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What exactly does Offshore outsourcing mean?

It's pretty simple . . . Offshore outsourcing means sending your process to someone located overseas (on another shore). Your process could be something like data-entry, software development, or setting up a call center. Whatever that process may be . . . sending it overseas is considered offshore outsourcing.

The definition of offshore outsourcing may be simple . . . but doing it right is not as easy. Before sending any business process offshore there is a process you will need to follow to ensure it is implemented successfully.

Offshore Outsourcing -- Process

A company should take extreme caution when outsourcing any of their business process overseas . . . whether it's a core or non-core process doesn't make a difference. Either way, it will have a positive or negative impact on your business operations.

Most companies outsource to cut costs. Also, these companies feel the overseas team has the expertise they are looking for . . . and can do the job better than they can. Here are some tips to make sure you're following a thorough process before sending your process offshore:

Offshore Outsourcing -- Know Thyself

Before you send any process overseas make sure you know exactly why you are doing so. If it's a non-core process, something repetitive, you are probably looking to focus your time and resources on core functions to grow and make more profit. You should be able to forecast how much time you will be able to save and how much more revenue you can generate over the course of the next quarter.

If it's a core business process . . . you should know that the offshore team has the expertise that you don't have. Or, they can do the job better offshore versus onshore. It would be wise to ask for a test run to see what they can do before you sign any sort of agreement or start handing over your actual processes.

If you have already worked with the team and know what they can do . . . then focus on why you think it will be beneficial to outsource this particular process. It should be imminently clear that the team overseas can just do the job better . . . don't think about the cost-savings alone at this point.

Offshore Outsourcing -- Request for Quotes

This is when you [the client] send out a request for pricing that includes details of your requirements. The clearer you are about what you want, what you need, and your budget requirements . . . .the smoother the process will be. You will get good feedback from reputable offshore outsourcing providers and create a healthy environment for competition among various vendors.

This is the time to examine each bidder very closely. By receiving their response to your RFQ you will be able to see how well they can communicate and comprehend your process.

Are they asking the same questions over and over again? Do they tell you they can do whatever you say without any need for clarification or questions of their own? Are they clear about their own process? Can you understand how they operate? This is the time to scrutinize every detail about the offshore team.

Finalizing the contract:

Make sure both parties are clear on every aspect of the contract. It would be wise for a lawyer to draft the agreement. There should be open communication between you and your offshore team during the contract negotiating process. Any questions should be settled before anything is on the official agreement. Open communication is the key to a well drafted contracted.

Measuring Success:

The objectives and goals should be clearly defined within the contract. Otherwise, you or your outsourcing partner will not know if they are meeting expectations. This will also help fine tune the process and realize the ultimate benefits of sending your process offshore. If the task is repetitive in nature . . . it should be somewhat simple to measure . . . i.e. number of loan documents processed, number of trouble tickets closed, number of customer complaints reconciled, etc.

Offshore Outsourcing - Legal Roadblocks:

If the company you're dealing with is based solely overseas . . . there are some legal factors you should take into account. Due to the fact that two entities are doing business together and located on different parts of the globe it makes for a heterogeneous legal environment. In other words, your laws are different than their laws and vice versa. Due to this fact it is good to find an offshoring partner that also has locations within the US.

This will come in handy if there is any type of dispute settlement involved. If there happens to be any dispute among you and your offshore team . . . it will be hard to fight the case without going overseas and handling it within their court system.

We all hope it never comes to that . . . but this is business and things can happen. Also, it's hard to tell which country's laws should apply to settle a dispute. Unfortunately, there is no standard approach to the legalities of grievance procedures when doing business globally.

It would be wise to state these procedures within the contract. This would be cited as the who, what, and where to settle any disputes between you and your offshore partner. There are international dispute settlement groups situated in London, Brussels and Geneva so this may be one route you can take to set up a standard approach to settling any grievances.

Another aspect to look into is any local laws and taxation issues that either party may have to adhere to. These types of things should be written in the contract.

Following these types of procedures doesn't guarantee that your offshore outsourcing will be a success however; it does ensure you are covering all your bases before getting into any type of agreement with an offshore team. There should always be some sort protocol to follow in business . . . doing anything haphazardly or without proper planning will almost always lead to disaster.

This wasn't meant to scare you from sending your process offshore . . . rather, this information is here to make sure you gain all the positive benefits through offshore outsourcing and are successful in implementing such a process.