How to Embrace Globalization and Succeed in Business
The term "offshore outsourcing" should be retired from the business lexicon, according to the authors of a new book, "Offshore Nation".
Mar 16, 2006
"Offshore Nation" is a guide for business leaders interested in the how-to aspect of services globalization, and the authors bring impressive credentials to the discussion. Atul Vashistha is the CEO of neoIT, a management consulting firm that helps organizations develop and implement services globalization strategies. His brother and co-author, Avinash Vashistha, was a managing partner at neoIT (he recently left the company). The authors stick to what they know best by writing a strategy book as well as a best practices approach to global outsourcing. "Offshore Nation" offers a look at what services globalizationmeans for business enterprises, and the best ways a company can optimally leverage it as part of its overall corporate strategy.
"Services globalization is the next step in the evolution of global trade and capitalism," the authors assert. "It is progress. It is efficiency. It is the race for competitive advantage. It is not just offshore outsourcing but the wholesale elimination of borders as a means of restructuring the free flow of services."
In the past, cost savings -- derived primarily from wage rate arbitrage -- drove offshore outsourcing. But now that firms are looking for the next competitive edge, services globalization must offer more. "Globalization of services can drastically reduce the cost of business," write the Vashisthas, "and can be used as a weapon to gain a competitive posture for a foray into a new line of business, to improve customer service for an existing product line, and to streamline the supply chain in order to beat a rival out the door."
Successful globalizers "are sophisticated, smart, and cautious about filling in the blanks on what to offshore, where to offshore, and when to offshore. The real story is about how smart companies are choosing the right offshoring strategy, the right offshore process, the right country, the right firm for the job or the right ownership option, and the right governance structure."
Indeed, the most important lesson offered in "Offshore Nation" is: Be prepared. The Vashisthas concede that this may sound like the Boy Scout motto; in "Offshore Nation," it is services globalization cardinal rule number one. Preparedness in services globalization, the authors suggest, is achieved through knowledge, planning, sourcing/building and management.
The knowledge stage of a successful globalization initiative involves understanding the unique competitive advantages of each "offshore nation" as the first step in deciding where to optimally source. Factors that differentiate offshore locations include natural and geographic advantages, resources, education, niche strengths, language, culture, and technological skills and expertise.
The Vashisthas devote more than 30 pages to detailed examinations of the rankings of top offshore nations on each competitiveness factor. In the "Leaders" category, the authors list India, the Philippines, Russia, China, Canada, and Ireland. In the "Up and Comers" category, there are the Czech Republic, Poland, Hungary, Mexico, and Malaysia. The "Late Starters" category includes Vietnam, Singapore, Central America and the Caribbean, South America, Israel, and South Africa.
Where to offshore "depends not only on cost considerations but on a variety of other criteria as well, including risk profile, the types of projects your company wants to offshore, and the importance of certain skills [such as English-language proficiency], and cultural compatibility."
If offshoring was ever a simple decision to move IT services to India and business processes to the Philippines, services globalization is now a much more complex decision. Factors to understand include the organization's risk tolerance, its core competencies, corporate culture, and long-term strategy as well as the competitive advantages of different sourcing destinations.
Understanding the risks involved in a services globalization initiative is a key part of the knowledge stage of the initiative, suggest the authors. "The solution lies in being able to visualize the process in its entirety, identify potential minefields, and take preventative measures," they write.
The Vashisthas do not recommend that a company attempt to manage the risk mitigation stage of the globalization initiative on its own. "Qualified third-party advisors are in the best position to help mitigate these risks, because in many instances they have onshore experiences in the countries of interest and an understanding of the specific nuances associated with them."
The planning stage of the globalization initiative is equally important. While the authors acknowledge that diligent planning can be a time- and energy-intensive effort, they emphasize its importance. "Putting these types of plans in place will initially take more time, resources, and commitment," the Vashisthas write. "However, the benefits can mean the difference between a substandard sourcing engagement full of hidden downstream costs and an engagement that leverages best practices and delivers maximum value for your business."
Diligent planning, they suggest, is as much about knowing the client organization as it is about knowing the supplier organizations: "At times, although the enterprise itself may be ready for services globalization, the processes or services that it plans to offshore are not ready. Perhaps they are not mature enough to withstand the rigors -- either because those services do not have enough of a foundational base within the client company or because the offshore market for those services is not mature."
The process of assessing an organization's services globalization readiness, they say, will reveal the real opportunity for services globalization and will provide the foundation for further analysis and execution of the globalization strategy.
But it is the management stage of the globalization initiative, the authors suggest, that is the most often overlooked. "Most offshore programs fail not because the engagement was improperly sourced or planned but because it was improperly managed."
The authors list dedication to transition execution, continuous monitoring of metrics, scope, and issues, maintaining a local program office, and knowledge of offshore outsourcing best practices as the keys to successful program management. Further, they advise, "Don't assume the supplier is an expert on transition management. For offshoring, because the market is relatively immature, every engagement must be considered uncharted territory."
It is clear throughout the book that the Vashisthas find a volatility-driven, innovative business environment to be very exciting. Whether other business leaders agree -- and whether other businesses can profit in such an environment -- is in part dependent on their ability to leverage services globalization to their advantage. "Offshore Nation" will show them how.
The book at Amazon.com.
