Offshore Training Outsourcing Benefits, Concerns, Models

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1 Offshore Training Outsourcing Benefits, Concerns, Models Written exclusively for TrainingOutsourcing.com by Harvey Singh, Founder and CEO of Instancy, April 2005 Recently, there has been a lot of conversation about the rising trend of outsourcing in the training industry; however, few of these deliberations have focused on the topic of offshore outsourcing. The purpose of this article is present some thoughts on potential benefits and real concerns associated with offshore training outsourcing and to describe some of the emerging models that are being used to provide offshore outsourcing services. Hopefully, we can initiate some dialog throughout the industry about offshore training outsourcing so that organizations can intelligently assess the potential for outsourcing and structure effective relationships. First, let's take a look at the relationship, or lack of relationship, between domestic training outsourcing and offshore outsourcing or 'offshoring'. While the terms 'outsourcing' and 'offshoring ' are often used synonymously, they actually represent distinct approaches or practices for accomplishing the same functions. They may, at times, be complementary and at other times be mutually exclusive. An organization may outsource select business processes such as human resource (HR) functions, information technology (IT), or training activities to vendors specializing in those services. The outsourced functions may be 100% performed 'onshore,' meaning that buyer and vendor are both located in the same country. Alternatively, an outsourcing supplier may perform the work outside of the country where the contracting organization is located or even in multiple 'offshore' countries. So, why and how would an organization want to contract with a company in another country to provide specific business services that have traditionally been performed in-house or by domestic suppliers? The rise of globalization, a powerful and irreversible trend, serves as a backdrop and primary driver for the rise of offshore outsourcing. Multi-national organizations operate in multiple countries and their value chains, supply chains, and markets span multiple 'shores'. Above all, the rise and emergence of the Internet as a ubiquitous communication medium for voice and data around the world over the last decade has taken globalization to a whole new level. Communication, commerce, and collaboration now know no borders. By the same token, in the digital world, knowledge-workers required to perform many professional services including IT-oriented Business Process Outsourcing (BPO) tasks can easily be located practically anywhere in the world. The early adopters of the training outsourcing services have typically been large multi-national organizations that operate in multiple geographies, languages, and cultures. It is no surprise that in order to serve such customers, the leading vendors of BPO services also operate in multiple countries and have geared up to provide 'multi-shore' operations to leverage global talent-pools, lower costs, and incorporate inherent speed of delivery advantages. However, the growing phenomena of offshoring and domestic outsourcing are not limited to large buyers and suppliers. In fact, many smaller, entrepreneurial organizations on both the buyer and supplier side of training are actively exploring and experimenting with such options in growing numbers. Furthermore, international acquisitions, mergers, and joint ventures are likely to increase in the coming years as training suppliers expand their capabilities to meet the comprehensive global training needs of organizations. Kathy Brittain White, who was named to the Forbes Top 25 American Businesswomen in 2001, noted that outsourcing will grow at an annual rate of seven percent (7%) to $1.2 trillion by By relocating work from Europe and the United States to countries such as India and others, global firms are expecting to cut costs by up to 40 percent (40%), she said. Countries such as China, Russia, India, and others can offer large and well-educated and trained workforces. In working with US buyer organizations, vendors from English speaking countries seem to have an early advantage in gaining BPO business opportunities (such as training related business processes) for professional services that require a high degree of communication skills. According to a survey by Earth Institute at Columbia

