Last week, most of the LISA staff attended the LISA Forum Russia, Localization Outsourcing – Business Models and Practices in St. Petersburg, held in conjunction with the Software Outsourcing Summit 2004, Russia's largest software conference for international development clients. We concentrated on (1) the benefits for Russia to enter the localization outsourcing business, (2) how to design global-ready software and (3) how the use of established industry standards reduces costs and increases revenues for companies.

What may be a new opportunity for Russian companies, though, has become “old hat” for language services providers in many other parts of the world. We wanted the perspective of a mid-sized service provider that has been “in the outsourcing trenches” long before it was fashionable and found it at WHP in Sophia Antipolis, France. Sylke Denfeld, Project and Vendor Manager for WHP, explains why the key to the entire outsourcing process is project management, no matter how simple or complex the project. She then provides insights into how to be successful at managing customers in today’s outsourced environment.

WHP and its customers define outsourcing as the subcontracting of products or services to an external vendor. Rather than producing the product or service in-house, it is purchased from an outside supplier. Outsourcing allows a company to increase its capacities without increasing its headcount. As a result, more products can be localized in a shorter timeframe.

Outsourcing works only as a long-term partnership.

Outsourcing means synergy between all partners with tight interaction, combined with knowledge exchange and mutual support. WHP's vision is completely opposed to the current market trend of "auction- type" outsourcing, in which projects go to the cheapest provider or the one just available. For WHP customers and partners, there is tacit agreement among all parties that outsourcing is a long-term partnership and an ongoing process. As such, it is built through intense communication, mutual trust, cooperation and support, rather than through any temporary contractual arrangement. This means taking into account all aspects of its clients’ environments, from production procedures on up through the social and political relationships within the organizations.

Obviously, this agreement is the key to successful outsourcing over the course of a mutually beneficial association since it allows WHP’s customers to leverage the company’s long-term relationships with its suppliers (more on that below), while permitting the company to maintain a stable customer base. Therefore, many customers involve WHP at a very early stage in content creation, e.g. before product internationalization, thus avoiding the normal drawbacks and facilitating localization. Interestingly enough, WHP provides its internationalization and localization consultancy services at no cost, as part of its pre- and post-sales service.

Project management is fundamental to the success of a project, so it is never outsourced.

WHP’s current outsourcing model distinguishes between tasks and services that call for constant attention and full control and those which only require selective control. Project management is at the heart of the process and considered to be fundamental to the success of all projects, so it is never outsourced. Project management tasks include all communication about a given project with the customer, as well as between all internal and external players. Project managers are in charge of the overall assignment and organization of tasks, including the budgeting for and financial tracking of project costs. For this reason, they have a large scope of responsibilities, but are also granted a high degree of authority and decision-making power, which in turn results in flexibility and higher-quality responsiveness to customer needs. (Editor’s Note: Read The Life, or Lack Thereof, of a a Localization Project Manager for a discussion of the five critical success factors for localization project management. For insights into how to add risk management to the Localization Project Manager’s toolkit, read Risky Business! Both articles are by Willem Stoeller of Welocalize.)

Localization Project Management has changed substantially due to increased outsourcing.

The role of a Localization Project Manager over the last several years has changed substantially due to increased outsourcing. Project Managers now spend much more time in communication and relationship management. It means being intelligent about projects, and figuring out what is best for the client over the long-term. This involves analyzing how clients work, how the overall workflow process impacts all parties and then working with both clients and outsourced suppliers to improve whatever can be improved. (Editor’s Note: Read Project Management, ROI and Efficiency – Doing More With Less, by Cathyann Swindlehurst of Cygnet International, to find out about the “levers” that Localization Project Managers can pull to increase the overall efficiency of projects.)

Metrics have been introduced to track the quality levels of external players.

Vendor management (translators and technical staff) has become a must, and metrics have been introduced to track the quality level of external players. In particular, three criteria have been identified as crucial for project success and customer satisfaction and are being measured:

These criteria are tracked on a per-project basis and lead to an overall evaluation of the vendor performed semi-annually. At the same time, they allow for instant corrective action on any particular project should the results not be up to the required standards.

The Project Manager’s work still involves the personal relationship with the vendor but supporting, training and improving the latter’s workflow processes have been added. Financial tasks such as quoting, purchase orders and invoicing issuing have been automated through an internal project management workflow tool called IPM, which also serves as a generic vendor data repository.

Translation is the service which is almost always outsourced. There are two main reasons for this:

1. Translators should always live and work in their native countries.

2. Today’s economics require it. Gone are the days when a customer or language service provider could maintain large internal translation teams for the major languages. When faced with unpredictable and highly fluctuating workloads, independent translation teams are far easier to manage. WHP currently works with 42 stable teams based in 35 countries, but with very few individuals.

The company maintains in-house desktop publishing, engineering/testing and QA resources, but the latter are now only responsible for the final finishing and control steps and/or the urgent and tricky tasks. The bulk of the technical work is now outsourced to low-cost countries. The ultimate responsibility for any outsourced service, however, still lies with the Project Manager who manages all quality control steps.

Assessing quality for an outsourced project is different than it used to be. QA has gained increasingly in importance. The internal production process is more transparent, and quality flaws can be detected more easily when production is performed “on-site.” With increased outsourcing, the QA measures have grown, and new steps have been added at various levels during the QA process.

The first step is to make sure that the outsourced supplier chosen is competent in general terms to perform the requested tasks. Consequently, the first phase of QA is a qualified vendor selection process. To maximize adherence to the specific needs of some customers, the latter may be involved in a test translation review.

