In October 2001, ServiceWare Corporation was undertaking a significant cost-reduction initiative but Lokesh Seth, VP of Development still had to bring a new product to market. Short on resources and tight on finances; Seth decided to partner with a New Jersey-based firm that provides software development from its staff in Belarus. Seth had worked with other offshore vendors in the past, so he was confident he could make the relationship work. But he was keenly aware of the challenges he would have to face dealing with an offshore development team.

Particularly over the past few years, offshore outsourcing has become increasingly common, driven by a desire for cheaper labor – which can often be seventy-five percent or more below American wages. And beyond the cost savings, many U.S. companies are pursuing offshore suppliers to diversify their skills sets, improve their quality, and reduce their time to market. But the attraction of these potential gains can mask the larger effort needed to make those offshore relationships work at all.

Fred Marroni, now Vice President of Engineering and Development for NOMOS Corporation in Cranberry, PA was charged with setting up an offshore team for a former employer, Union Switch and Signal. Marroni’s due diligence included several trips to India to visit prospective vendors. But what he found were significant discrepancies between what he had been told and what he had seen for himself. In the end, he decided against moving forward with the arrangement; the investment required would simply outweigh the potential benefits. 

Multiple challenges

The decision to go offshore is a difficult one, complicated by politics, mythology, and breathless news stories touting others’ successes and failures. But what if the decision to go offshore has already been made? How do you successfully execute that decision? The challenges Seth and Marroni faced, and their responses to them, offer valuable lessons in helping newcomers navigate the sometimes-choppy waters of offshore outsourcing. 

The first, and perhaps greatest challenge in pursuing an offshore strategy is managing the transition from an existing home-based development team to the new one. How do you keep morale up and productivity at an acceptable level when your employees see their jobs moving offshore? In ServiceWare’s case it required a great deal of communication to ultimately secure cooperation from the home team. Early in the process, Lokesh Seth noted, the company’s management sat down with the staff to explain how the firm’s survival hinged on the move. But in return for their cooperation, ServiceWare offered solid severance packages for anyone displaced. 

Today, only twenty percent of ServiceWare’s development takes place in the U.S.; eighty percent now occurs offshore. But communication and eventual acceptance by Seth’s former team were fundamental to making the transition work.

Selecting a Vendor 

Selecting the right vendor is critical to any outsourcing relationship, but it’s especially important when managing and interacting with a distant team. What should you look for? “In addition to technology capabilities select a vendor that is a good organizational fit. Do your homework on the specific team that will be working for you and projects they have completed in the past. It is also essential that the vendor have a US presence.” Seth advises. ServiceWare’s vendor for example, has an office in Princeton, New Jersey, which makes troubleshooting much easier. It gives clients the ability to meet face-to-face with key people in the organization assigned to their project.

Take the time to validate a vendor’s credentials carefully; they may not be what they claim to be. Early on, Fred Marroni had been told an overseas vendor he was considering had the desirable CMM Level 5 certification. But, as he discovered, that wasn’t the whole story. While some companies may have achieved this milestone at the corporate level, larger organizations, particularly in India, have multiple development sites. You need to determine exactly where your work will be performed and what certification levels that site has been awarded. Then check to see whether a reputable third party has performed the audit, he cautions. 

Hitting the road

Beyond that, Marroni suggests traveling to the site location yourself and meeting with proposed developers. When he visited a prospective vendor’s site in India, he noticed how young the staff members were. Real-world work experience had been an essential qualification for the job. But his observations about their youth made him skeptical about the vendor’s credibility and qualifications. 

Seth concurs. To avoid becoming a bait-and-switch victim – in which the experienced A team comes in for the sales pitch while the rookie C team is assigned to do the work – Seth selected a small size vendor and set out ground rules early in the process. He insisted on handpicking the team that would be assigned to his project. He also insisted that as long as those people worked for his chosen vendor they would remain on his project to ensure consistency on his team. Achieving that required more time up front, but it ultimately paid off; most of his offshore team has been on his project now for more than three years. 

