MIS Quarterly Executive


High employee turnover combined with acute skills shortages creates significant HR challenges for offshore IT outsourcing vendors. These challenges also pose risks for clients of offshore vendors. There is a wealth of insights into how client firms can mitigate their own HR issues, but there is a conspicuous lack of information on offshore vendors’ HR challenges and how their clients can mitigate the risks posed by those challenges. This article describes the four key HR challenges typically faced by offshore IT outsourcing vendors in India—skills shortage, high employee turnover, diminished employee motivation and well-being, and increased training and development costs. Based on in-depth interviews with managers in Indian IT outsourcing vendor firms, we recommend that clients should make relational investments in some areas of their offshore vendors’ HR functions to help the vendors address their unique HR challenges. These investments will help clients minimize their own risks arising from the vendors’ HR challenges. Based on a second round of interviews with some of our original interviewees, we discovered that the character of offshore vendors’ HR challenges has changed during the current economic crisis. These changes highlight the tricky nature of the challenges and reaffirm the importance of clients working closely with vendors to minimize the risks they pose, today and in the future. We discuss the changes and advise clients’ IT leaders on how to adjust to them.