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Project selection criteria for offshoring

posted Mar 26, 2013, 2:01 PM by Jageshwar Tripathi   [ updated Apr 6, 2013, 2:23 PM ]
In one of my blog post I started this topic and here I  want to continue from where I left in the blog. Here is a model which can help in prioritization of projects for off-shoring.  This model is based on 4 aspects of an application or project:
  1. Business
  2. Technical
  3. Management
  4. Legal

Under these major aspects or categories of factors there are different criteria which influence off-shoring possibility positively or negatively. The criteria which negatively affect off-shoring if they are high can be considered as "Pullers" and the criteria which support the possibility of off-shoring  when criteria is high, can be considered as pushers or supporters. In each of the above category there may be pullers and pushers both.  One important point to consider here is that the criteria defined here are for comparative study of various projects to prioritize their off-shoring, puller are not necessarily factors which stop you from off-shoring a project. Even if one of the criteria shows pull but it may bot be showstopper. Except Legal aspect all others can be managed at off-shore. In case of projects having legal restrictions too there are strategies to manage some of the work from off-shore and very restrictive at onsite.


Business

There are various criteria which are related to the  business, an application supports. These factors include: business value, need of special business knowledge to develop, manage project, cost of development or maintenance and whether an application or project is a research work or intellectual property of the organization. 

Business Value:

If project is very critical to the business , if it is main part of or driver of business strategy and any risk in this application may impact business negatively its business value is considered to be high. These kinds of applications have high risk associated with them and their off-shoring possibility comes after other less business critical applications. Any business won't offshore these projects to avoid any risk. Higher the business value lower the priority of a project for off-shoring.

Special business knowledge required

Some of the projects may require special business knowledge and very specific business processes. Taking these projects far away from business community (business users) may have challenges of  project management. As compared to other projects these kinds of project should have higher priority while deciding for off-shoring. Higher the requirement of special business knowledge or process knowledge lower is the priority.

Cost of maintenance or development

This is the reason why projects are sent to offshore destinations. Cost at offshore is often less as compared to total cost onsite. If project cost is of higher range sending it to offshore would result into more cost saving as compared to project if small cost budget. So higher the project cost higher the priority of project off-shoring.

Research or work of IP

If a project has a research work or unique concept which is an intellectual property of an organization, sending it to offshore and outsourcing it would be a decision that should be taken with cation. These kinds of projects take lower priority for off-shoring as compared to other. Here priority means when there are many projects to choose these project will be taken up later on if one has to choose from among many. Although all kinds of projects had been sent to offshore and they were managed successfully.


Management

There are some criteria related to management of a project and other related areas, these criteria also influence positively or negatively for off-shoring:

High customer interaction needed

If project requires high interaction with end users, business community and other customers, managing it from offshore can be a difficult task. Although there are ways to have better interaction and coordination at offshore and onsite but when we have to choose among many project which one to pick first, these kinds of projects will be taken later.

Dependency on local knowledge

If there are project activities which can only be performed locally or if project execution rely on local knowledge such projects take lower priority than other projects.

Large number of resources required

If there are large number of resources (human workers) needed in a project, of-shoring it can resolve problem of resource fulfillment. Often large number of resources are easily available at destinations which are known for off-shoring work. Higher the resource requirement, higher the priority for off-shoring.

Mature process

If project development/management process is mature, standard specifications are in place, there is less risk in the project and such projects can easily be sent to offshore.

Long end of life

Project transition at offshore has its own cost, so if project life is longer off-shoring it has benefits otherwise if project life span is very short, cost benefit of off-shoring will be less considering transition cost. These projects have lower priority for off-shoring

Special skills which can be found easily at offshore

Sometimes projects require special skills or technology knowledge which is often easily available at off-shoring destinations. These projects are better candidate of off-shoring.

Legal

Legal Restrictions

There may be legal restrictions against off-shoring certain kins of projects, score of off-shoring is less in these cases. Although there are ways to handle these cases, for example restricting only part of it which is important and other parts  can be sent. Examples are government projects, projects which can not go beyond a country's borders.

Privacy or data protection laws

If privacy and data protection laws are applicable for the nature and type of project, such projects have lower score of off-shoring. Examples are cases where only national of a country can work in a project.

Security requirements

Sometimes there are security requirements and restrictions due to security, these projects have lower priority for off-shoring. 

Technical

There are some criteria which are technical in nature, they also influence off-shoring.

Independence / self contained

If project is self contained and doesn't have dependency on other projects or systems it can easily be detached and send to offshore. Modularity is the key here. High independence high score for off-shoring

Mature specifications

If specifications of the project are stable and mature, there is less risk and ambiguity, such projects can be sent to offshore.  High maturity of specifications, higher the score of off-shoring.

Big scope

There is a minimum size which is optimum for off-shoring. Very big scope projects are difficult to manage. To control progress and achievements of a project its results should be achieved in a certain duration. controlling these things at onshore may become a challenge.
 

Relative score for off-shoring

Weight of different criteria

All the criteria doesn't influence equally. Different criteria has different level of impact so different criteria should be given weight.  Since target here is to sort projects not exactly measuring their offshore-ability so grades can be kept simple  by taking grade range as number of factors and based on their strength (negative or positive) assigning weight. If we have 14 criteria we can arrange them as per their strength from 1 through 14.

Rating of each criteria

Based on project environment and  context different criteria can be given ratings on a scale of 0 to 3. A criteria when has very low and negligible value it can be given 0. The ratings can be as follows:
0 - No impact or not applicable. For example in some of the projects there is no legal restriction.
1 - Low
2- Medium
3 - High

Relative off-shoring scores

Relative off-shoring scores can be obtained by multiplying weight with rating of a criteria for a projects. Score of all  the criteria for a project can be determined and finally adding score of all the criteria will give total comparative score of off-shoring for a project.
Total Off-shoring score TOS= Sum of (Weight X Rating)

Project selection criteria for offshoring

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Jageshwar Tripathi,
Apr 1, 2013, 12:26 AM
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