Making it work: how to avoid some common offshoring blunders—and what to do when you can't

CFO: Magazine for Senior Financial Executives,  June, 2004  by Roy Harris

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Fortunately; Business Engine's breach was not a case of intellectual-property theft. But the experience helped convince the company that to continue operating offshore without one of its own dedicated managers on the scene--as many companies working with third-party vendors do--would be unwise. So in 2001, Business Engine recruited Neil Mehta, who had specialized in supply-chain and systems integration at Arthur Andersen and Price Waterhouse. His presence eased many security worries. "Having a manager on the scene in some ways makes it more secure than if you had a [U.S. employee] working out of the house," says Dickey. "Whether the phone line to the office is 12,000 miles or 12 miles, it becomes irrelevant."

Mehta, 33, who is American-born but of Indian descent, also helped address problems with work quality. Before he arrived, reliance on E-mail communications with California of: ten led to delay's of at least a day in answering technical questions from the Indian office, and reinforced a feeling among the 40 Blue Star employees in Mumbai that the offshore work "had no status" within Business Engine.

Poor communication and low morale resulted in a large amount of software with code-writing errors that required "rework" by the team of 60 developers back in California. Training alone didn't seem to solve the problem. "Even after two years of getting the rework rate down in India, it wasn't [low] enough,' recalls Dickey'. While domestically the rework rate was about 30 percent, "when we first started [in India], we experienced error rates of about 70 to 80 percent."

When Mehta first arrived, he replaced E-mails with frequent phone calls to California. He also took over the job of assigning Blue Star employees to various Business Engine jobs. Because labor in India is relatively cheap, error rates often can be lowered by simply assigning more people to double-check the work. Mehta set up a system in which each code-writing task "would get reviewed and tested by a peer, who would sign off on the code and the task." He also installed monthly measurements showing the number of tasks completed on time--factoring in the difficulty of each task--and citing reasons for lateness. By using Business Engine's own management software to measure offshore performance, he was also able to let onshore managers track some offshore functions on a daily basis. That effort, he says, brought "accountability to the work being done by the people offshore."

Knowing what functions lend themselves to good measurement, and then tracking them effectively, are the keys to successful outsourcing, according to professor Ravi Aron, an expert in BPO at the University of Pennsylvania's Wharton School. "There are many processes that cannot be codified," he says, "but when you find processes that can be, you see how easy things are" (see "Measuring the Miscues," page 58). At Business Engine, Mehta's efforts at improving communication and measuring error rates are credited with tightening the operation significantly. Rework is no longer sent back to California, but performed in Mumbai. Better yet, notes Mehta, "that rework is now down to 5 percent."