What Is the Connection Between Six Sigma and Offshore Outsourcing?

After the glow of labor savings has diminished, the true long-term success of offshore initiatives centers on the teamwork and processes of a globally distributed workforce. Disregarding process improvement methodologies, especially Six Sigma, is a recipe for offshore failure. This article explains why managers need to incorporate the Six Sigma methodology in their offshore outsourcing projects.

Introduction
Six Sigma offers companies the chance to make breakthrough performance improvements. Its ability to generate cost savings and enhance quality through business process improvement is well documented. General Electric has claimed $6.6 billion in savings from its Six Sigma initiatives. Motorola, one of the original thinkers behind the Six Sigma program, has measured nearly $20 billion in savings since the 1980s.

Alongside Six Sigma, offshore outsourcing has surfaced as another powerful movement in business. It holds the potential to change company cost structures and add whole percentage points of profit to bottom lines. There is a race — almost a panic reaction — for companies to take advantage of this movement, but care must be exercised to ensure that service performance and quality are not compromised in any way.

This is where a Six Sigma practice can be beneficial. Six Sigma is a tremendously useful methodology that can measure, analyze, and improve key business process performance indicators. For companies practicing offshore outsourcing like GE, Dell, Intel, Motorola, and many others, Six Sigma has proven itself as the method of methods for breakthrough performance results.

Offshore and Six Sigma
The majority of offshore outsourcing projects in practice today involve either contact center processes or application development and maintenance processes (AD&M). As the span of control increases with globalization, it becomes critical for management to establish a method to define, measure, and control a business process.

The heart of the Six Sigma methodology is a disciplined cycle of process improvement called DMAIC (define, measure, analyze, improve, and control). DMAIC begins when companies map the critical business process and define its key performance indicators (KPIs). Next companies measure the KPIs for the current process. After the measurements are noted, the company adjusts and improves the process through collaborative teamwork and analysis. The cycle described is iterative in nature: through continuous investigation and improvement, a process can achieve a high Sigma level.

Sigma is a statistical term that measures how much a process varies from perfection based on the number of “defects” per million units. A process that achieves a Six Sigma level has reduced defects to 3.4 defects per million (0.00034%). This is practically error-free performance.

The information technology and service oriented groups within company walls have been late adopters when it comes to Six Sigma — ironic since IT is in the business of process improvement. Every day, IT groups work with their corresponding business side to analyze and improve business processes through the application of information technology. Yet when it comes to their own processes, IT divisions have been slow to implement Six Sigma.

As IT groups move work to offshore vendors, the ability to define, measure, analyze, and improve those processes will become imperative. By incorporating Six Sigma with its own work, IT will be able to deliver high-quality, value-added services to its business units. Six Sigma capabilities will be a major component in the alignment being sought today between the world of information technology and the business units they serve.

The best practices of the future will include offshore outsourcing, as well as a business process methodology that can continue to improve and perfect the vital service processes of the IT organization.

Applying Six Sigma to Offshore Initiatives
The next question managers ask is where to begin. EBS can help. We are one of the premier companies helping companies to answer the Hows and Whys of an offshore outsourcing program. We were one of the first to produce a comprehensive book on the subject, Offshore Outsourcing: Business Models, ROI and Best Practices (Mivar Press, 2005). In addition, we have an active IT return on investment (ROI) practice that shows companies how they can measure the business value of their IT investments. Our expertise can guide your company in the quest to generate cost savings and quality improvements through offshore outsourcing and Six Sigma.