"We are company with over $500 million in revenue and plan on outsourcing some IT and R&D work to a very reputable Indian firm.  However, we have been reading some horror stories of outsourcing gone bad.  We are very impressed with the firm and have done all the research but do you have any other suggestions on how to get the most out of this partnership and how can we avoid any problems?

Congratulations on doing everything right so far.  Outsourcing, like any other business process, has its risk and you have to manage it as another risk.  What we have found is that when a firm recognizes that all business processes have associated risks, and then honestly identifies what those risks are, and manages them, they are less likely to be caught by surprise.  And in the business world, all the way from your top management to Wall Street, nobody likes surprises.

How to manage an outsourcing project to an Indian firm?

• While Indian firms can be technically very competent, they are still not very well-versed in the American business practices.  Some firms have employees who have worked in the US or other developed economies, most employees have never left the shores of India.  Thus, the methodologies and principles that we take for granted are new to many people who will work on your assignment.  Solution:  Take a look at the background of the team that will be working on your engagement.  If you see that some have never worked outside India, it makes sense to insist that the company staff the team with at least 20% of the team with people who have experience of working in the US.  You may also want to fly other members of the team for a couple of weeks to the US and let them get acquainted with your firm and business philosophy and processes.  An expense but will payoff in the end through better productivity, fewer communication problems, and better output.  (Related:  India hype)

• Have a very clearly defined set of goals to be accomplished, what the final output will look like, who will do what/when, etc. Due to differences in culture and poor communication, Indian firms are yet to fully appreciate the urgency that is the way of life in corporate America. 

• Do a thorough risk analysis and share it with your Indian partner.  Develop jointly a risk management framework.  Finally, implement a risk management program and assign roles and responsibilities.  (Related article:   Risk management)

• Provide incentives to your partner beyond just meeting the metrics presented during the sales pitch.  If you share your savings with your partner, you are likely to achieve higher savings.

• Make sure that there are metrics in place and they mean the same thing to you and to your partner.

• Develop a governance structure, particularly a communication program.  Outsourcing such critical processes as IT and R&D is not the same as outsourcing payroll.  You have to be actively engaged with the progress of the project.

• As part of your risk management framework, lay out steps to be taken when something goes wrong.  Make sure that the partner can take some of these steps without requiring approvals from multiple levels of bureaucracy in your office.  

• Finally, spell out what will lead to termination of the relationship and how it will be done.

Recommended articles:  Framework for outsourcing options     How to develop an India strategy?

Bringing economic prosperity to America     Global R&D for pharmaceutical sector

Incorporate your business in India  Innovative business models for India   Online chat support