HowdoyouchooseanoffshoreoutsourcingsupplierinIndia? Howdoyoudecidewhichofthesefourapproaches,orcombinationofapproaches,willbestalignwithyourbusinessstrategy?

Itdependsonthecontext.Thecompaniesthatcreatedcaptivecentersweredoingitbecausetheywantedtosellairplanesinthatcountry,orproductstotheChinesemarket,ortheyweregoingtocommittoalargevolumeofwork.Mostcompanies,ifyou'rejustlookingforcostsavings,startoffwiththefee-for-servicemodel,becausethat'stheleastamountofcommitment.Butthere'salotoffluidity.Forexample,oneofthefinancialservicesfirmsinourstudy,withafee-for-servicemodel,engagedoneofthelargeIndiansuppliers.Afterfiveyearstheysaid,"Wehavesomuchworkhere;whyarewegivingthissupplierthismargin?"They'recreatingtheirowncaptivecenternow.We'vealsoseenacompanythathadacaptivecenterandthensoldit.

Soitseemsthatmostcompanieswillstartwithfee-for-service,andthenafterwardbeginthinkingaboutothermodelsthattheymightwanttomoveto.Atwhatpointshouldyouthinkabouttheotheroptions?

IwishIcouldtellyouthatthepeoplewetalktohavethisgreatmastervision,butalotofitisjustdippingtheirtoesinthewaterandmorestrategicthingscameup.Weliketothinkthatallofthiswassoplanned,butusuallysomeopportunityarisesandtheyseetheopportunity.

Whatshouldyoubethinkingaboutstrategicallywhenyoudecidewheretogo?

EverybodyassumesthatchiefinformationofficersaregoingtopickuponeoftheGartnerorIDCreportsandlookatthecountrycomparisons.Butmostofthecustomerswetalkedtowenttoadestinationwheretheyhadexistingmanufacturingcapabilities.Becausetheyhadalaunchpad,theydidnotpicktheirdestinationsbasedonlookingatITcriteriabut,instead,wheretheyalreadywereglobally,andwheretheywantedtogoglobally.TheywanttocolocatetheirITwiththat.That'sgreat,becausetheycansendthepeoplewhoarealreadylivingtheretodothings.Theycanvisitsuppliers,andhavethesupplierscomeontheirpremises.It'sgreattoalreadyhavethevisasandeverybodyestablishedonyourlaunchingpad.

BesidesIndia,whatothercountriesdoyoubelieveU.S.CIOswillbeturningto?

IthinkthePhilippinesaregoingtobeoneofthenextbiglocations,becausetheyhave300,000ITprofessionals.Iwouldn'tdiscountCentralandSouthAmericatoprovideSpanish-speakingcallcentersandotherkindsofbusinessprocesses,sincegovernmentsinthatpartoftheworldaretryingtostimulatehigher-valuework.IthinkourmaininterestinChinaisthatwewanttosellproductsthere.We'vegotahugelanguagebarrierthere,asfarasIT,butinotherbusinessprocessesIseemuchmoreactivityinChina.

CanacompanythatwantstogetgoingonstrategicIToffshoringdiveintothiswholehog,ordotheyneedtorampupslowly?

Ibelievethateverycompanyhastogothroughtheirownlearningcurve.Theyhavetodeveloptheirownexperiencetodoit.Now,theycouldgoupthatlearningcurvequicklybylookingatbestpracticesandwhatotherpeoplehavealreadylearned,butessentiallythey'regoingtohavetolearnhowtodoitthemselves.

Doyouseeanychangeinhowexecutivesthinkaboutoffshoreoutsourcingastheylearnmoreaboutit?

Iseesomanyparallelsbetweenthedevelopmentoftheoffshoreoutsourcingmarkettodayandthedomesticoutsourcingmarket15yearsago.Ireallybelievethattenyearsfromnowthisisgoingtobeasmuchofanonissueasdomesticoutsourcing.Weliveinaglobaleconomy,andwe'regoingtosourceITandotherbusinessprocessesglobally.Thisisnotgoingtobefront-pagenewsanymore.

Basically,ifyou'relookingatIndia,you'reeithertalkingaboutaTier1supplier-thecompaniesyou'veprobablyheardof,suchasInfosysorTata-orsmaller,lesser-knownTier2suppliers.Eachhastheirstrengthsandweaknesses.[OxfordUniversityProfessor]DavidFeeny,[UniversityofWarwickProfessor]LeslieWillcocksandIjustdevelopedsomethingcalledthe"SupplierCapabilityModel."Themodelgivescustomersawaytoassesswhatthesuppliersareabletodeliverintermsoftheircapabilities.That'sverydifferentthanlookingatsupplierresources.Customerslookatthesuppliers'facilities,andattheiremployees'resumes,andtheythinkthat'sgoingtotranslatetodeliveringwhattheywant.Ourmodelsays:Don'tlookatthesuppliers'resources;lookattheircapabilitytodeploythoseresourcesforthecustomer'sbenefit.

Whatwouldbeexamplesofsuchcapabilities?

Agoodexampleisbehavior-managementcapability.Behaviormanagementhastodowithhowasupplierretains,motivatesandrewardsemployees.Soinsteadoflookingatresumes,you'relookingattheculturethatthesupplierhasbeenabletocreatetomotivate,retainandrewardtheirinternalemployees.Tier2supplierstypicallyhavehadamuchstrongerbehavior-managementcapabilitythanTier1suppliers.

Whataretheydoingdifferently?

Becausetheyaresmallercompanies,theirchiefexecutiveofficerknowsalltheemployeespersonally;theyknowtheirownpersonalstrengthsandweaknesses,theircommitmenttothatcompany.Theysocializetogether.Theemployeesreceivealotofpersonalrecognition,whichisveryimportantinIndianculture.However,theyareweakonotherthings.

Suchas?

Sourcingcapability,theabilitytogloballyaccessandmobilizeresources,includingpeoplewithscarceskills,onbehalfofaclient.AndthelargeTier1suppliershavebroadertechnologyskills.

Dr.MaryC.Lacity:ABriefReadingList