1. Cost Reduction Expectations
The biggest risk with offshore outsourcing has nothing to do with outsourcing- it involves the expectations the internal organization has about how much the savings from offshore will be.
2. Data Security/Protection
Privacy concerns must be completely addressed. Although these issues rarely pose major impediments to outsourcing, the requirements must be documented and the methods and integration with vendors defined.
3. Process Discipline (CMM)
The Capability Maturity Model (CMM) becomes an important measure of a company’s readiness to adopt an offshore model. Offshore vendors require a standardized and repeatable model, which is why CMM Level 5 is a common characteristic.
4. Loss of Business Knowledge
Companies must carefully assess business knowledge and determine if moving it either outside the company or to an offshore location will compromise company practices.
5. Vendor Failure to Deliver
When considering outsourcing, IT organizations should assess the implications of vendor failure. Although such failures are exceptions, they do occur, even with the superb quality methodologies of offshore vendors.
6. Scope Creep
If the actual work varies from estimates, the client will pay the difference. This simple fact has become a major obstacle for IT organizations that are surprised that the price was not “fixed” or that the vendor expects to be paid for incremental scope changes.
7. Government Oversight/Regulation
IT organizations must ensure that the offshore vendor is sensitive to industry-specific requirements and the vendor’s ability to: 1) comply with government regulations; and 2) provide sufficient “transparency” showing that it does comply and is thus accountable during audits.
8. Culture
Most leading vendors have cultural education programs, but executives should not assume that cultural alignment will be insignificant or trivial.
9. Turnover of Key Personnel
While offshore vendors will often quote overall turnover statistics that appear relatively low, the more important statistic to manage is the turnover of key personnel on an account. The impact of high turnover has an indirect cost on the IT organization, which must increase time spend on knowledge transfer and training new individuals.
10. Knowledge Transfer
The time and effort to transfer knowledge to the vendor is a cost rarely accounted for by IT organizations. It will result a decline in productivity during the first year of an agreement, largely due to time spent transferring both technical and business knowledge to the vendor.
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