Saturday, March 04, 2006

Offshore Outsourcing Best Practices Increase Your Profit Margin

When your software development company is forming long-term offshore outsourcing relationships with another company, the foundation of the success of this venture should be laid during the negotiation period itself. The centerpiece of this negotiation period is the Service Level Agreement.

The aim of outsourcing is to gain value for the host organization. There are several contrasting views however regarding how to maximize value and minimize risk by outsourcing. The following best practices can serve as a guide when structuring your SLA, and then implementing and maintaining a relationship with the chosen provider.

Five Golden Rules For Offshore Outsourcing :

1. Develop enduring relationships between key management personnel.

The usefulness of the relationship between the key management personnel of both teams depends on good understanding and strong working ties between them. Studies on outsourcing success stories have demonstrated that working chemistry in management and peer friendships among employees have proved to be important determinants in forming long-term relationships that yield real value.

2. Present a Quantifiable Objective.

A useful performance criterion includes quantifiable objectives and clarifies expectations of the quality of service. If you can get ahold of SLAs for comparable projects, they will serve as reasonable starting pointsóbut remember, these are negotiable. In any event, ensure that exact objectives and expectations are included in the SLA and are understood by both organizations prior to implementation.

3. Pre-determine the Incentives and Penalties Schemes.

The provider should be driven to meet the established customer expectations or even exceed it by adopting the performance based pricing criteria. If performance of the service provider exceeds expectations, then incentives should be given; conversely, appropriate penalties should be imposed if objectives are consistently missed.

4. Review Periodically to Maintain Successful Relationships.

Organize formal review meetings often. During the meetings, both sides can discuss the performance of both teams and determine the future objectives or goals of the company accordingly. They can also discuss product reviews and deliverables during these meetings. Keep in mind that performance objectives may need to be continually revised according to changing market conditions and the opportunity costs of both firms.

5. Communicate Well & Often to Bridge Cultural Differences.

The parties involved in an outsourcing relationship belong to distinct cultures, these differences have to be accepted and bridged. The cultural understanding between the two organizations can be enhanced by organizing social events, educating about company background, participating in each othersí quality programs, etc. Communication really is the key to a healthy relationship. It may be helpful to send a loyal employee to the BPO site for a few months to facilitate understanding in the implementation phase.

For details read here.

The article is sponsored by A-1 Technology Inc which is an established Software Development Company and is one of the best Software Development Companies in the era dealing in offshore outsourcing including services offshore website development and software development.