The outsourced supplier then enters a trial period to become familiar with WHP’s requirements and processes. A clear upward trend in the learning curve is expected during this period. After that, standard metrics (as explained above) are applied for each vendor and each project. During debriefing sessions, feedback from external partners is solicited in order to improve mutual performance in the future.

Expectations and requirements need to be defined in the outsourcing contract.

A major concern of localization customers with this type of “cascading” outsource model is quality assurance and overall process control at a critical moment, e.g., just before product release. When outsourcing significant and vital tasks and processes, customers lose their immediate and continuous control, transferring it to a third-party organization. This makes most customers nervous, so it is therefore essential for all parties to clarify expectations and define requirements in the outsourcing contract at the beginning.
It is natural that new customers are interested in the vendor qualification process. They also want to know how WHP evaluates and checks the service of its sub-contractors to ensure that the required quality is being achieved. Some customers may also be concerned with legal issues, such as confidentiality, intellectual property, copyright protection and/or insurance coverage for sub-contractors. To allay their fears, WHP adheres to a very strict vendor qualification process, which allows it to select competent sub-contractors with a proven record of experience in the required field.

Small teams are no guarantee for reliability or quality

The customer’s risk is amplified and may even become dangerous, when working with language service providers who have little or no control over their suppliers as they work with a fluctuating pool of translators and technicians. The simple fact that the provider uses small teams is no guarantee for reliability or quality, as small teams may swap resources and add freelancers, depending on availability and workflow.

QA requirements limit the current pricing pressure

This is why WHP is convinced that there is a limit to the current pricing pressure, i.e., a customer will always have to balance cost against service quality. Low-cost service providers cannot afford to maintain a rigorous vendor selection and management process day after day. Quality will always be affected adversely at some point under such conditions.

WHP’s retention rate for both clients and outsourced suppliers is almost 100%.

To avoid this trap, WHP follows ISO-compliant processes and metrics that are also binding for all of its teams. Its client retention rate is almost 100%, and the same applies to its external teams, with most having worked with WHP for almost ten years. The company applies metrics and submits its outsourced service providers to a constant evaluation process on a per-project basis. To allay any legal concerns that customers may have, it is an integral part of the standard selection process to require that all outsourcing partners sign a non-disclosure agreement (NDA) and that they be covered by a professional insurance contract. A certain level of data security such as antivirus software, optimized archiving procedures, etc. is also required. Most important, WHP performs on-site audits.

Taking cost reduction one step further past outsourcing leads to “off-shoring.” According to the Sourcing Interests Group (SIG), U.S. and European companies can obtain net savings of 25% to 50% when outsourcing technical tasks to third-party vendors located in emerging countries, where living costs and salaries are lower. However convincing the immediate economic benefits may be, such a model is not without micro- and macro-economic long-term effects. These may include an increased loss of process control for the company and growing unemployment and loss of customers for the economic region in which it’s located.

Outsourcing requires a perfect synergy that appears only after years of cooperation

The main, if not only, advantage to off-shoring is cost reduction. With the current price pressure such considerations count. But there are many inconveniences. For instance, engineering and publishing is a highly interactive process, during which many actors have to be perfectly tuned to respect tightly compressed timeframes. The “dance” truly requires a perfect synergy that appears only after years of cooperation. When dealing with teams in remote time zones that may have different quality standards, unimaginable working conditions (you can phone your Chinese engineers almost around the clock), or a fuzzy time perception, you have to rethink and reimplement your whole process. Cultural aspects are are almost always underestimated, if not ignored, no matter how good the intentions up-front. (Editor’s Note: For a different take on this issue in outsourcing, see Riding the Next Wave: Outsourcing to Latin America, by Teddy Bengtsson of Idea Factory Languages.)

WHP is a traditional company in the sense that it remains focused more on long-term benefits than short-term turnover.

Although it has become fashionable, WHP has no current plans to invest in local operations in low-cost regions. That being said, the company has worked with local partners in countries such as Brazil, Russia, India and China (BRIC) since 1996. The company’s strategy continues to be one of supporting dynamic partnerships with local companies that share its standards and views, rather than taking them over or replacing them by launching its own operation. WHP strongly believes that this approach frees it to be much more flexible and to avoid substantial overhead. The latter often annihilates the initial advantage of reduced labor costs. Perhaps, in this regard, WHP has a traditional philosophy in the sense that it remains focused more on the long-term benefits, rather than short-term turnover. (Editor’s Note: For more details on WHP’s strategy and the man who leads the company, Günther Höser, read Two CEOs Speak Their Minds.)

There are several areas in which customers could increase the benefits to be gained from outsourcing.

There are several areas in which customers could increase the benefits to be gained from outsourcing. On the technical side, greater cost savings and reduced time-to-market will result as more and more customers switch to developing their products according to open standards, as opposed to proprietary formats and tools. WHP is a medium-sized company, so it cannot dictate or force a client to use a certain technology. Instead, clients determine the technology and WHP then adapts its processes. Obviously, this benefits its clients greatly since it means WHP is flexible enough to integrate its clients’ workflow and processes, instead of the other way around.

On the business side, replacing short-term contractual arrangements (to take advantage of the lowest prices - at least on the surface) with long-term partnerships with language service providers has a considerable positive impact on quality, cost and time to market. This type of stable relationship leads to workflow integration and process optimization on both sides – the key to successful outsourcing.

Sylke Denfeld, Former Vendor Manager at WHP.