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Apr 16, 2008

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i think this article presented the outsourcing decision analysis via genetic algorithm (hence, evolutionary approach). the initial operation being outsourced is the initial population (or individual) in the start of the algorithm. if the evaluation of the operation being outsourced does not improve the situation, then the company needs not to reject the idea of outsourcing.it's just that the initial operation being outsourced does not fit for offshore outsourcing. the company can replace the operation to be outsourced. then evaluate the operation's performance in the outsourced state. the number of iteration for the algorithm is the one period of performance evaluation (in sales commonly known as marketing period). business has really a lot of risk to take, it is always in constant innovation. who kows product maybe obsolete in the future (as floppy replaced by flash disk). one good thing about evolutionary approach is that it always converge to optimal solution. it could be wonderful if outsourcing company could provide software using evolutionary algorithms for the decision-analysis of prospective companies to outsource some of their operations. who knows it could entice all companies to opt for outsourcing.

Thanks to Uttiya's pioneering work, when I got to Bangalore in 1996 I thought we were late to the game...hindsight !

I agree with the organic approach to a sourcing relationship, it creates project structures and relationships that are both more robust and more flexible than the big bang implementations.

However, I find that larger companies often get lost along the way between "walk" and "run". If a sourcing pilot is successful, follow-on projects multiply across departments and business units. Hands-on project managers with their own spin on tactics hyperfocus on operational governance. Execs are off focused on grander strategy, until they wake up one day and find that their outsourcing pilot has turned into a dozen siloed implementations owned by different managers. Each project is running fine, but the strategic impact is not there, and the total dollars are adding up. Words like "value add" get bandied about, but by this point there are many opinions about what constitutes value.

My team is often called in for a relationship intervention, to help bridge the "Walk to Run" gap. We've concluded that there is a set of strategic outsourcing competencies that must be put in place in parallel with the "crawl, walk" phase before you can "run".

Dan,

Without going into the distinct differences between business and IT process offshore transition, my experience has shown that when offshoring routine processes that are well documented, the issues are pretty much the same across the board - for example, application support, or payroll data management. The real differences come into play with process that require customization to the business, and the ability to find the skilled labor offshore to take on the work. For example, there are often shortages in specific skillsets within application development, or financial analytics, that require alignment to the parent business. Moreover, attrition can be a huge issue with these more complex processes, so this much be managed well both onshore and offshore to minimize risk.

Phil

Excellent synopsis for developing an offshore strategy. Thank you. Do you see major differences between business processes and IT offshoring when transitioning work offshore?

i think that's how the approach should be... crawl, walk and run... step by step...slowly but surely

Offshore outsourcing is the way of hiring an external organization to do some business functions in a country other than the one where the product are actually developed. Functions are being performed in a foreign country by a foreign subsidiary. Opponents point out that the practice of sending work overseas by countries with higher wages reduces their own domestic employment and domestic investment. Offshore outsourcing benefits its employee because they are earning higher than what they are expected to earn in their own country.

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