Doing Offshore RightDoing Offshore Right

That's what Joe Drouin, CIO at automotive-parts maker TRW Inc., did when the company began outsourcing IT work offshore three years ago. He reduced staff through attrition and never had to fire anyone. Still, he says he wishes he'd planned at least one very detailed meeting with staffers explaining the company's IT-services strategy and exactly how offshore workers fit into that equation, which would have quelled the rampant rumors about job losses. "If I could wind back the clock and do it all over again, I would have done a better job of communicating," Drouin says.

When building-materials company Clopay Corp. began outsourcing several years ago, CIO Jim Honerkamp held numerous brown-bag lunches where staffers were invited to voice their opinions. But Honerkamp was careful to keep those discussions focused on business realities. "I explained what we needed to do to go forward," he says. "We had to do more with less, and there was no way to meet that challenge with keeping everything in-house."

Offshore outsourcing is often painted as disregarding internal IT talent. In fact, managers in many ways need to do a better job of making sure they have the right in-house talent in place to make decisions. Drouin says he makes it clear to staffers that they are the owners of IT projects, and overseas contractors are there to provide help when needed. "We haven't let TRW people go so that we could build up our IT resources in India," he says. "Everything we've done up until now has been supplemental. From an internal TRW point of view, that's a very important message."

But when it comes to offshore outsourcing and staffing decisions, there's more at stake than morale. Companies need to consider what formula works best for them. GM's approach is heavily weighted toward internal staff doing project management and contractors doing application development.

That's not a formula that appealed to Ravi Ramakrishnan, VP of applications at ocean-carrier APL Ltd. APL's application-development department created what Ramakrishnan calls "shadow organizations," meaning its three-layered staff of developers, senior developers, and managers is mirrored in India, where it retains a contract staff through IT services firm Infosys. Because of the time difference, staffers at the Oakland, Calif., office can hand off work at the end of their days to colleagues just arriving at work in India. It's a very different approach than GM's, which calls for a small project-management team internally and a big development team overseas. "That model requires IT organizations to have a fair degree of maturity," he says, such as well-defined development processes. "Frankly, I don't believe we're in that state, and I don't think a lot of U.S. companies are in that state."

Ramakrishnan says the shadow-organization structure provides a broader career-development path for staff workers and can also create opportunities for contract workers, who may be tempted to bolt for something better if they're stuck with the grungiest of coding jobs. But APL cut about 10% of its internal application-development staff with its new staffing structure, and that hurt morale. Still, things would have been worse with poor communication, Ramakrishnan says. "We did direct face-to-face communications, rather than E-mail broadcasts," he says. "We answered questions that came up to the best of our knowledge."

After the emotions and global politics are stripped away, offshore outsourcing looks just like any other business-technology strategy in that the success depends on good execution. But it turns out, part of that execution means spending a lot of time addressing those emotions.