Global Sourcing (Out-Sourcing nearshoring & Offshoring) and vital tips for your vendor management   

Outsourcing, offshoring and vendor management: common issues & best practices for managing vendors

The mega global-sourcing (outsourcing nearshore or offshore) deals are usually very complex, often requiring a collaborative multi-sourcing, multi-shoring solution, where either one or both of the parties can end up wanting out of the engagement. It is therefore paramount and vital to your outsourcing success to:

• Outsource as a long-term strategic decision
• Practice careful management supervision
• Maintain close communication, even if time-difference makes this bothersome
• Ongoing management of relationships - excellent clear Communication is vital to invest and maintain
• Plan on frequent travel for you and your employees in order to optimize communication with your outsourcing partners on all levels.
• Senior executive support and involvement is vital - reward those who help you with the outsourcing, involve them with the outsourcing / offshore partner team on all levels and plan for frequent travel
• Obtain a deep cross-cultural understanding - educate yourself and your team, all your workers onshore and offshore for better cultural compatibility and cross-culture understanding
• Make the outsourcing offshore development-center employees feel they are part of your team. Visit them regularly
• Create a seamless integration of onshore and offshore teams - treat them the same
• Pay careful attention to personnel issues - engage in open & honest communication with your outsourcing-affected employees
• Maintain a proper mix of retained "in house" staff and outsourced operations - important to balance
• Track the performance of offshore/ nearshore and your onshore teams with the same metrics
• Have clear communication plans and processes
• Research carefully - use Global-sourcing (offshore or nearshore outsourcing) specialist consultants for identifying a short-list of potential vendors.
• Double your research with minimal cost, to avoid potential failure and lower the risk involved  - use tools and reports to support / verify your short-list or identify other or better possibilities
• Use proven, in-depth RFI reports & RFP templates - for evaluating all the finest details you don't want to miss, for saving months of work and in order to avoid mistakes.
  Do not trust your decisions to what the vendor sales-teams have to say. What they present to you is not always in accordance to reality. You must use the right tools to properly evaluate your potential vendors. Cover yourself from all directions or you'll end up part of the loser statistics...
• Ensure your chosen partners can and will resize according to your cyclical market needs
• Decide if you need a proactive consultative vendor relationship. Would your chosen vendor/s provide this?
• Support the small guys. You may not need all the functionality offered by the larger, mature more expensive players. Smaller vendors' solutions, in combination with some in-house efforts, provide benefits that justify the additional risk. Smaller vendors may offer architectural and service and support advantages and be willing work within a "pay for use" deal. (The benefits for the vendors lie in exclusivity, higher initial payments and walk-away penalties.)
• Aim to work long term with same vendor
• Focus on limited number of vendor partners
• Don't buy more than you need. Anything you buy today reduces your future leverage. When your phone rings at the end of the month, quarter or year, don't be lulled by volume discounts and capitalization rules. Only purchase what your organization really needs or can effectively use in the foreseeable timeframe. Besides, anything you "save" today is just a fraction of the overall cost of implementation.
  If it makes sense to buy, it also makes sense to first compare software solutions.
• Be Flexible & creative. Accept the reality that sets in, check new avenues, explore new paths and opportunities in a flexible way. Be ready to switch your outsourcing models, vendors and locations.
  • Have the rising wages eroded profitability?
  • Do you need your own captive center or a mix of both captive and a vendor partner?
  • Should you give up a troubled captive center to your vendor-partner? How?
  • Would using vendors in a partner co-sourcing model be your best solution?
    • » Time & Material Model
    • » Fixed Bids Model
    • » Shared Risk Model
    • » Other / mix Models
• Utilize good counsel. Get a state-of-the-art contract. Go outside your organization, if necessary, to acquire the support of experienced IT negotiators and legal counsel. Be sure to clarify critical definitions and cap increases, minimize up front payments, and get the most out of the warranty periods (by specifying start dates and longer terms)
• Re-examine and renegotiate some of the terms of the existing contract
• Seamless integration. Make sure your onshore home team and the new offshore/ nearshore teams integrate well.
  • Cultural training for both teams
  • Measure & track performance using same metrics for both teams and reward equally
  • Visit your offshore/nearshore development center and make them feel they are part of the team.
  • Have your onshore home team also visit on a regular base the vendor team partners.
  • Frequent communications with vendor partners at all levels of company. Critical!
  • Don't assume your new contractor knows what you want!
  • Clear communications of plans & processes as well as of any strategic direction changes
• Supervision models. Decide which best fits your needs. Should you contract a vendor to do this? If your outsourcing model supports multiple vendors in many different time zones you/ your team may soon burn out trying to keep up the necessary vital day-to-day communications. You have a few options:
  • » Onsite- your dedicated team
  • » Remote supervision
  • » Loose supervision
  • » Partner remote supervision
• Celebrate your successes! With both your teams.

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