Sourcing optimization is an organization’s ability to obtain the greatest efficiency and value when sourcing learning content design and development with either onshore or offshore providers. Companies can achieve it by employing a simple model that determines the most efficient alignment of a project’s management with its complexity.
Many organizations are choosing to source their content design and development with outside providers, both domestic (known as “onshoring”) and/or foreign (“offshoring”). To fully optimize such relationships, companies should adopt a business strategy that is compatible with their needs and goals.
When outsourcing with an overseas training service provider, for example, client companies have the option of dealing directly with that entity, known as “direct offshoring,” or engaging its services via an onshore training services provider typically hired to perform other training functions, known as “indirect offshoring.”
It is often assumed that when initiating such projects, clients can achieve the greatest value for their money by focusing on the location of the instructional designers who will perform the work. While that factor can indeed influence the project’s overall cost, research by Training Industry, Inc. demonstrates that a far more important issue involves the location of the project manager (PM) or team who will oversee the contract. By comparison, the location of the design resources is immaterial. This is true regardless of whether the engagement involves an onshore or offshore provider, the study found.
FACTORS THAT IMPACT OPTIMIZATION
The project manager’s location is one of two important variables that impact the optimization of sourcing engagements. The other involves the complexity of a given project. Together, the two factors can be weighed to create an efficient formula used to achieve training and budgetary objectives.
In terms of complexity, the simplest engagements in design and development are those in which content already exists and there is no demand for additional subject matter expertise. Such simple tasks typically involve the transformation of completed content to a different medium or modality, or translation into another language. Engagements become complex when proprietary content must be pulled by the design team from subject matter experts.
The PM function can be located in several places. It can be situated onsite at the customer’s office, at another facility onshore to the client, or at the facility of the training service provider located offshore.
The decision of where to place the PM function influences the engagement in two principal ways. It impacts the client’s ability to oversee the partner, and it affects the overall price paid by the client for the development of its training content.
Here’s why: The most expensive PM is typically the employee or team located onsite at full salary and benefits. The second most expensive is the contracted individual or team who is not paid benefits by the client company. The least expensive is the PM employed by the offshore provider at a lower salary.
Research on this topic by Training Industry, Inc. has resulted in the following maxim:
- The cost associated with project management and a client’s ability to oversee an offshore project is increased with the closer proximity of the PM to the client.
- Conversely, the cost of project management and the customer’s control over the project decreases in an offshoring relationship the farther the PM is located from the client.
This means that organizations can fully optimize their offshore relationships by selecting a PM location that conforms to its need for oversight and control, a need determined by the engagement’s complexity. The following diagram illustrates the concept.
The yellow portions of the diagram represent the inefficient areas of an offshore relationship. They include paying more for PM than is necessary (upper left) and assuming increased risks associated with complex projects (lower right). The latter finding demonstrates that while companies might conclude that they will save money by assuming the additional risk of having an offshore PM overseeing a complex project, this is not necessarily the case. Although the client is indeed spending less for PM, it is incurring increased internal costs because it must allocate substantially more resource time to the offshore project.
- Level of complexity. The level of complexity should drive the PM location decision, and it should be the first issue for any organization considering offshoring its content development. The more complex the project, the closer the manager should be to the client.
- Onsite PM factors. Onsite PM is best suited for high volume or large global projects such as company-wide content development and global rollouts. It might also be warranted when complex or technical content is involved, frequent interaction is needed, and when valued personnel such as subject matter experts insist.
- Onshore PM factors. Onshore PM is best employed for medium volume or limited scope projects, complex or technical content, medium communication needs between client and project leads and when clients are accustomed to working remotely.
- Offshore PM factors. Offshore PM is best used for minimal and short-term projects, when the overall need for communication and SME interaction is minimal and when client staff is comfortable dealing with remote workers.
- Indirect offshoring. In an indirect offshoring engagement, which is contracted by the client’s outsourcing partner at its discretion, the client is neither involved with nor concerned about its partner’s offshoring decision. Except for its own contractor oversight activities, it does not need to become engaged in sourcing optimization decisions.