The Dao of Outsourcing

Traditionally outsourcing vendors place coordinators on the customer site to facilitate communication with the offshore team.   This article discusses a different approach to coordinating offshore outsourcing projects where the client places a coordinator on the outsourcing vendor site to manage the offshore project.

I recently read a good blog post on Pragmatic Outsourcing titled The Myth of the Onsite Coordinator. Often offshore software outsourcing vendors place employees on the client site as part of the offshore engagement.  As Nick Krym mentions in his blog post, there are disadvantages to having an onsite offshore coordinator, the main being cost to the client.  An alternative approach that can be more effective is for the client to place an employee on the outsourcing supplier site.

Although an offshore coordinator could be employed by the outsourcing vendor or client, for the purpose of this post when I refer to “offshore onsite coordinator”, I mean a client employee or contractor managing the outsourcing initiative offshore.  This offshore onsite coordinator is responsible for managing the communication and coordination between the client and the vendor and may also be responsible for managing the vendor.

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Many companies have internal experience and best practices for choosing outsourcing vendors, few have experience working with Chinese software outsourcing companies. Here are 5 key areas to consider when looking at China as a global services delivery location.

Choosing a Chinese software outsourcing company should not be a yearly task. However, many American companies are forced to go through the vendor selection process more than once which is time consuming for managers and defeats one of the main advantages of offshoring, to allow managers to focus on core business activities. Below is a list of five selection criteria that are often neglected or forgotten causing the need to switch to a new vendor.

What is the vendors financial stability?
Without naming names, there are more than a few Chinese software outsourcing companies going through tough times financially.  Over the past three years most companies competed on price with India which resulted in margins that were raze thin.  These companies have gone through tough times over the past year with the appreciation of the RMB causing cutbacks and even layoffs.  Check the financials of your chosen partner to ensure they will be in business for the length of the contract.  This is not easy as most local vendors are not public but if you build a good relationship with the vendor through the sales process they will normally share this information with you.

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