Historically, the early adopters of off-shoring were the US and the UK-based corporations and their focus was on BPOs and KPOs where standardised processes and activities are off-shored either to a captive or to a third party. However, over the past several years various professional services and consulting organisations have built up their off-shoring delivery capabilities in a significant manner.
While the traditional model of BPOs and KPOs have proven largely successful, the ongoing challenge for professional services firms is how to go beyond the “cheaper-better-faster” framework of traditional off-shoring and use global delivery centres to transform the actual delivery of work to end clients. In other words, while off-shoring has largely delivered on its promise of reduced costs, greater efficiency, and even some intellectual property creation, it has not yet fully delivered, outside a few niche areas, in terms of having a transformational impact on the parent organisation, particularly around revenue generation and providing substantially different products and services to customers.
How does one define what a transformational impact really is? Some firms use metrics like number of patents filed by offshore resources, or the number of PhDs hired offshore. Questions such as the following can help understand a transformational impact:
# Does the offshoring centre generate incremental new revenues from clients?
# Does it fundamentally change the way work is delivered to clients?
# Does the centre allow the firm to get into areas that it just could not have without having such a capability in place?
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So, how can a company that has already committed to off-shoring, actually use this commitment to generate such an impact? Based on three years of being in the trenches and various trials and errors, here are seven key lessons learned and specific actions to achieve this objective for professional services firms.
* Focus on capabilities, not structure: Disregard the existing organisational structure of the parent. While convenient and easily understood, it will only serve to reinforce existing silos and turf battles. Instead focus on what capabilities are needed, what skills are required to create such capabilities, and then create scale in those. For example, a benchmarking database can generate valuable insights but only if it has sufficient data.
Having many similar databases in various business units (BU) leads to a sub-par situation — it is far more effective to build benchmarking as a centralised hub that various BUs can contribute into and access. Similarly, reinforcing an organisational structure at the offshore center can result in overlapping skills, internally competing for the same talent pool in the market, and infighting over who is best equipped to deliver work. Such distractions adversely impact the ability to deliver truly outstanding work.
* You can build it but that does not mean they will come: A grandiose plan of building a large centre of excellence, while laudable, will likely be a failure. A much more sensible approach is a brick-by-brick, multiple pilot approach. Test-test-test: test the capabilities and services with onshore stakeholders, test the impact with customers, get feedback and make adjustments. Win the skirmishes to prepare for the bigger battles. Several companies fall into the ‘Big Bang’ trap, when the reality is that a more deliberate approach will lead to superior results.
* Hiring and retaining pools of talent: Regardless of what structure is put in place, all impact will be nullified without clarity on the skill sets and the kinds of people to be recruited. All too often, an offshore center will place back office staff with customer facing staff. They will create a homogenized environment, a one-size approach that often backfires. For specialised, scarce, high talent resources, an environment commensurate with their expertise is required. This encompasses everything from physical facilities to perks to dress codes to expense policies. And it is important to think of such staff in ‘pools’, that is, not as one’s and two’s but as a core mass, that learns, grows and creates an internal eco-system amongst themselves.
* We are one team but not all are the same: Recognising that there are clear differences in an onshore and offshore model will enable the company to extract the most value. There are real differences in customer proximity, cultural nuances, language, time zones, communication skills, and career aspirations. Pretending we are equal in all respects will lead to disappointments and failed expectations.
Several questions need to be answered around team structure and organisation. For example, will customer relationships reside onshore or can some be moved offshore? How will work flow to the offshore center: directly from customers or vetted by onshore colleagues? What will the role of secondees be — managing the business or largely as trainers and relationship managers? What is the growth curve for the staff? All of this matters — it impacts recruiting, career pathing, future opportunities, and consequently the overall impact. The closer the off-shoring center can be to end customers, the greater the potential impact.
* Knowledge is power: The more knowledge that can be created offshore, the more impactful it will be. While this sounds obvious, it is often not viewed as a strategic goal. Knowledge can take several forms — insights into customer behavior, predictive risk models, research, new product features, sector based insights, etc. The key is to harness the off-shoring opportunity, to think through how data is captured, converted into knowledge and then disseminated, in order to generate real insights and actions that then lead to greater revenues. For example, investing in databases and repositories, in data hubs and other knowledge tools at the offshore location can help reap big dividends.
* Let freedom ring: Finally, the off-shoring centre must be given freedom — money, resources, time — to define their customer offerings. This is the market test — is the center able to deliver products and service that are valued in the market place? Will customers pay more, come back more often, can we expand into new areas? To achieve this, the team offshore must comprise of sufficient rain makers — senior people with direct customer service or product leadership experiences. Shackling the ability of the offshore centre to generate its distinctive value to customers, will never allow it to achieve the kind of impact that is truly transformational.
* What’s in the white space? Leaders must view the off-shoring capability differently. Not the usual approach of process efficiency, but as an opportunity to get new traction and into new areas. Such a mindset requires exposure to other successful models, a fresher way of thinking, and an openness to explore a range of possibilities. Senior leadership should be thinking strategically, and not just operationally, about off-shoring.
In summary, an offshore commitment can be transformed into top line impact, but it requires a radically different approach than traditional off-shoring models. There are already examples of companies achieving this, and the rewards are manifold and sustainable.
The author is partner, KPMG Global Services