Innovation in Offshore Relationships

The other day I ran into a very interesting McKinsey article. It describes how successful innovators are

The other day I ran into a very interesting McKinsey article. It describes how successful innovators are shaping the offshore industry. I found the article very clear and right on the mark. It is titled “How innovators are changing IT offshoring”, available from the McKinsey Quarterly. If you have access to it, I’d recommend you read it.

Basically, the authors argue that to achieve long term productivity in an offshore relationship, clients and vendors should engage through a “managed service” model instead of the more traditional “staff augmentation” model. The “managed service” model implies that more leeway is granted to the vendor, so as to allow the offshore company to staff and manage the team more freely. The client does not micromanage what’s happening in the offshore location. In turn, more responsibility for the delivery of concrete services is demanded from the vendor, as well as deeper functional knowledge and alignment with high level business metrics of the client. This model requires trust. Trust is hard to come by these days, but it’s very powerful when appropriately leveraged in an offshore relationship.

Most interesting is one of the metrics brought to the table as an indicator of successful relationships: people retention.

At Hexacta we have always believed that keeping a motivated team is crucial to achieving high productivity and to retain valuable resources. Key for keeping motivation high is setting up the right team structure in the offshore location. Offshore teams should be structured with different seniority levels, and should have a strong local management. Having different seniority levels in the team allows for the most complex tasks to be tackled by the most experienced developers while the easier and repetitive tasks are tackled by the more junior team members. This provides room for people to grow, to coach and to be coached, thus rising motivation. Team member rotation is also necessary. When appropriately planned, functional knowledge is not lost, it is refreshing for the team and ends up generating a much higher retention level.

It is nice to hear that what we’ve advocated for many years is now recognized as a best practice. It’s also nice to be called an “innovator” after so many years of thinking the same way!

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