The forgotten side of outsourcing

If onshore and offshore outsourcing is the new wonder drug, "human factors" should be listed as both a benefit and a side effect. Human factors are one of the most important parts of any outsourcing effort, particularly when the outsourcer is located offshore. To proceed successfully, you should carefully consider the people issues from both sides: benefits and drawbacks.

Benefits

Outsourcing can supply your organization with highly specialized skills on a part-time basis. Most CIOs find it difficult to justify filling precious openings with staffers whose technical skills are required only intermittently.

Since IT is the outsourcer's primary focus, any staffers transferred to the outsourcer will have expanded career opportunities -- to develop highly specialized skills and broaden their experience across multiple industries.

Outsourcing also provides an opportunity to transfer some administrative costs and headaches to your outsourcer. You won't have to waste precious months "managing out" nonperforming staffers. And with fewer people to manage after outsourcing, your organization will require less time for human resources management and administration.

Side Effects

You can overoutsource and lose your delivery skills. Reckless outsourcing can strip your organization of the skills required to be effective. If you outsource everything, you'll also strip your organization of its ability to use leverage on and control the outsourcer.

The outsourcer's culture may not fit yours. One outsourcer introduced a group of hard-driving Northeasterners into a conflict-avoiding, consensus-oriented Midwestern company. Misunderstandings and hurt feelings were rampant, until the outsourcer's staffers were coached to soften their approach.

Outsourcing can cause fear and dysfunctional behavior in your remaining staff. Other departments may see IT being outsourced and worry that they may be next. (One textile firm, after outsourcing its IT department, found its fashion designers discussing the merits of moving to New York to avoid being outsourced.)

Outsourcing creates a legal morass of employment regulations and layoff notifications, as well as compensation and benefits-continuation issues. In order to avoid nasty litigation, get competent legal counsel from the start.

Misunderstandings about outsourcing can generate bad publicity. One company's outsourcing plans were leaked to a state senator, who was told that the company was bringing in illegal aliens under false visas to replace U.S. citizens. The senator was prepared to take the issue to the statehouse, until the company cleared up the misunderstanding.

Before you outsource, put a comprehensive plan in place to deal with human factors. This is even more essential if you're going offshore.

  • Keep critical skills on your staff, such as architects, planners and program/project managers. Don't outsource your team's ability to be successful. In addition, for offshore development projects, make sure that about 30 percent of the staff will be located onshore.

  • Include human resources, legal and public relations departments from the beginning. Legal will help you navigate the complexities of federal, state and local employment laws. Human resources can reassure your staff, and public relations will deal with major internal critics and the community.

  • Interview the outsourcer's staff thoroughly when selecting who will be assigned to your account. Make sure they fit your culture, in addition to having the right expertise. Require the outsourcer to designate a backup for key people, in the event of turnover.

  • Create a joint program team with your outsourcer. Treat all team members equally in terms of accountability, supervision and deliverables -- whether they're on your staff or on the outsourcer's. Rotate remote staffers through your facility so they become recognized team members, not just faceless voices on the telephone. The most successful outsourcing engagements involve long-term partnerships in which everyone is committed to program success. Offer incentives to promote cooperation.

  • Take extra care of remaining staffers. Describe career opportunities explicitly. Give as much interesting work, recognition and other perks as possible. Offer retraining when job responsibilities change significantly. Keep your ear to the ground for rumors, and squelch them before they create unnecessary apprehension.

Most articles on outsourcing emphasize how much money you can save. But don't neglect the human factors. They may not visibly affect your return on investment, but they'll definitely affect your outsourcing program.

Whether you insource, outsource or go offshore, people are still your company's most important asset. And regardless of their location, they'll ultimately determine your success.

- Bart Perkins is managing partner at Leverage Partners Inc. in Louisville, Ky., which helps CIOs manage their IT suppliers.

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