The full value of services globalization
The authors prefer the term "services globalization" because businesses no longer simply ship processes offshore to reap the benefits of wage differentials. Instead, they advocate a more holistic approach, considering a variety of benefits that global sourcing offshore may offer -- including quality enhancement, risk mitigation and new opportunities for growth. And they're looking beyond India to consider a variety of sourcing locations to find those that best match their goals."Services globalization is the next step in the evolution of global trade and capitalism," the authors assert. "It is progress. It is efficiency. It is the race for competitive advantage. It is not just offshore outsourcing but the wholesale elimination of borders as a means of restructuring the free flow of services."
In the past, cost savings -- derived primarily from wage rate arbitrage -- drove offshore outsourcing. But now that firms are looking for the next competitive edge, services globalization must offer more. "Globalization of services can drastically reduce the cost of business," write the Vashisthas, "and can be used as a weapon to gain a competitive posture for a foray into a new line of business, to improve customer service for an existing product line, and to streamline the supply chain in order to beat a rival out the door."
Being prepared
While the authors unflinchingly advocate that organizations adopt services globalization strategies ("If your 5-year or even 1-year business plan doesn't include globalization of services, throw it out and rewrite it or you'll be written off"), they caution that a successful globalization strategy requires diligent planning, knowledge, and a dose of caution.Successful globalizers "are sophisticated, smart, and cautious about filling in the blanks on what to offshore, where to offshore, and when to offshore. The real story is about how smart companies are choosing the right offshoring strategy, the right offshore process, the right country, the right firm for the job or the right ownership option, and the right governance structure."
Indeed, the most important lesson offered in "Offshore Nation" is: Be prepared. The Vashisthas concede that this may sound like the Boy Scout motto; in "Offshore Nation," it is services globalization cardinal rule number one. Preparedness in services globalization, the authors suggest, is achieved through knowledge, planning, sourcing/building and management.
The knowledge stage of a successful globalization initiative involves understanding the unique competitive advantages of each "offshore nation" as the first step in deciding where to optimally source. Factors that differentiate offshore locations include natural and geographic advantages, resources, education, niche strengths, language, culture, and technological skills and expertise.
The Vashisthas devote more than 30 pages to detailed examinations of the rankings of top offshore nations on each competitiveness factor. In the "Leaders" category, the authors list India, the Philippines, Russia, China, Canada, and Ireland. In the "Up and Comers" category, there are the Czech Republic, Poland, Hungary, Mexico, and Malaysia. The "Late Starters" category includes Vietnam, Singapore, Central America and the Caribbean, South America, Israel, and South Africa.
Where to offshore "depends not only on cost considerations but on a variety of other criteria as well, including risk profile, the types of projects your company wants to offshore, and the importance of certain skills [such as English-language proficiency], and cultural compatibility."
If offshoring was ever a simple decision to move IT services to India and business processes to the Philippines, services globalization is now a much more complex decision. Factors to understand include the organization's risk tolerance, its core competencies, corporate culture, and long-term strategy as well as the competitive advantages of different sourcing destinations.
Understanding the risks involved in a services globalization initiative is a key part of the knowledge stage of the initiative, suggest the authors. "The solution lies in being able to visualize the process in its entirety, identify potential minefields, and take preventative measures," they write.
The Vashisthas do not recommend that a company attempt to manage the risk mitigation stage of the globalization initiative on its own. "Qualified third-party advisors are in the best position to help mitigate these risks, because in many instances they have onshore experiences in the countries of interest and an understanding of the specific nuances associated with them."
The planning stage of the globalization initiative is equally important. While the authors acknowledge that diligent planning can be a time- and energy-intensive effort, they emphasize its importance. "Putting these types of plans in place will initially take more time, resources, and commitment," the Vashisthas write. "However, the benefits can mean the difference between a substandard sourcing engagement full of hidden downstream costs and an engagement that leverages best practices and delivers maximum value for your business."
Diligent planning, they suggest, is as much about knowing the client organization as it is about knowing the supplier organizations: "At times, although the enterprise itself may be ready for services globalization, the processes or services that it plans to offshore are not ready. Perhaps they are not mature enough to withstand the rigors -- either because those services do not have enough of a foundational base within the client company or because the offshore market for those services is not mature."
The process of assessing an organization's services globalization readiness, they say, will reveal the real opportunity for services globalization and will provide the foundation for further analysis and execution of the globalization strategy.
But it is the management stage of the globalization initiative, the authors suggest, that is the most often overlooked. "Most offshore programs fail not because the engagement was improperly sourced or planned but because it was improperly managed."
The authors list dedication to transition execution, continuous monitoring of metrics, scope, and issues, maintaining a local program office, and knowledge of offshore outsourcing best practices as the keys to successful program management. Further, they advise, "Don't assume the supplier is an expert on transition management. For offshoring, because the market is relatively immature, every engagement must be considered uncharted territory."
Flexibility is key
Overall, "Offshore Nation" is about finding ways to be more flexible: "Definition is meaningless because innovation and a lack of definition are the only way to avoid obsolescence and stay competitive. Stability is impossible because volatility is everywhere and will continue for the foreseeable future. And following any blueprint for the future is a recipe for disaster because the future has never been so uncertain and so exciting."It is clear throughout the book that the Vashisthas find a volatility-driven, innovative business environment to be very exciting. Whether other business leaders agree -- and whether other businesses can profit in such an environment -- is in part dependent on their ability to leverage services globalization to their advantage. "Offshore Nation" will show them how.
The book at Amazon.com.