Outsourcing’s Stumbling Block

NEW YORK — When IT outsourcing goes bad, it’s usually because the company
that’s sending out the work abdicates management of the project, Deepak
Khandelwal, a consultant with McKinsey & Company, said.

“(The relationship) is something you have to manage,” Khandelwal said during
an outsourcing session at CeBIT America trade show.

There should be three levels of communication, he advised. With a large
project, it’s important to have people on the ground with the outsourcer.

In addition, middle managers should hold weekly, or at least monthly,
meetings with their outsourcer counterparts to be sure work is on track and
service level agreements are being met.

Finally, executive managers of the two firms should meet every quarter to
review performance and set future expectations.

Khandelwal said any company considering outsourcing to educate themselves
about what’s working for other companies — although warned that no two
situations are exactly the same. Large companies must go into projects with
realistic expectations.

“There are no cookie-cutter solutions,” he said.

There are also more choices than many business executives think. Outsourcing
should no longer be considered an Indian phenomenon, although Khandelwal
notes that the country got out to a head start because of its high number of
English speakers and aggressive marketing by government leaders.

Other countries are looking to emulate India’s success, although they will
stress different attributes.

Take Hungary for example. The European country boasts workers with expertise
in several European languages and a history of innovation.

Last year, the country established the Hungarian Technology Center (HTC) to
help market to U.S. firms that are developing products for the continent or
looking to outsource back-office tasks.

The HTC has offices in Virginia and California. Already, GE, Ericsson and
IBM have some operations there, Andrew Gonczi, HTC director of business
development, said during the event.

Others countries that were highlighted as gaining momentum in IT outsourcing
include China, the Philippines and the Baltic states. Each will likely
develop their own expertise, depending on language, culture and educational

William Martorelli, principal analysts at Forrester ,
said despite election year rhetoric and a couple isolated incidents where
U.S. firms have pulled back outsourcing arrangements, the trend is

The Cambridge, Mass., research firm recently adjusted its figure on its
outsourcing forecasts. Forrester says about 3.5 million jobs will move
offshore by 2015.

“We don’t think outsourcing is something born out of recessionary pressure
but a fundamental shift,” Martorelli said. “

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