Fortunately, Business Engine's breach was not a case of intellectual-property theft. But the experience helped convince the company that to continue operating offshore without one of its own dedicated managers on the scene — as many companies working with third-party vendors do — would be unwise. So in 2001, Business Engine recruited Neil Mehta, who had specialized in supply-chain and systems integration at Arthur Andersen and Price Waterhouse. His presence eased many security worries. "Having a manager on the scene in some ways makes it more secure than if you had a [U.S. employee] working out of the house," says Dickey. "Whether the phone line to the office is 12,000 miles or 12 miles, it becomes irrelevant."
Mehta, 33, who is American-born but of Indian descent, also helped address problems with work quality. Before he arrived, reliance on E-mail communications with California often led to delays of at least a day in answering technical questions from the Indian office, and reinforced a feeling among the 40 Blue Star employees in Mumbai that the offshore work "had no status" within Business Engine.
Poor communication and low morale resulted in a large amount of software with code-writing errors that required "rework" by the team of 60 developers back in California. Training alone didn't seem to solve the problem. "Even after two years of getting the rework rate down in India, it wasn't [low] enough," recalls Dickey. While domestically the rework rate was about 30 percent, "when we first started [in India], we experienced error rates of about 70 to 80 percent."
When Mehta first arrived, he replaced E-mails with frequent phone calls to California. He also took over the job of assigning Blue Star employees to various Business Engine jobs. Because labor in India is relatively cheap, error rates often can be lowered by simply assigning more people to double-check the work. Mehta set up a system in which each code-writing task "would get reviewed and tested by a peer, who would sign off on the code and the task." He also installed monthly measurements showing the number of tasks completed on time — factoring in the difficulty of each task — and citing reasons for lateness. By using Business Engine's own management software to measure offshore performance, he was also able to let onshore managers track some offshore functions on a daily basis. That effort, he says, brought "accountability to the work being done by the people offshore."
Knowing what functions lend themselves to good measurement, and then tracking them effectively, are the keys to successful outsourcing, according to professor Ravi Aron, an expert in BPO at the University of Pennsylvania's Wharton School. "There are many processes that cannot be codified," he says, "but when you find processes that can be, you see how easy things are" (see "Measuring the Miscues," at the end of this article). At Business Engine, Mehta's efforts at improving communication and measuring error rates are credited with tightening the operation significantly. Rework is no longer sent back to California, but performed in Mumbai. Better yet, notes Mehta, "that rework is now down to 5 percent."
"Having someone on the ground there has made a big difference," according to Dickey, who says that the airfare spent flying Mehta back to California for a week or two every several months is well worth it. "He has a much better handle on what we're striving for." That's important in an environment geared less to design work than to performing repetitive tasks, because Mehta can explain why a particular product specification is important to a customer. "Once you have good specs written, the rates improve dramatically," says Dickey. Indeed, the level of rework is now the same as it is in Ontario.
Dickey says the company can now build on its success, and is considering moving some business processes offshore. For example, he expects to create several quality-assurance positions in India by the end of the year.
When Things Go Wrong
While the lessons learned by IndyMac and Business Engine now allow them to contemplate moving such higher-level functions as finance overseas, privately held Everdream learned a very different lesson: when to pull the plug on an offshoring deal.
Everdream provides computer desktop management for the likes of Federal Express, ADP, and car-sales giant Sonic Automotive Inc. Like IndyMac's Adarkar, Everdream CEO Gary Griffiths was no stranger to outsourcing; he was involved in IBM's successful outsourcing of Thinkpad development work to Bangalore, India, in the early 1990s. "I believe [offshoring] is a necessary part of our economy and world trade," he says.
In late 2002, Griffiths wanted to bring greater scale to the business by supplementing the 100 employees at its California headquarters and in Charlotte, North Carolina. One candidate for assistance, he says, was Everdream's 24/7 help desk for its 300 customers. "We viewed our core competency to be in technology development," he says, not running the help-desk call center. "So we looked to a partner to help move the lion's share of that business [offshore]."
Sykes Enterprises Inc., a Tampa-based outsourcing provider, offered Everdream call centers in India, Manila, and Costa Rica. "We were nervous enough about the whole offshore thing that we didn't make the jump to India or Manila," says Griffiths. Although it meant passing up some savings, he chose Costa Rica. "We figured we'd start near-shore and go the next step later," he explains.
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