Outsourcing in India is one of the most popular management decisions today. Although it is generally supported by the cost reduction factor, this is just one of the reasons companies outsource to India. Many parties who outsource are unaware that Indian companies do not simply offer cost effective solutions, but also provide value addition by improving productivity and quality. Already many companies are outsourcing with quality rather than cost in mind. Several companies are motivated by the vast talent pool in India and not necessarily the cost cutting aspect.

In today's world a company must outsource to stay competitive. Leading companies worldwide acknowledge that to stay ahead, they need to reduce costs, provide the best quality, use the latest high-tech skills, as well as be reliable and creative. There are several simple reasons why to outsource in India. India is a talent-rich country that exports software to some 95 countries around the world. India has a mature industry with world-class systems and quality. Not only does India offer technological agility, flexibility, time-to-market and a competitive advantage, it also offers world-class infrastructure and numerous incentives for foreign investments.

India is emerging as a global brand when it comes to superior quality which is not only seen in BPO but also in manufacturing which has so far been considered China's strong-point. India stands out as a leading market for call center and IT outsourcing. India has high tech facilities and the good infrastructure that is required for setting up e.g. call centers. Also the endless pool of English speaking workforce that provides good quality voice based services for extremely low costs results in huge savings for companies. This is the reason why most fortune 500 companies outsource to India.

The majority of outsourcing contracts are moving to India, even though countries like China or Russia are offering better rates in some of the services. The dollar buys a lot in India and companies in the USA are saving billions of dollars by outsourcing their non-core operations.

Why India as the outsourcing destination?
When selecting India as a destination for outsourcing, most companies see two major areas of benefit over other destinations: first, the local people; and second, the country itself.

India has a stable democracy, as demonstrated to the world by the 2004 general election where the incumbent BJP party was ousted to the surprise of most commentators. Telecom and power availability is very good, and India leads the world in the use of technology standards, such as the Capability Maturity Model devised at Carnegie Mellon University.

English is used in India as the language of business and academia because it provides a common standard in a country with dozens of regional languages and thousands of sub-dialects. India has more than 250 universities and 900 colleges creating almost 2.5 million English-speaking graduates and postgraduates each year. It is obvious why India has attracted attention with a talented resource pool growing at this rate.

What can be outsourced?
There is no simple way of describing the right blend of project size, offshore country, complexity of operations, outsource or captive-the answer is a function of the inputs from each company and depends on its particular appetite for risk and potential savings. This analysis is the hidden cost of outsourcing because its cost is often missing from the business plan.

These are the strategic issues that should be debated before the project begins. Having a good understanding of this process and the reasons why India is chosen so often for offshoring will help you to deliver the project once the transition commences.

Defining Service Level Agreements
There is a tendency to set up a bulletproof SLA where you nail the vendor to the floor with penalties for missed delivery. You need to be aware of some issues while deciding the Metrics and KPIs (key performance indicators) once a project moves offshore to India. When you are seated in Europe/ USA and the development work is taking place in India, creating some form of tracking structure on an IT project is essential. You can no longer walk down the hall to kick the tires and see how the team is doing.

Unfortunately, many service providers do not help you a great deal when planning which KPIs to use. This can lead to one of two problems: either the KPIs are the wrong indicators of good performance, so they are of no genuine use in monitoring the relationship, or there is a KPI overload as you attempt to monitor too much.

In some outsourcing contracts, the SLA is viewed as a tool for defining the level at which penalties apply-and not much more. Clients trawl through the small print of the SLA at review meetings to see how many penalties could be enforced. This is hardly a good use of time and does not reflect the spirit of partnership in which you should be trying to manage the project.

The best way to consider the SLA is as a car dashboard (this metaphor was coined by Rob Aalders, author of the excellent and very practical book, The IT Outsourcing Guide, Wiley, 2001). Use just a select few key indicators-that's what the acronym stands for, after all. When you drive your SUV to your kid's soccer game, you don't monitor the performance of individual spark plugs and the fuel/air mixture; you just look at basic key indicators such as engine temperature and the amount of gas left in the tank. If you have complex metrics that require constant monitoring, then it will require a full-time team to watch over the relationship, and even then they may not be able to detect certain problems until disaster strikes.

