The pandemic of COVID-19 has shown that remote work, at least when it comes to knowledge intensive jobs, is not as inefficient as it has been portrayed in the past. While some experts argue that we need to set up new outsourcing contracts to work with the most skilled and knowledgeable people around the globe, the growing interest in doing so is proof that we need to think beyond borders. The answer lies in how to achieve effective outsourcing with distributed work. In our research with Professor Darja Smite from Blekinge Institute of Technology in Sweden, we propose three important lessons learned from working remotely during the pandemic.
In his book, Prof. Smite presents insights about collaborations set up by such companies as Ericsson, ABB, Spotify, Telenor and smaller companies. He explains how some collaborations fail and how others are successful. What makes a collaboration successful?
Professor Smite says: In the past, when clients hired out jobs, the relationship was primarily “win-lose”: the client paid and got the job done; the subcontractor did the work and got the money. But now, companies are working with service providers that allow them to have a more integrated team and a more positive relationship. This means there is less of an “us and them” attitude and more of a “win-win” approach. This also means companies are working more closely with their service provider and with each other.
Prof. Smite describes the main differences between partnerships and collaborations. Generally speaking, partnerships share many commonalities with collaborations, such as shared goals, diversity of experience, and project management roles. However, collaborations are distinct in terms of professional backgrounds, distinct personalities, and the sharing of power.
| Behavior | “Win-lose” power relationship | “Win-win” long-term alliances or partnerships |
| Contract type | Resource-based or fixed price for an agreed scope of work. All deviations are negotiated, typically with additional payment. | Based on a service-level agreement for the forecasted scope of work, typically with a target price. Delivery exceeding expectations is often rewarded with economic bonuses. |
| Focus | Scope delivery, sometimes headcount | Service delivery |
| Requirements and scope | Specified by the client; “thrown-over-the-wall”; fixed | Specified together; flexible |
| Responsibility for deployment | Client’s personnel is responsible for deployment | Outsourcing partner is responsible for deployment |
| Responsibility for quality assurance | Unit tests are run by the outsourcing partner; systems integration tests and acceptance tests are performed by the client | Unit tests, system integration tests and acceptance tests are performed by the outsourcing partner (some might be repeated or performed jointly) |
| Responsibility for issue management | Issue management and the amount of work is negotiated in the contract | Outsourcing partner proactively investigates and resolves customer issues and participates in investigations carried by the client. |
| Responsibility for software improvements | Scope of necessary improvements is negotiated, typically for additional cost | Outsourcing partner identifies the needed improvements and maintains them in a backlog, which is negotiated and prioritized together with the client, typically within the service contract |
| Focus on outsourcing provider’s personnel | Focus on headcount and/or competences; onboarding performed by the service provider | Involved in selection of candidates; onboarding performed jointly |
| Comunicare | Vertical, limited. | Horizontal, extensive. |
| Personal relationships | “Us and them” attitude | “We are in this together” attitude |
| Sourcing project management | Micro-management style | Delegative management style |
Companies are encouraged to find out how to build a winning team and to understand what it means to have a culture of social integration. They should think about the recruitment process, including how they find, hire, and onboard new employees. They also need to consider the importance of mentors and social activities for new employees. After hiring someone, companies should introduce them to the whole team and provide opportunities for them to get to know everyone. They should make sure the newcomer has the right skills and is compatible with the company culture. Once they are hired, new employees are introduced to everyone, including the most important players. They are made aware of the processes, the company routines, and the organisational structure. They receive guidance on how to get started, how to learn, and how to improve. Newcomers are given time to get familiarised with the daily tasks, processes, and routines. New employees are also invited to social events to get to know everyone.
In many instances, offshore engineers who are not affiliated with the company are treated differently than local engineers. For example, they may not have access to the internal technology infrastructure and are rarely involved in any formal training programs. This exclusion also applies to consulting firms that hire offshore engineers as temporary employees.
Why do companies need to make a special effort to create a social atmosphere in their companies? Prof. Smite says that firms should pay particular attention to social issues such as promoting employment equality among employees and contractors. For instance, companies could encourage subcontractors to employ employees on the same terms as the company’s own employees. In some cases, this can be accomplished by treating offshore and onshore employees as equals
Reference:
– Professor Smite, her first blog on “success factors in outsourcing to other countries”
– Nataliya Sjøvoll (Project Manager ICT)