2 University, cost savings and access to workers with high levels of professional skills are driving factors behind the majority of US companies' decisions to outsource. As many as 45 companies known for sending work outside for completion showed that 82 percent were currently outsourcing jobs and that 79 percent went to offshore businesses. The majority of these companies not only reported finding competitive prices by offshoring but that the workers actually had better work skills. Seventy percent of the companies reported that the quality of outsourced business processes had increased between five to twenty-five percent (5%-25%). Benefits of Offshore Outsourcing of Training If managed effectively, from selection of the right vendors to the coordination of project tasks and implementation of quality assurance procedures, an offshore partner can often augment the benefits derived from domestic outsourcing by providing: Additional cost advantages - outsourcing of training to an offshore vendor may allow the buyer organization to do more with less. For example, by using lower cost offshore resources, an organization may be able to: develop more e-learning content convert existing content into digital and interactive format in subject areas that may have had to be postponed or neglected indefinitely because of lack of funds save costs on learning system integration or customizations make content more media and simulation rich These cost advantages are likely to be more pronounced during lean times such as the periods following the dot-com bust and post-9/11 tragedy. Access to potentially large and multi-disciplinary talent pools - offshore resources in countries like India, China, Russia, and others provide a rich reservoir of well-educated professionals usually at a fraction of in-country costs. This talent pool may include software professionals, instructors, subject matter experts, instructional designers, technical writers, multi-media designers, and more Speed of execution - offshoring using multi-shore locations and/or around the clock multi-shift production centers may provide faster turnaround of skilled-labor intensive tasks such a programming, system integration, media production, etc. Comprehensive customer support - in many cases, a lack of resources necessitates less than optimal customer care or technical support during training initiatives. Less costly offshore operations may permit the inclusion of these critical support services and contribute significantly to the success of a training rollout or change management initiative or other learning project.

3 Multiple Business Models for Offshore Outsourcing Multiple models for offshore outsourcing have emerged over the past few years as buyers and suppliers try to improve and streamline BPO operations and governance structures. The choice of a single model or a combination (hybrid) model in a particular situation depends on a number of factors including the business objectives of the buyer organization, type of work being outsourced, duration of the initiatives, scope or volume of work, extent of operating control, and cost considerations. Some of the most commonly employed models include: Supplier Direct - in this model, the buyer organization outsources elements or an entire business process directly to an offshore supplier. Services are provided utilizing the staff and resources of the offshore vendor. Dedicated Center - in this type of arrangement, the outsourcing service provider sets up an exclusive operation for the client allowing for tighter control over the work being performed. Third-Party Transparent - using this approach, a buyer may contract with a domestic or onshore outsourcing service provider that then sets up or manages an offshore center(s) or contracts for offshore resources to gain cost or other competitive advantages. Captive Center - in this case, the outsourcing organization may set up its own center in an offshore location and manage it through its internal resources without actually contracting with an outsourcing supplier. Offshore Training Outsourcing While much has been presented in the media and press about technology and transaction-based outsourcing engagements such as IT and software development, call-center operations, back-office administration processes (i.e., HR, accounting, and others), very little attention has been given to outsourcing of training related business processes. Because of the complexity of many training operations, offshore outsourcing of these functions requires careful examination before deciding to employ one of the models that has been successfully applied to other business processes. Training processes often significantly affect other organizational issues, communication, behavioral change, knowledge transfer, organizational culture, and interpersonal issues, much more than other business process such as IT tasks or HR processes. Training may touch a host of areas ranging from 'hard-skills' (such as a technology, products, processes, etc.) to 'soft-skills' (such as sales, customer services, leadership, motivation, etc.). Finally, technology infrastructure plays a growing role in delivering and managing training (including elearning). The following matrix presents typical elements that are included in training business processes and analyzes each in regard to considerations and propensity for offshore outsourcing:

