On-site / Offshore Staffing Ratios: Your Mileage May Vary
Predictably the report has gotten a lot of attention in the U.S. business and IT industry press. What is surprising, however, is that it was largely overlooked by the general news media, particularly given the quadrennial U.S. debate over immigration policies rages on.
Meanwhile, some companies are quietly reducing their reliance on on-site foreign IT workers, which represents the largest percentage of H-1B holders. For these companies, however, it’s not about electoral politics or immigration debates. It’s about finances and sourcing maturity.
The former reason is easy to understand. On-site workers command higher rates than their offshore counterparts. In the current economic environment where every budget item is closely scrutinized it’s natural that companies might look at on-site labor rates to further reduce sourcing costs, particularly in cases where the percentages can represent as much as 35-40% of total vendor headcount.
However, according to clients I’ve spoken with on the subject there’s more to shifting the on-site/offshore balance than simply cutting the former.
In one case a client is faced with the situation where internal IS and on-site Infosys delivery teams work very closely with one another. He also admits that his company “does not manage quality very well.” Not having access to the on-site delivery team, which represents 35% of the Infosys total headcount dedicated to his company, “would have a negative impact.” Still, he is mindful of the benefits of changing the ratio.
As a workaround he is collaborating with Infosys to transfer selected projects and personnel to the latter’s Mexico development center, which is only two time zones from his company’s headquarters. He sees the shift as a win-win situation that delivers lower rates while maintaining staffing continuity and reducing “H-1B hassles” for Infosys.
Another client, whose company uses a combination of delivery models including managed services and full outsourcing, has a formula for determining internal and vendor staff ratios based on portfolio optimization. Projects and even entire application suites are categorized by the level of control accorded to client and vendor staff. In some cases vendors own almost complete responsibility for deliverables.
In this company vendor management is focused on relationships and on deliverables, not the work itself. Metrics are tied to outcomes, which leaving vendor partners largely free to own decisions about staffing ratios and locations, as long as the SLAs are met.
The client said that mature sourcing practitioners such as his company would less inclined to “play” with current ratios, especially if they “think they’re in a good place.” He noted that his organization has worked hard to achieve the right on-site/offshore mix and is now more focused on working with Infosys and other partners to ensure that the right skill sets are applied to the right initiatives.
Depending on the level of control associated with the project or initiative in question his company’s on-site percentages range from a high of 25% to no more than 10%. The skills mix, too, tends more toward delivery management than actual on-site work.
How widespread the trend toward reducing reliance on on-site vendor staff is and where it’s heading is difficult to say. The examples cited above and the half-dozen or so other clients with whom I have discussed staffing ratios represent a small anecdotal sample.
Nevertheless, the sample is defined by companies that, while continuing to focus on fundamental global sourcing value propositions continue to push the envelope while adapting changing economic, technology, and yes, political conditions. The question is does this small sample represents a larger trend toward more flexible staffing models.
The former reason is easy to understand. On-site workers command higher rates than their offshore counterparts. In the current economic environment where every budget item is closely scrutinized it’s natural that companies might look at on-site labor rates to further reduce sourcing costs, particularly in cases where the percentages can represent as much as 35-40% of total vendor headcount.
However, according to clients I’ve spoken with on the subject there’s more to shifting the on-site/offshore balance than simply cutting the former.
In one case a client is faced with the situation where internal IS and on-site Infosys delivery teams work very closely with one another. He also admits that his company “does not manage quality very well.” Not having access to the on-site delivery team, which represents 35% of the Infosys total headcount dedicated to his company, “would have a negative impact.” Still, he is mindful of the benefits of changing the ratio.
As a workaround he is collaborating with Infosys to transfer selected projects and personnel to the latter’s Mexico development center, which is only two time zones from his company’s headquarters. He sees the shift as a win-win situation that delivers lower rates while maintaining staffing continuity and reducing “H-1B hassles” for Infosys.
Another client, whose company uses a combination of delivery models including managed services and full outsourcing, has a formula for determining internal and vendor staff ratios based on portfolio optimization. Projects and even entire application suites are categorized by the level of control accorded to client and vendor staff. In some cases vendors own almost complete responsibility for deliverables.
In this company vendor management is focused on relationships and on deliverables, not the work itself. Metrics are tied to outcomes, which leaving vendor partners largely free to own decisions about staffing ratios and locations, as long as the SLAs are met.
The client said that mature sourcing practitioners such as his company would less inclined to “play” with current ratios, especially if they “think they’re in a good place.” He noted that his organization has worked hard to achieve the right on-site/offshore mix and is now more focused on working with Infosys and other partners to ensure that the right skill sets are applied to the right initiatives.
Depending on the level of control associated with the project or initiative in question his company’s on-site percentages range from a high of 25% to no more than 10%. The skills mix, too, tends more toward delivery management than actual on-site work.
How widespread the trend toward reducing reliance on on-site vendor staff is and where it’s heading is difficult to say. The examples cited above and the half-dozen or so other clients with whom I have discussed staffing ratios represent a small anecdotal sample.
Nevertheless, the sample is defined by companies that, while continuing to focus on fundamental global sourcing value propositions continue to push the envelope while adapting changing economic, technology, and yes, political conditions. The question is does this small sample represents a larger trend toward more flexible staffing models.
