Hidden Costs: Travel Time And Expense Add Up Quickly

An often-overlooked cost of offshore outsourcing is the required investment in management time and travel. Sony Electronics Inc. is an example of a company taking a hands-on approach to its offshore operations. Management is key, given that the company uses three vendors for offshore coding and a variety of operations that take place overseas. To keep tabs on what's going on, Maureen Read, VP and general manager of Sony's customer-services center, visits India three times a year, as do several other Sony managers, usually at separate times to keep the visits on a rotating basis.

Sony's approach isn't necessarily the norm in visiting offshore sites. Three out of 10 companies in the InformationWeek Research survey have never visited their offshore vendors or have visited only once. On the flip side, 22% have people from their IT management teams working on-site at the offshore facilities, and 17% send managers quarterly, according to our survey. Costs for travel are often underestimated. "If you send four people to India once a year, you've just spent $50,000 to $60,000, and that's on coach class," says Dean Davison, a Meta Group analyst. "That's half of a person in terms of salaries and things."

Sweetheart Cup Co. takes the opposite approach. No one from CIO John McGregor's team has visited China, where development work is being done on production-tracking software. That work is handled by a U.S. company, E5 Systems Inc., and Sweetheart lets all interaction flow through the E5 team, some of whom speak Chinese. "We rely on E5 Systems," McGregor says. "We're not putting ourselves in the position of having to translate communications."

Illustration by Jonathan Weiner

Return to main story: Precious Connection