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Project Selection Criteria for Offshoring

 In one of my blog posts, I started this topic, and here I want to continue from where I left off. Below is a model that can help in prioritizing projects for offshoring. This model is based on four aspects of an application or project:

  • Business

  • Technical

  • Management

  • Legal

Under these major categories, different criteria influence offshoring possibilities positively or negatively. The criteria that negatively affect offshoring when they are high can be considered as "Pullers," while the criteria that support offshoring when they are high can be considered as "Pushers" or supporters. Each of these categories may include both pullers and pushers. It is important to note that these criteria are for the comparative study of various projects to prioritize offshoring. A puller is not necessarily a factor that stops offshoring but may influence its priority. Except for legal aspects, all others can be managed offshore. Even in projects with legal restrictions, strategies can be employed to manage some work offshore while keeping highly restrictive tasks onsite.



Business 

Several criteria related to business impact the feasibility of offshoring:

  • Business Value: If a project is critical to business strategy and any risks may negatively impact the organization, its business value is considered high. These projects have higher risks, making them lower priority for offshoring.

  • Special Business Knowledge Required: If a project requires specialized business knowledge, managing it remotely may be challenging. Higher dependency on business knowledge lowers the priority for offshoring.

  • Cost of Maintenance or Development: Cost is a major factor in offshoring decisions. Higher project costs make offshoring more beneficial in terms of cost savings, thus increasing the priority of offshoring.

  • Research or Intellectual Property (IP): If a project involves research or unique intellectual property, sending it offshore requires careful consideration. Such projects generally have lower priority for offshoring.

Management 

Management-related factors also impact offshoring feasibility:

  • High Customer Interaction Needed: If a project requires frequent interaction with end users or business teams, managing it offshore can be challenging. These projects have lower offshoring priority.

  • Dependency on Local Knowledge: If project activities rely on localized knowledge, such projects take lower priority for offshoring.

  • Large Number of Resources Required: Projects requiring a large workforce are ideal for offshoring, where resources are more readily available. Higher resource requirements increase the priority for offshoring.

  • Mature Processes: If project processes are well-established and standardized, offshoring becomes easier and more viable.

  • Long Project Life: Since transitioning a project offshore involves costs, longer-duration projects benefit more from offshoring.

  • Availability of Special Skills Offshore: If a project requires specialized skills that are readily available at offshore locations, offshoring is more favorable.

Legal 

Legal restrictions can significantly impact offshoring feasibility:

  • Legal Restrictions: Certain projects may have regulations preventing offshoring. However, partial offshoring may still be possible.

  • Privacy or Data Protection Laws: Some projects require strict adherence to data protection regulations, limiting offshore involvement.

  • Security Requirements: If a project has high-security requirements, offshoring feasibility decreases.

Technical 

Technical aspects also influence offshoring feasibility:

  • Independence/Self-Containment: If a project is modular and does not depend on other systems, it is easier to offshore.

  • Mature Specifications: If project specifications are stable and well-defined, offshoring becomes more viable.

  • Big Scope: While offshoring provides cost benefits, very large projects can be difficult to manage remotely.

Relative Score for Offshoring

To determine the feasibility of offshoring, each criterion should be assigned a weight based on its level of impact. Since the goal is to prioritize projects rather than precisely measure offshoring suitability, simple grading can be used. If there are 14 criteria, they can be ranked from 1 to 14 based on their influence.

Rating of Each Criterion:

Projects can be rated on a scale of 0 to 3 based on their specific characteristics:

  • 0: No impact or not applicable (e.g., no legal restrictions).

  • 1: Low impact.

  • 2: Medium impact.

  • 3: High impact.

Calculating the Total Offshoring Score (TOS):

The total offshoring score for a project can be determined using:

TOS = Sum of (Weight x Rating)

By comparing the TOS of different projects, organizations can prioritize which projects to offshore first based on strategic and operational feasibility.



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