The Trend toward Offshoring
There seems to be a stampede of U.S. companies rushing to outsource their operations to offshore companies, dramatically expanding the economies of India and China. What is fueling the trend is the desire to gain access to lower cost, high quality labor. Top business functions for offshoring include customer service, IT and technology services, and now corporate training. This article highlights some of the findings from our upcoming research study, Offshoring E-Learning: What Works, which will be available next month.
As in other business functions, training managers are under pressure to reduce expenses and demonstrate their value to the corporation. Maintaining an internal team of content developers, instructional designers, administrators, and instructors is expensive. More U.S. training departments are looking externally to provide resources for their training initiatives.
How Much can you Save?
A $10K-50K content development project in the US may cost 20-40% less in India. In some cases the costs savings can be much higher.
We interviewed one U.S. conglomerate which has been offshoring its e-learning content development to Indian firms (SIFY and Tata Interactive Systems) for the past few years. According to a learning professional at the company, the total savings from offshoring amounted to approximately $500,000 last year, roughly 40% below what they would have paid to U.S.-based suppliers.
Of course, cost savings is not the only factor to consider. A vendor’s internal skills, processes, and service and support capabilities are all important to a project’s success. And, as one e-learning executive noted, “The real measure of success is whether the courses are meeting their objectives.”
Strategic Benefits of Offshoring
Training executives experienced with offshoring also point to the strategic benefits. One of the key benefits of offshoring (and outsourcing in general) is that it enables you to focus on your core competencies and strategic issues. In our High Impact Learning Organization research we identified four strategic benefits to outsourcing and offshoring learning functions. These are "strategic planning" functions which training managers often put off because they are so focused on program development and management:
Strategic Focus Areas Enabled by
Offshoring Content Development
Focusing on strategic planning with upper management and how learning fits into the organization’s strategic plans.
Working with first-line managers to better understand their specific line–of-business training needs.
Developing approaches for measurement and analytics to benchmark and track the effectiveness of training programs.
Evaluating new technologies and approaches that may improve training efficiency and/or effectiveness.
What Should you Offshore?
Once you understand the business benefits, the key question is: what programs and projects should you offshore?
Many companies establish processes for making decisions on what to offshore. You may have already established an outsourcing decision model -- many of the same criteria apply. Some of the projects which are good candidates for offshoring include:
Labor-intensive projects which take advantage of cheaper wage rates. For example, if you want to turn existing instructor-led materials into e-learning content, offshoring works very well. Large content development, localization/translation, and LMS data integration also fall into this category.
Projects that do not require intensive interaction or collaboration between developers and subject matter experts. Application training, where the offshore team has ready access to the software and can develop the training without much collaboration, is one example.
Projects large enough to justify the necessary management attention that offshoring requires. Consider pooling resources with another business unit or division to offer a more sizeable amount of work. Larger projects are more attractive to the offshore partner and may also get you a lower price.
Non-strategic programs or initiatives which may be important but not in the upper right quadrant of your Training Investment Model.
New Content Types (e.g. simulations) or areas in which you do not currently have, and do not wish to build, an internal competency.
The Bottom Line
Outsourcing is nothing new for training organizations. Most training groups have been outsourcing content, delivery, and content development for years and, more recently, have moved toward outsourcing technology operations and support functions. Telecommunications and internet access is now widely available -- The biggest challenges are setting up the appropriate governance and communications structure and finding the right solution provider.
The outsourcing of training functions and technology is a major trend in the market and, despite many political issues, we believe offshoring will continue to grow.
Key Research to Help you Understand This Area
The High Impact Learning Organization
Our most important new research on best practices
in the management, organization, and governance of
corporate training, including issues involving outsourcing.
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Thursday, February 25, 2010 21:51
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Madhura Chakrabarti leads the People Analytics research practice at Bersin by Deloitte.
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