A recent Bersin & Associates white paper offers advice on best practices for selecting and managing an offshore partnership. Here’s an excerpt.
There seems to be a stampede of U.S. companies rushing to outsource their operations to offshore partners. As a result, the economies of India and China are booming. What is fueling the trend is the desire to gain access to lower cost, high quality labor. Top business functions for offshoring include customer service, IT and technology services, and now corporate training.
The reasons for offshoring learning initiatives are the same as those for other business functions: First and foremost, companies want to take advantage of lower labor costs overseas. In a study by the World Outsourcing Summit, nearly 48 percent of outsourcing decisions are made to reduce operational costs. But cost savings is no longer the sole driver of offshoring. Increasingly, firms are recognizing that offshoring provides improved business performance by focusing internal efforts on core competencies and strategic activities. Offshoring also enables learning teams to maintain a lean in-house staff and still meet business demands during peak times.
Finding the right partner is obviously an important part of ensuring the success of an offshoring initiative. But just as important is how you set up and manage the project, and then revise your process based on the results.
This process is circular, indicating that after you complete a project, you then apply the lessons learned to improve the process for the next one. Continual process refinement is part of a successful offshore partnership.
Some additional internal homework is required at the start of the process. Issues that must be addressed include the following:
What parts of the project (if any) should we keep in house? Keeping some activities in-house adds to the complexity of managing the project and requires a greater degree of communication between the internal team and offshore partner. The decision will depend on your internal resources, your team or organization’s core competencies, and your desire for control.
What resources are required in house? This should include a project lead to facilitate communication with the offshore partner and subject matter experts. It may also include instructional designers, developers, and technical personnel. Whatever resources are necessary, they should be made available and committed to the project’s success. Roles should be clearly defined and understood up front.
What are the project goals? These must be clear to both the company and offshore partner to ensure expectations are set correctly and everyone is working toward common goals.
How will we measure the success of the project? Again, success measures should be clearly identified and accepted by all parties involved.
Are we committed to a long-term partnership with an offshore company? The first project will likely have many hiccups, so prepare to invest in the relationship and make it work for the long term. If you are thinking of this as a one-off project, you will likely be disappointed with the results. For these unique projects, it is probably better to hire a U.S. vendor and pay the premium.
There are many factors to consider when evaluating an offshore partner. The top characteristics are
- financial stability
- service and support.
As in the United States, there are a myriad of learning service providers abroad, and new ones are popping up every day. Some will be out of business in a few years (or less). If you are looking at offshoring as a long-term partnership (and you should be), you will want to choose a solid company with a high potential for longevity. Look at the company’s financial records for the last three years to determine profitability and cash on hand. If the company is private, you can ask to see these records under a nondisclosure agreement (NDA).
In India, there are a few “high profile” suppliers such as SIFY, Tata Interactive, and NIIT. While by no means a guarantee, these companies already have significant customer bases and are a safer bet than some of the newer entrants. While you might get a better price from a smaller company, you should make sure you are comfortable with its long-term potential.
Many offshore companies claim to be experts in e-learning content development or technology. You must interview them in depth to assess their skills and training methods.
From a content development perspective, find out whether they use sound instructional principles. According to one training professional we interviewed, Indian companies have taken a while to build up their skill sets in the area of instructional design. In just the last few years, many have gotten up to par with U.S. companies—but not every company has developed the internal skills necessary to build an effective online course.
To assess the staff’s knowledge of basic learning and instructional design principles, ask the offshore firm to send you a typical course to evaluate. Does it have objectives? Is it engaging, not just through fancy graphics, but through instructional methods? How is the user interface?
Then, interview the company’s staff about topics such as Bloom’s Taxonomy and knowledge of adult learning theories.
Another area to explore is how the offshore company trains its employees. Some companies will have a staff person, who has the appropriate degree or training (many times from a U.S. university), whose job is (at least in part) to train others. But what if this expert leaves the company? With the Indian tech sector being white hot these days, retaining top talent is a challenge for nearly every firm. It is important to understand how employees are trained and kept up to date.
Questions for the offshore firm include the following:
- For the key personnel: What degrees do they have and from what universities?
- What is the organization’s retention/turnover rate?
- How are employees trained (initially) and how are they kept up to date on new tools and methodologies?
- How technically savvy is the organization? What technologies do they use? For content development, for example, do they use HTML, Flash, simulations?
- How knowledgeable are they about AICC and SCORM? If they claim their content is AICC and SCORM compliant, ask them to show you a course and explain WHY it is AICC/SCORM complaint.
- How knowledgeable are they about your LMS? Do they use it as a testing platform?
Finally, consider whether it is important that the vendor has experience in your organization’s industry. Knowing the problems your customers face and the terminology they use can prove to be extremely valuable in creating effective learning courses.
If a vendor is working with your competitors, however, this can also raise some concerns. In this case, find out how the vendor deals with intellectual property and privacy issues.
Providing high-quality services remotely requires well-developed project management skills and processes. Look for companies with the tools, methodologies, and management expertise for providing services to clients across geographies.
