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Managing IT Projects Offshore

~ By Duncan Haughey

Map of India in abstract style

Today, many organisations have decided to move their IT development offshore to reduce costs and increase competitiveness. They send work to places such as India, China and Russia. The cost savings in these countries is significant, but the headline saving is only a small part of the equation.

Running projects offshore is different to running them at home. Having spoken to many project managers over the years, it has become apparent the same issues are arising time and again. Understanding these before you start an offshore project will help you prepare better. These are six key areas to consider, and where most of the issues lie when offshore outsourcing.

1. Understanding the Culture

Culture is the most complex area and takes some time to understand. Western norms of doing business do not always apply in places such as India and China. Without a proper understanding of the culture, it's easy for things to go wrong. Going on a cultural training course is useful. A good course will tell you what to expect, how to react and plan strategies to deal with different ways of working.

2. Selecting the Right Projects to Go Offshore

Some companies are taking a blanket approach to their offshore adventure, expecting to dispense with their internal IT development entirely. The problem is that not all projects lend themselves to offshore development. Suitable candidates for going offshore are typically those projects that are either well-defined, with little change expected, or repetitive work. Projects that need large amounts of customer involvement, or are likely to have many changes during development are not suitable.

3. Defining the Scope

Offshore projects need defining in more detail than those run at home. You will get what you ask for, including any mistakes and errors, whether obvious or not. Make sure everything is written down, and never make assumptions about what is apparent or implied. A spin-off benefit many companies have experienced in this area is an improvement in the quality of their functional and technical specifications.

4. Getting What You Pay For

It is important to check whether the people and services you pay for are getting delivered. There is a tendency to provide cheaper solutions instead. Agree what you are buying in advance and regularly check what you are getting is correct. Ask to see people's résumés and check they have the relevant qualifications and experience. Make regular visits to check the working environment and equipment is as expected and of a suitable standard.

5. Effective Communication

Communication is the single most important part of offshore working. You should invest plenty of effort in setting up a suitable communications structure. You can't assume that the correct information will always get passed to the right people. One solution is to have an experienced company manager offshore, at least initially, to make sure everything runs smoothly.

6. Monitoring Progress

The terms "offshore development" and "black box" should not be heard in the same sentence. This concept will not work. Offshore projects need managing or, at least, monitoring. It is important to have frequent milestones and deliverables in any offshore project, so it's easy to monitor progress and take timely corrective action. The onus is on the customer to track progress because the offshore company will seldom mention problems to save face.

Common Pitfalls

  • Not a quick fix budget cut. It takes from three months to a year to transfer work to an offshore partner, and during this time costs will rise, therefore, don't assume cost savings for this period.
  • Employing arms and legs rather than brains. It is common place to find that you will work with a qualified and experienced developer, and several inexperienced trainees or students. The developer is expected to coach and guide the inexperienced staff to deliver packages of work. These people are often unable to make sound technical decisions, and in some of the worst examples, have only a rudimentary knowledge of the technology used. This inexperience can lead to poor quality and extended lead times.
  • Lack of accountability. It is important to have a single point of contact that can make decisions and get you what you need. All too often, the person in this role has little power and is only there as a token to keep the customer happy.
  • Onshore experience. Do not rely on telephone and email communication alone. It is necessary for key staff members from the offshore partner to work onshore, so they can understand the company culture and customer expectations. This assignment can typically last between three and six months.

Anecdotal evidence from companies with two or more years experience in offshore outsourcing is that given time it can work. Expect some savings, but be prepared for the months of effort and a significant investment up front to establish an effective offshore partnership.

Comments (2)

Topic: Managing IT Projects Offshore
5/5 (2)
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28th June 2016 8:52am
Hari Prasad (Bangalore) says...
While the above comments are excellent, a couple of others are:

  1. Evaluate the person (just not the company) or team you work with and understand the competency and commitment levels.
  2. Have a clear exit strategy included in the SOW such that any lapses can be repaired and include penalty clauses.
  3. Milestones - link payment releases to gate reviews.
  4. Have regular quality reviews and provide scenarios for testing at the beginning so that expectations are set clearly for quality acceptance.
  5. Last, but not least, your company's commitment should be high and measures for constant monitoring should be in place.
Have fun offshoring.
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11th December 2014 11:22am
Abhijit Talukdar (Mumbai) says...
These are excellent observations, Duncan.

Being someone, who has worked on both sides for many years, I totally agree with you that cultural difference is one of the first things to look at to ensure the success of offshore projects.

Here are my mantras for success of offshore projects.

1. Ensure that the size of the offshored project is manageable - ideally never more than $1mn. Bigger projects should be broken down into smaller sub-projects to achieve this target.

2. Relocate a member of Customer's staff to the offshore location for the duration of the project, specifically to manage the cultural difference. When this is not possible, hire independent and experienced local program managers to do this job.

3. Monitor offshore projects regularly - at least once in a month. Take all flags raised seriously.

4. Once an offshore project gets into trouble, it rarely gets out cleanly again. Therefore look for signs of failure all the time, including those at your own end.

5. Count the savings from offshoring only after they have been realized. Learn from your own lessons thereafter.

Happy offshoring!

Attainix Consulting

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