Finally, consider the total cost of the relationship. Where is the vendor located? And how often do you plan to visit their location? Both the time and money involved in supervising an offshore team should be considered when making your decision.

Managing Remote Teams

Administering offshore teams in a distant country requires a special style of management. Seth recommends creating rapport by getting to know the team in their home environment. But many companies do just the opposite. They fly a group of overseas developers or engineers to the U.S. so they can experience American methods and culture. But they rarely reciprocate by attempting to learn the remote team’s home culture. And there’s plenty to learn about: language, culture, and time zones, for starters. Breaking down these barriers and getting to know one another are valuable goals. Creating a cohesive team that works well together is an investment, but it is an investment worth making. 

Even after a good working relationship has been established with your offshore team, some important logistical challenges remain. One grows out of the myth that work will advance while you sleep. “It is true that the work in India is being done while we are asleep here in the U.S.,” Marroni admits. “But it is also true that when problems arise, you are likely to get a phone call in the middle of the night.” And if the problem doesn’t get resolved, work essentially stops until the following evening.

Day for Night

Many outsourcing firms claim to have 24/7 shift support. But that’s not always the reality either. Outsourcing has become such a big business in India and a few other global hotspots that many firms are experiencing a shortage of qualified workers. Demand is high and workers now have a choice of employers. There is little incentive to pick the night shift when there are plenty of day jobs available at increasingly competitive wages. As a result, night shift support will remain an issue as demand increases.

With a time difference of just seven and a half hours between Belarus and the U.S. East Coast, instead of ten or more as in the case of India, Lokesh Seth has been able to manage the “work while you sleep issue” with some creativity. He requested his overseas team to come in late and stay late in order to have more overlap with the home team’s working hours. As a result, the entire team is able to have morning meetings, EST, to discuss important issues. Development then continues into the early morning hours before the U.S. team arrives the following day to view their progress.

Process Control

In ServiceWare’s case, their vendor agreed to adopt the client company’s product development process. But process control has remained a challenge. “Review your vendor’s tools and processes and make adjustments accordingly,” Seth’s suggests. And develop far more detailed specifications and technical requirements than you would for an in-house team. That can help, but one result has been that ServiceWare now spends at least twenty-five percent more time developing its documentation than it did before the offshoring effort, Seth estimates. He also suggests sending prototypes to the offshore team along with the technical documentation. At ServiceWare, a small home-based team develops such prototypes to help reduce the chances of error.

Personal communication

E-mail is great, but it also has a down side. Poll your own office. You might be surprised to find how many people send e-mail to colleagues sitting just a few feet away instead of walking over or picking up the phone. E-mail is quick, easy, and provides the opportunity to say what you want without the risk of being interrupted. But while these may be real advantages, they can also become barriers to interactive communication. 

“Email and instant messaging are great tools that make outsourcing possible but one cannot solely rely on them. It is essential that you take the time to walk through the details together,” says Seth. Cultural differences have a major impact on communication. One person’s interpretation of the facts can be very different than another’s. It is also helpful to have ongoing personal interaction with the offshore team. Accordingly, he visits his development team several times a year to maintain good communication.

Maintain Commitment

Careful vendor selection, proper management of remote teams, and solid communication can all help product developments projects take advantage of the world’s vast pool of talent. But to succeed, you must remain truly committed to your goal. A successful project requires time, money, and effort. And the return on investment almost always takes longer than expected. Companies typically end up spending a lot of money before their savings really start to add up. Marroni estimated a significant investment to build the infrastructure needed for his project. And even though things have improved considerably in just the last few years, his point remains valid: underestimate the level of commitment needed to make a project succeed and you could end up with disappointing results. Take your commitment seriously, and you could have a valuable relationship with your offshore vendor for years to come.