Couple of years ago one of my clients made a decision to insource their ERP from their single vendor to whom they outsourced their entire IT Operations and Development. The decision was based on non performance over a series of key levers, failure to meet key SLAs, lack of talent and bunch of other reasons and it made perfect sense.  For a niche ERP you really need highly skilled resources that won’t fit into a single provider – single global rate card which was the underlying situation.  The vendor tried to make it work with a small team of talent and filling the rest with mediocre resources.  The result was obviously a disaster that resulted in poor performance for every metric that you could measure. 

Once decision was made the sourcing began for a location offshore, the trio of clients resources starting scouting couple of cities and eventually settled on a expensive city to base their center.  (first mistake).  The fallacy was driven by the fact that other cities already are deprived of niche ERP skills courtesy big IT outsourcing firms. (second mistake) 

Then began a rebadging effort to take a few resources from vendor – half of these resources moved out in first 6 months since they didn’t fit into the new culture, the re-badged ones struggled,  They were like fish out of water and were clueless  since either they were used to mediocre ways of doing things earlier and could not adapt and the rest felt the heat and left while those that remained continued their poor old legacy. 

The new leaders  who stepped in  were further clue less about what is in store – many had no experience of outsourcing atmosphere, how the industry works and how to make effective use of it from both human talent and cost perspective.  That resulted in lot of pain labelled as growing pains.  Then the usual excuses follow lets learn to walk before we can run.

The recruitment offshore was hap hazard, not much uniformity in enforcing a compensation that is fair across the levels.  There were even examples of managers paid less than their subordinates that quickly resulted in demotivation.  Promised made to hire faster which fell flat later reality dawned. 

Logistics was a nightmare, having chosen an expensive city the cost of getting set up and finding a place of everyone was deemed unwieldy.  So it was a compromise to let some work remote for few days and have sporadic presence in office. Working to suit a global coverage became an issue as well since transportation needs had to be met. The facility has limited parking that killed whatever motivation resources had to come to office, lack of food after office hours for extended support is another example.  These are things a outsourced vendor are good at given their expertise and volumes.    So when principal employers go behind their outsourced vendor and set up shop in their own countries, they learn the lessons very hard.  

It took an year to stabilize, meanwhile the organization went thru near stagnation on the platform since it could not attempt anything beyond keeping the lights on.  Then came the realization that the platform needed some serious upgrades as the vendor never bothered to keep it up to date – cant blame them with the rate they agreed they could bare do Business as Usual work.  That took close to a year to plan and execute.

So two years in the process the results are slowly showing, the team is more or less stable, there is attrition that cannot be avoided entirely, some are avoidable if the managers know how to handle resources offshore when you bring serious talent and not channel their energies and exploit their talent. 

Adding all the costs besides the visits from clients sites, doing retreats and events to keep the motivation, keeping aspiration in check – the sum total really becomes questionable – was the rationale to save costs or get control, – it is the latter that proved to be a win. 

Insourcing is painful.  A good plan, and well-orchestrated strategy, engaging a consultant who has done this well is the key to make it successful and less painful to eventually gain the advantage for the reason you chose to insource.

At last check there was a serious consideration to bring some jobs back and slow whittle down offshore.