Outsourcing's Stumbling Block

When outsourcing goes bad, there's usually a simple reason why.
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 standards.

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 accelerating.

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.

This article was first published on internetnews.com.

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