1. Government regulations – Foreign governments has their own rules for labor regulation, taxes and economic development. Failing to comply with these rules can result in stiff penalties and lengthy delays. Make sure your supplier understands the rules and will keep you in compliance, and make sure your service agreement spells out your suppliers responsibilities.
2. Time zone constraints – The time differences between locations in the U.S. and Europe, Africa and Asia can range from seven to 14 hours. Your offshore resources may be going home when your workday is starting. To avoid unnecessary delays, your service agreement must spell out times of availability, including contingencies for matters that require immediate attention.
3. Control – A perceived lack of control is the single largest detractor in outsourcing decisions. Outsourcing often leads to improved control and performance because you can clearly spell out your expectations in the service agreement and include penalties if they are not met. Much of the anxiety around control issues can be addressed with well-defined business metrics, periodic performance inspections, clear escalation processes and sound communication practices.
4. Political stability – Political instability is one of the biggest unknowns in dealing with offshore suppliers. Civil insurrection or war can shut down your offshore operation indefinitely. An effective way to mitigate this risk is to work with a U.S.-based company with access to offshore operations in several countries. In times of crisis, it can be the suppliers responsibility to minimize disruption by shifting the work to another location.
5. Industry knowledge – Offshore suppliers generally have good technical skills, but they often lack relevant business-related experience and may not understand the business practices of your specific region. Choose a supplier who can incorporate industry-specific business knowledge, effective business models and experience specific to the regions in which you operate.
6. Project management – When your company choose to partner directly with an offshore supplier, choose someone who has already learned the lessons of working with offshore resources and can assign certified project management professionals to work with your firm. Most of the project management problems occur in the early stages, but these problems can throw an entire project behind schedule.
7. Business continuity – Business continuity planning and disaster recovery planning are fundamental to the well-being of any organization. Make sure your offshore supplier has a disaster recovery plan that will support your minimum service levels. The best approach is to plan carefully and make sure you have strong infrastructure support that can easily redistribute workloads to alternative locations, minimizing the chance of an interruption to your business.
8. Infrastructure – Your relationship with your offshore supplier is only as good as the communication and network infrastructure that separates your two countries. Your suppliers local infrastructure may be too primitive or unreliable for you to count on 24×7 connectivity. Make sure to factor in the cost of setting up a separate infrastructure that meets your organizations needs, or at least make sure you build in redundancies to your network.
9. Cost savings – The primary reason for companies to outsource is their quest for lower cost. However, lower hourly labor rates do not necessarily translate into lower costs. Factors like suppliers transition processes, productivity rates, service delivery capabilities and quality commitment can impact the overall project cost and the value gained from the offshore engagement.
10. Publicity – Even if shifting work offshore makes good business sense, it can create public relations issues for your company. Your decision to outsource will be watched closely by the employees and the media. Negative publicity could alienate your customers. Choosing an outsourcing supplier with both on-shore and offshore operations can minimize the potential for negative press.
Source: Offshoring Times