Ask for metrics, such as the percentage of courses delivered on time. If they have an 80 percent on-time completion rate, find out what happened in the other 20 percent of projects that were delivered late. Ask the firm to show you their last 15 projects with the projected and actual delivery dates.
Understand how the firm’s processes are built to ensure quality every time. The processes must be repeatable so that every project has the same high level of quality.
The firm should also have project monitoring capabilities so you know at all times whether your project is on schedule. Ideally, these capabilities should be online, so you can look at your project status any time of the day, without waiting for your offshore project manager to respond to you.
Due Diligence Checklist
Due Diligence Checklist
- Staff bios, skills, and training methods
- Retention/turnover rates
- Industries served; expertise in your industry
- Financial records for last 3 years
- How is IP protected? Does supplier have standard NDAs?
- Technologies used; integration with your systems
- Project management, monitoring, and QA processes
- On-time, on-budget metrics
- Number of customers, size of projects, number of staff per project
- Client references
- Communication skills
- Cultural fit (including fit with the way your team/organization does business)
- Geographic reach: Do they have local office near you?
If you are planning to offshore a significant number of projects or operations, scalability will be a key factor.
Find out how many resources the firm has on staff and how they manage their workload. If your project demands vary over time, will they be able to (and be satisfied with) 1 or 2 projects this quarter, and 20 the next?
You will also need to estimate how fast your organization’s workload is growing and assess whether the offshore partner has the capacity to scale with your business.
Service and support
Service and support are typically not among the main factors considered when selecting a vendor. However, these are often the key drivers of satisfaction with an e-learning product or project. A vendor’s level of service may be tied to its available resources or its number of customers. Many e-learning professionals who have selected smaller vendors have told us they receive an extremely high level of service and personal attention.
Service may also be a value that some vendors, regardless of size, internalize more than others. For example, the United Nations Development Programme group (UNDP) has found outstanding service from many of its offshore suppliers. A Technical Specialist at the UNDP’s Learning Resources commented that their partners in Asia will “bend over backwards” to get things done and have managed to turn around requests in a day that would have taken other firms a week to complete.
Many of the large offshore companies maintain U.S. offices to provide better service and support to clients at a local level. This convenience helps facilitate communications and enables quick face-to-face meetings. An “onshore” project model (described in the Making it Work section) can also be used effectively to improve communications and the level of service.
Vendor review process
After narrowing down your vendor list to a few candidates, conduct a formal vendor review, including all key stakeholders in your organization. It is best to meet with vendors in person, either at your office or theirs. Some training executives stress the importance of visiting the partner at their overseas headquarters or where the work will be performed. Many times, the final decision of whether to work with someone comes down to “likeability”—do you trust and want to work with these people? The best way to assess this is to meet them in person and look at first-hand how they do business.
One company we interviewed conducts an extensive vendor review process annually to select its offshore partners. This process could be used as a model for other companies. Here is how it works.
At the end of the vendor review process, you may decide select one vendor (“sole source”) or multiple vendors. Investing in multiple partnerships is advantageous when the workload is too much for one vendor or when vendors have different strengths or core competencies. One company we interviewed works with three vendors, one in India, one in Canada and the third in the U.S. The company likes to get fresh perspectives and finds a higher degree of creativity in its course development by working with multiple partners.
These are the advantages of selecting multiple vendors. But be wary of trying to maintain too many relationships simultaneously. The economies of scale and time needed to transfer knowledge can be maximized with one, or at most a few, partnerships.
Signing the contract
As with any business relationship, contractual details must be carefully crafted to protect the interests of both client and supplier. Here are some considerations when drafting the vendor contract:
Clearly define metrics for success and failure for both the company and offshore vendor. Establish checkpoints throughout the project, and define escalation processes if the project goes off track.
Develop a performance-based incentive structure, including metrics for acceptability. Incentives may be based on the project schedule, with penalties if the project falls behind due to vendor errors, or quality metrics. Alternatively, a bonus structure may be put in place for early delivery or exceptional quality.
If possible, establish fixed pricing by the project or course hour (for the finished course), rather than pricing by the hour. This will help you to better predict costs.
Address intellectual property and privacy issues. These are not uniformly understood and adhered to around the world, and should be clearly spelled out and understood.
For the worst case scenario, define exit clauses that address responsibility for documents, transfer of knowledge, and intellectual property rights.
The widespread use of the Internet and telephony technology makes it relatively easy to communicate across continents. These trends are helping more organizations to offshore business functions to improve their efficiency and focus. Outsourcing is nothing new for training organizations. Most training groups have been outsourcing content, delivery, and content development for years and, more recently, have moved toward outsourcing technology operations and support functions.
Managing an offshore project can prove to be tricky, however. Without discipline for managing these projects, a company can squander the costs it had hoped to gain.
For more advice on making the most of offshoring, read the full report "Offshoring E-Learning: What Works®" at www.bersin.com.
Published: November 2005