopted the Deming principles?
Exactly. The Japanese adoption of Deming ultimately became a catalyst for an improvement of manufacturing processes worldwide. The same thing is going to play out around the Indians in IT processes.