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The Secrets of Outsourcing Success

InfoWorld – by Ephraim Schwartz

Outsourcing is a volatile subject. after all, it puts jobs and even careers at stake. But we need to remain calm and take a sober look at the business strategy of outsourcing IT. Besides, I promised part three of my look at outsourcing last week.

To that end I spoke with Arkadiy Dobkin, CEO of EPAM Systems, an outsource provider in Minsk, Belarus; Abnash Singh, executive vice president of Vmoksha Technologies, an outsourcer based in Bangalore, India; and Michael Akselrod, senior vice president for research at Reuters, an EPAM customer in New York.Akselrod stresses that his opinions are his own and do not represent those of Reuters.

IT project assignments at Reuters are unpredictable, and the company would benefit from a model that would save it from hiring people at peak, only to end up with little for them to do when business slows. Still, Akselrod was skeptical of using outsourcers that were thousands of miles away but EPAM's model made it work for him.

The biggest problem in dealing with a remote supplier, especially in IT, is communications, according to Akselrod and Dobkin. When you've given a project to an outsource vendor, explained everything, and assigned a deadline, you must have proper communications during the project. Without it there is the danger that the work turned back to you will not be what you expected.

EPAM's solution was to put two high-level, technically capable people -- one at the project management level and one at the development leader level -- on Reuters' site.

"They become part of our team environment," Akselrod says.

Yes, these people are paid at a higher rate, but it was well worth it, Akselrod says. They act as proxies who are responsible for all the work that must be done. They review the work then distribute it to the people in Minsk. It is these people who manage the outsourced site.

Vmoksha's Singh believes that outsourcing does not work properly if, after defining requirements of the project and signing the contract, the customer continues to make changes to the specification. "If the outsourcer is working on a moving target it creates difficulty and pain," he says.

Singh recommends a change management process with a change control board where the customer, not the outsourcer, would take the lead.

Even if the specifications don't change much, "frequent and regular communications between vendor and customer is vital," Singh says. He adds that his company uses NetMeeting, WebEx, and IM to great advantage.

Vmoksha also offers a very unique protection plan; "de-risking" the outsourcing experience is how Singh puts it. After the vendor sets up the infrastructure and hires the resources, the customer can take over the entire center at a predetermined price.

At the end of the day, outsourcing is a difficult issue. But under the guise of a wise, well-thought out "policy statement" from the Computer Systems Policy Project - an exclusive club of only the CEOs of Dell, EMC, HP, IBM, Intel, Motorola, NCR, and Unisys - the group says outsourcing is a result of bad U.S. policy and a poor educational system. The report ignores the fact that a coder sitting in Russia or India is costing these companies about 60 to 70 percent less than an equivalent stateside programmer.

As outsourcing demand increases and the international skilled worker pool gets scarcer, outsourcing costs will rise worldwide. At that point, something other than payroll considerations will become the differentiating factor in hiring.