4 Element of Training Business Process Enterprise Learning Strategy Performance Consulting Curriculum Planning Subject Matter Expertise and Instructional Design Content Development and Media Production Propensity Table Offshore Outsourcing of Elements of Training Business Process Offshore Outsourcing Considerations In general, establishment of organizational learning strategy needs to be closely tied to overall business objectives. An outsourcing vendor must be able to work with the senior business and learning strategy teams in an on-shore and on-site capacity. Offshore organizational development experts may be able to provide detail and labor intensive analysis in a supporting role Performance consulting involves analyzing root causes of organizational and individual performance gaps and devising various performance improvement plans (training and non-training). Close interactions with business line managers and employees are necessary to evaluate performance gaps and develop intervention options. Unless a specific performance consulting project involves analyzing repetitive patterns of performance, offshore outsourcing of this training business process is difficult. The offshore provider may be able to organize on-shore/on-site access to performance consultants for most performance analysis tasks. Curriculum planning involves developing learning programs and organizing career tracks for specific job roles. Because this training function often requires onsite analysis, research, and observation to develop a complete understanding of the responsibilities and competencies for multiple positions within an organization, it is typically not a great candidate for offshore outsourcing. Only repetitive or wellunderstood curriculum planning tasks are usually efficiently performed in an offshore capacity. Subject matter expertise and instructional design functions may be carried out through offshore outsourcing arrangements for well-known and non-proprietary content areas. However, it is difficult to outsource proprietary content such as product information, internal processes, and compliance and regulatory training to offshore locations. For effective results, it may be best to have local or internal experts guiding the training development process while leveraging offshore resources to perform specific functions such as creation of labor intensive training scripts and detailed instructional storyboards, and development of activity and instructional plans. In an offshore outsourcing model that includes provision of subject matter expertise and design services, the instructional design plans and client learning team members for accuracy and consistency as well as language and cultural nuances must carefully review storyboards. Content development and media production, particularly for online or elearning, is clearly an area that can often be outsourced efficiently to an offshore center. Programming, scripting, authoring, graphics, and animation development tend to be highly skilled-labor intensive tasks. Offshore content development and media production may be performed at dramatically lower costs when compared to in-country expenses. It is no surprise that content factory models (with inter-disciplinary teams of project managers, programmers, multi-media specialists) have already proven very successful and resulted in a growing trend toward offshore outsourcing of training content development, especially for large volumes of content conversion from instructor-led or print-based formats to online or other elearning formats. Propensity for Offshore Outsourcing High Selective Low

5 Instructor-led Training Delivery and Mentoring Services Measurement and Tracking Back-office Administration IT Infrastructure Management and Technical Support Learning System Integration and Software Development Multiple Vendor Management Instructor-led training delivery involves classroom instruction by human facilitators to live audiences. While more and more instructional delivery is moving online, a number of training programs use a blended learning approach that may involve a combination of instructor-led training with technology delivered components or options using elearning methodologies. Clearly, face-to-face instruction cannot be efficiently conducted in an offshore location. However, in special instances, instructor-led training delivery may be conducted via or virtual classrooms and the mentors or instructors may be located at an offshore center. It is important in these situations to ensure that the offshore personnel have the appropriate level of knowledge, subject matter expertise, language, and facilitation skills to deliver exemplary programs and mentoring services. Measurement and tracking involves evaluating the effectiveness of training. While performance tracking or extracting data reports from a Learning Management System (LMS) may be accomplished by offshore personnel and systems, the interpretation and analysis of the data with respect to business objectives typically requires involvement of on-shore/on-site performance consultants or learning strategists. Back-office training administration may involve enrollment, scheduling, payments/billing, assignments, cancellation, instructor assignments, facilities management, resource management, shipping of training supplies, and a myriad of other logistical and operational elements. Clearly, many of these mundane, transaction-based, and repetitive tasks may be effectively outsourced to either domestic or offshore providers. In addition to the outsourcing the tasks involved in training back-office administration, the outsourcing of LMS or LCMS to an outsourcing partner can have significant advantages for the outsourcing organization including a reduction in capital expenditures. There are several offshore outsourcing companies that specialize in providing personnel, services, and technology tools and infrastructure needed to perform training back-office administration. IT infrastructure involves managing the hardware and software systems that support learning business processes such as LMSs and LCMSs., content management servers, database servers, and other IT systems and operations. Training IT infrastructure outsourcing is a growing trend. Given that much of the IT infrastructure and servers are Internet enabled and accessible remotely, increasingly it is becoming more feasible to outsource such tasks to an offshore location. IT and software development resources are needed to implement and integrate learning systems. The architecture planning is typically best performed in close collaboration with a local training outsourcing provider, whereas, actual system integration, programming, and testing may be conducted efficiently by offshore operations. Organizations must first carefully contemplate the extent to which they should outsource the training function and then whether it makes sense to outsource the management of multiple training vendors to a single training service provider. Typically vendor management (contracts, negotiations, business terms and policies) is difficult for an offshore provider to efficiently direct