The goal of a penalty scheme should never be to obtain the penalties, but rather to ensure that minimum expectations are met. In this spirit, some organizations elect to allow the supplier to "clrawback" penalties if subsequent performance is better than expected.

Accepting a service credit is the action of penalizing the vendor, so it will provide additional service at no charge. Service debits are effectively a bonus for the supplier, whether by allowing it to clawback credits or by paying an additional cash bonus over and above the normal fees. Service levels are based upon the business requirement-the call center must answer the telephone within three rings, the PC must be fixed in four hours, the number of checks processed must be more than 10,000 per hour. Over-performance has no business benefit for the client. Otherwise, it would have set the threshold higher in the first place.

Be sure the penalty clauses are specified. The SLA needs to define where the minimum required level of service is going to be and the consequences of failing to deliver, but try to think beyond penalties, fines, and overly complex metrics. Crafting the SLA and KPIs should be about thinking of what is going to be mutually beneficial as the relationship grows. Above all, it should be a working document.

DEALING WITH CHANGE
Change in the strategy of a company is really one of the hardest problems to deal with. It is not so much that you have decided to go to India, but the way you deliver IT services internally has to change. At a practical level there are a number of issues to contend with:

The Indian team will be working in a very different time zone. India is Greenwich Mean Time + 5.5. If you start work at 9:00 a.m in Spain, then it will already Lunch time for your Indian team, thus making it difficult to schedule joint conference calls and meetings. Some teams, however, learn to exploit the time difference. Even where tasks are not shared, it can be an efficient use of time to stack up your requests for the Indian team and find them all completed by the next morning.

Transferring tasks and code from country to country means that you need to strictly define your source code or document control system. Using tools to check in and out the different versions of work in progress becomes more essential when the teams cannot physically see each other or view who is working on what.

Once you have decided to run with outsourcing, then everyone needs to run together, because many of your informal procedures will need to change. Managing a team locally and managing a shared team with onshore/offshore resources are two very different tasks.

This businesses need to adapt the management and working style to better suit an offshore project. Informal meetings called at the last minute were replaced by regular meetings with approved minutes. Follow-up actions for all parties were always agreed upon and documented, and every time project requirements are discussed, they have to be documented and approved.

There is a danger in removing all technical skills from the onshore location. Even though the new primary skill may be managing the supplier relationship, some technical knowledge must remain to guide the offshore resource in much the same way as a project manager with technical knowledge will lead a software development team. It is not enough to rely on the SLA alone.

When a team is offshore and you can rarely communicate directly, then everything has to be documented and agreed upon for it to work. CULTURAL DIFFERENCES
An appreciation of different cultural values is essential, because you want your offshore team to feel included in the service you are delivering; yet they may not respond to the same drivers as your Spanish team.

For the on-site team, some basic information and training on Indian culture and ideas about what to do and what not to do can be useful. An inexpensive training program for members of your Indian team could help to meet you halfway on cultural understanding. With the huge population and melting pot of religions, caste, and languages in India, it can often feel as if there is a festival of some sort every other day. All this new information on culture will be impossible to understand, but an attempt is worth the effort.

Most cultural training is related to communication and relationships. Because of the distance and cultural differences, you can never communicate too much when a part of your team is offshore. Differences in attitude or style can affect your project delivery. As far as is practical and affordable, you should encourage travel in both directions so both sides can interact. This can be managed by allowing a variety of developers to participate in project planning in Spain, rather than always using a single representative.

Ensuring that some members of your Indian project team spend time working in Spain will help you to sail through most of the cultural problems. It can also address some differences in technical styles. The Indian contingent may have a very different idea about coding style and revision tracking that is meaningless to the local team, so this is a specific area on which to focus time and effort.

Exposure to the culture of the other team in this way will encourage an improved working relationship. Efficiency often improves dramatically when you work with someone you have met in person, even if there is no specific reason to meet. Having a point-person charged with communication management in both the onshore and offshore locations can also help to reduce confusion. This is reinforced if the onshore team member is employed by the supplier and the position is rotated through the offshore team.