When Knowledge Can Travel

In reality, there are, in fact, only certain types of situations where offshore outsourcing stands a chance of succeeding. That's because certain corporate cultures make it impossible to give up enough knowledge to offshore completely. "Some companies are just not up to doing outsourcing, forget offshore. They want to own everything," says neoIT's Vashistha, who points to examples such as traditional mutual insurance companies whose tolerance for risk is low and need for control is high.

It's also particularly tricky for young companies to transfer knowledge offshore. "In a start-up company there's the growth factor, and trying to figure out how to do things here and at the same time how to do things offshore would be too challenging," says Emmanuel Saint-Loubert, CIO of e-mail security at antispam software maker Tumbleweed Communications.

Other types of projects on the no-no list: anything that involves complicated processes or complex problem solving and decision-making, rapid development projects, systems that may be retired without a clear sunsetting plan, high-risk projects (for example, those with major revenue impact or sensitive data), legacy systems in older programming languages (offshore workers rarely have this training), works in progress, applications requiring specialized technical or business knowledge, and systems subject to regulations compliance.

In effect, the most likely candidates for knowledge transfer include the support of mature systems (if they are well understood and documented by the client) and the development of new, non-core systems - such as timekeeping systems or inventory control - that are a manageable size and can be easily separated from the company (and reintegrated).

Smart CIOs will take the transition slow, and approach the transfer of knowledge - technical, domain, cultural and personal - to offshore workers no differently than they would manage the training of a new employee fresh out of school (which makes sense). "If you bought PeopleSoft and spent two and half years training your own people on it," DeLaCastro says, "why would you expect someone offshore to get it in any less time?"

Among the requirements for successful offshore knowledge transfer:

Pilots. Would you start a green in-house programmer on your biggest system? "A lot of CIOs suddenly open the floodgate on the dam, and they're surprised when the whole city goes under," says DeLaCastro. Conducting an offshore pilot project helps CIOs and their staffs identify the bottlenecks in the knowledge-transfer process and work on them in advance of sending more critical systems offshore.

Structure. Before the arrival of offshore workers for training onsite, neoIT's Vashistha advises creating a transition road map that outlines all the processes involved in knowledge transfer - including identifying who the in-house subject matter experts are and the processes or systems they support, the knowledge they must transfer and to whom, a schedule of job shadowing, a plan for a transition readiness test and a schedule for ultimate transition offshore. "During the knowledge transfer, it's literally like being on the receiving end of a fire hose a lot of the time, and [the offshore workers] can't absorb it all at once," Nigam says. "[A structure] mitigates the risk of losing the context of what was learned."

Retrenchments. As for dealing with the sensitive issue of displaced employees who harbour vast stores of knowledge, candour is the best policy. In addition, making an effort to help laid-off employees find new positions either within the company or outside of it enables a smoother transition.

"There's no topic that internally creates more fear and loathing than moving jobs offshore. You have to be sensitive and honest about it. You can't do it under cover of darkness," says Beyman. For the Lehman Brothers CIO, that meant standing up in front of the entire IT group in four locations (New York City; Jersey City, New Jersey; London; and Tokyo) and explaining the company's rationale for going offshore. Lehman Brothers gave the 100 employees affected - most of them programmers - a three-month working notice and the chance to find another job in-house, which 20 employees have done. The company offered a standard severance package along with a special transition payment to encourage people to stay through their notice period. More than 95 percent remained through the transition, but Beyman doesn't kid himself about the main reason why. "It was the peak of bad times," he says. Most couldn't find jobs elsewhere.

Job shadowing. The simplest way of accomplishing knowledge transfer is through job shadowing. Where most CIOs miss the boat is in recognizing that job shadowing should be a two-way street. Not only must on-site employees mentor the offshore workers and enable them to learn their roles in context, some local workers or managers must also travel offshore and shadow the vendor's employees there to observe how the work transfers from the client to the vendor, and smooth out those touch points.

Audits. As the knowledge transfer progresses, it's important to check against original goals and plans often. The checks and balances put in place (like a test on capabilities) are the key to preventing a premature sign-off to the offshore vendor. "With the pressure to meet deadlines, CIOs have to understand that getting the transition done well is more important than meeting a deadline," Vashistha says.

Ongoing Travel. At Cendura, Nigam keeps the two-way travel going long past the transition phase. Twice each quarter, either he or a software engineering vice president is in Hyderabad. In addition, he sends domain experts over regularly to train employees on new business processes or systems. "There's also a constant flow of people from India coming here," says Nigam, who rents out an apartment to house them. "We just had a dozen people over here, and the next batch will come in a month." They don't come over for specific development work but to get to know the way things work. "The cultural osmosis in both directions is very important," he says. Yes, it undercuts the cost savings of offshore outsourcing, but it's crucial.

"I think at least half of outsourcing initiatives are going to fail," Nigam adds flatly. "So many are going to fail, it's not even going to be funny, simply because [companies] skimp on ensuring that ongoing two-way traffic."