6 Concerns over Offshore Outsourcing of Training Functions While it is easy to visualize the benefits of offshore outsourcing around criteria involving costs, resources, and speed, there are some very real concerns that need to be examined when considering entering into an offshore relationship: Intellectual property (IP) - the rules and enforcement of intellectual property laws tend to vary between countries and should be carefully examined before entering into an offshore arrangement that requires protection of IP. Countries that standardize and vigorously enforce international and intellectual property laws understand the need to protect IP and the need to establish strict guidelines to leverage outsourcing opportunities. Caution should prevail when considering outsourcing training operations to countries with a reputation of less than stringent adherence to intellectual property safeguards. Security and confidentiality - data and information security and confidentiality may be more susceptible to exposure in an offshore outsourcing environment. Before entering into an offshore relationship, organizations must thoroughly examine the integrity of the processes to be employed to ensure security and confidentiality of any information, data, and IP. In addition, it is mandatory to thoroughly check the references of any outsourcing provider company before entering into an agreement. Language and culture - Language and cultural issues play amore important role in certain business processes than others. Training, especially content development involving soft skills like business communication and marketing tends to be more vulnerable to language and cultural issues. For example, scenario or situational-based learning methodologies often use specialized language or terminology that requires close scrutiny during review stages when working with offshore organizations. Be certain to consider the possibility of problems that may occur for specific training projects or functions that may be affected by language or cultural differences when considering offshore outsourcing. Lack of face-to-face interactions - training processes often require extensive human interaction to achieve quality results, especially when compared with technology or administrative functions. For example, interactions between business leaders, subject matter experts, instructors, instructional designers, media specialists, and others are necessary to achieve efficiencies and quality programs during development and delivery of learning. A thorough assessment of the need for personal interaction should be made before entering into any offshore outsourcing relationship. Time differences - having an offshore center that is awake and churning on learning process outputs while the local office team is asleep can be a benefit for some tasks especially in the program development tasks, but there are times when close proximity and immediate turn-around or communication is needed among project stakeholders to achieve operational excellence.

7 Conclusion Given that domestic training BPO is in its early stages of adoption, it should be understood that offshore outsourcing of learning functions is even less mature as a proven business practice. There are few long-term relationships where entire training functions or business processes have been successfully outsourced to offshore service providers. However, there are numerous examples of successful out-tasking of training projects such as major content development efforts, establishment of effective customer service call centers, and systems programming to offshore organizations. These successes in out-tasking and selective training business functions are likely to lead to more comprehensive training BPO engagements with offshore vendors. The emergence of offshore outsourcing provides very competitive options for specific business processes for many organizations. To accommodate these potential partnerships, the larger training BPO vendors are gearing up to provide end-to-end services in what is likely to develop into a hybrid business model approach as the opportunities for comprehensive training BPO outsourcing become more prevalent in the future. The majority of the initial wave of offshore training development initiatives has typically been implemented via Third Party Transparent relationship models. In these engagements, an onshore or local outsourcing service provider assumes the responsibilities and risks involved in setting up offshore equipment, facilities, resources, training, and relationships with the offshore supplier partner organization. As the offshore outsourcing trend matures, the frequency of offshore projects employing multiple or hybrid business models is expected to increase rapidly. Despite some very real concerns, the potential benefits of offshore outsourcing cannot be denied for many training activities with the primary benefits being reduced costs, availability of talented professionals, and speed of delivery. It should be understood that much of the trepidation about offshore outsourcing and inherent pitfalls can be managed quite well through careful investigation of potential partners, thorough analysis of offshore locations and countries, methodical evaluation of the impact on specific training processes to be offshore outsourced, and a systematic examination of the proper governance models necessary to gain efficiencies and insure quality. About the Author Harvey Singh is the founder and CEO of Instancy, a multi-national learning technology company that provides training outsourcing solutions (onshore and offshore) in the areas of technology infrastructure and content management systems. Harvey is also the co-founder and Chief Technology Officer of TrainingOutsourcing.com. Prior to founding Instancy, Harvey co-founded, MindLever in Research Triangle Park, North Carolina. MindLever was acquired by Centra Software (real-time collaboration and content management provider) in Harvey has served on the Board of Advisors for elearning standards initiatives IMS and DoD's Advanced Distributed Learning and was nominated as elearning Executive of the year in In 1993, Harvey co-founded Empower, a pioneering onshore and offshore learning service provider focusing on advanced multimedia, simulation, and learning product outsourcing TrainingOutsourcing.com