• Technology
  • CFO Magazine

Making It Work

How to avoid some common offshoring blunders -- and what to do when you can't.

IndyMac managed to ensure the quality of reverification work in India by requiring progress reports and listening in on some calls. Finally, the bank placed a senior vice president on permanent assignment in India to work with its outsourcing vendor, New York­based ExlService Holdings Inc.

“Loss of control is the foremost concern” in most engagements, says offshoring specialist John K. Halvey, an attorney with Milbank, Tweed, Hadley & McCloy in New York. And control issues are growing more acute, says Halvey, “as the functions being outsourced become more sensitive.” Indeed, IndyMac is now considering offshoring administrative jobs in human resources, finance, and accounts payable.

The Start-Up Curve

For anyone contemplating outsourcing work to a location thousands of miles away, the start-up is easily the most frightening step. Like IndyMac, Business Engine found that putting a manager on permanent assignment in the offshore location allowed the company to work through many of the problems that can plague an effort during that phase, and prevent them from recurring.

In early 2000, the business-software firm faced a severe shortage of Web-literate developers near its large facility in the blue-collar Ontario area of Southern California, and turned to Mumbai, India-based vendor Blue Star Infotech Ltd. to help with basic software test and code work.

Soon after, Business Engine got a scare when it detected Indian employees sharing access codes on its virtual private network. In one case, the company found a single access code in use for 18 hours a day, suggesting that two workers were using the same code. Such lax security immediately gave rise to greater fears. “The next step was to make sure they weren’t exporting information,” says CEO, president, and CFO Doug Dickey. Indeed, loss of intellectual property was a top concern among executives surveyed by CFO, and the number-one worry of those who are currently outsourcing offshore.

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 often led to delays 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.

Discuss

Your email address will not be published. Required fields are marked *