Synopsis
The paper serves as a guideline for IT managers planning to move development offshore. The issues discussed are from an outsourcer’s perspective. The focus is more on time and money (T&M) engagements as compared to fixed price (FP), because in FP there is little control of the outsourcer. The points discussed are based on the author’s experience in the investment banking (IB) or capital markets IT industry but should be applicable to other verticals. The paper isn’t about the merits of offshore outsourcing.
The various sections in the paper are IB IT industry traits, FP and T&M engagement definitions, typical notions on offshoring, issues observed in offshoring and suggested remedies, traditional vendor management department activities, recommended approaches to offshore-onsite team structuring, offshore-onsite project execution and reducing vendor dependency tips.

There are some traits of the IB IT sector which has made outsourced offshoring more challenging than others like supply-chain, retail and insurance. They are:
- Cost isn’t a very big factor in IT projects
- The business is very dynamic and requirements are never really frozen
- Technical challenges are demanding
- The organizations are less structured in their functioning
- Information/documentation is typically not easily available or shared

Offshore outsourcing engagements can be categorized into 2 types:
1. Fixed Price (FP) - There can be strategic and maintenance fixed price initiatives. In strategic a deliverable is agreed upfront for a set of requirements. The cost and time-frame is also agreed within certain constraints or assumptions. In maintenance a certain SLA (service level agreement) is decided upfront for a certain period of time.
2. Time & Money (T &M) - The delivery or project ownership stays with the outsourcer. Outsourced consultants provide services for a particular time period (6 months, year, etc) at a pre-decided rate. The rate can be an hourly/daily/monthly rate.

The paper will not go into elaborate details on how to decide between FP and T&M. Nevertheless it’s worth noting the typical reasons IT managers prefer T&M engagements. They are:
• Requirements are rarely well-defined or static
• Penalties for imprecise early planning or changes in requirements or changes in design
• Finding and qualifying vendors may take so much time that some of the benefits are lost
• Follow-on work in the project may be impossible or expensive or difficult to manage
• Delays and problems may be hard to detect in advance

Choosing between FP and T&M are based on needs and both cases are suitable for different situations. Most discussion points mentioned in the paper are more pertinent to T&M type engagements.

Offshoring

Outsourcing has probably always been the simple part, people have been doing it for years and the organizational systems are designed for it. But when it comes to offshoring there is reluctance in managers to do it. Some of the common fears or questions which managers have in offshoring their work are:

1. How do I manage team members so far away? Managers still feel it would be an overhead to plan and track work being done by team members far away.
2. My requirements keep changing so how do I delegate work? In the IB industry in many key areas the requirements are always in a flux and the time to market is very less. This does pose a challenge in segregating large and independent chunks of work.
3. Am I getting real benefits by offshoring? Managers assume that the only benefits are in cost savings. Having just cost as a reason is not good enough for moving offshore.
4. The IT system is proprietary to the organization. Isn't there a risk in exposing intellectual property (IP) offshore? There is a still a fear that by offshoring there is a good chance of compromising on IP and

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