The reasons for deciding to outsource work can be many and varied. Often the move is driven by cost concerns but this is not always the case. Many organisations, for example, find that they need to outsource to a secondary location to find scalable talent or to be near to a key client.
Whatever the reason for the transition, you will need to select an outsource partner (unless you decide to open a captive operation) and the future success of your entire organisation could then be heavily dependent on how that partner performs. Therefore, selecting the right partner is a very critical process.
What do you need to consider when going through the selection process?
- Cost: This is obviously a critical consideration but ongoing costs are notoriously difficult to determine. What is certain is that costs are not simply related to the monthly bill you get from your outsource partner. Other intangible costs such as drain on management bandwidth, attrition and training are often very significant – but problematic to quantify. If you chose the cheapest option might this radically increase these intangible costs?=
- Management Capability:It is critical that you assess the management capabilities of any outsource partner. Offshore business in countries such as India and Romania have grown exponentially over the past decade or so but management capability has not necessarily been able to keep pace with that growth. It is not a question of education or technical ability; it is more an issue of commercial experience and acumen. Most organisations who transition work abroad are looking for people who can operate with a knowledge of their home country market conditions and – even more difficult – an understanding of home country cultural expectations. How do you assess management capability in advance of working with people?
- Attrition rates:How does your potential partner manage its attrition rates? Attrition rates are notoriously high in the outsourcing sector in and this can cause serious difficulties on an ongoing basis. Attrition leads to knowledge and skills seepage, and massive recruitment and re-training costs (which can eat away at any cost arbitrage you were looking to harvest.)
- Size:Should you team up with a large, well-established player in the market who has size, scalability and well-tested procedures, or with a smaller outfit which is growing and hungry for your business? With a larger player you might end up being a small fish in a very large pond and feel you are of little importance whereas a smaller partner may see you as strategically vital but lack the sophistication you are looking for.
- Cultural affinity: Your home team will need to work closely with offshore colleagues and vice versa. Often, however, the outsource location is in a country with a completely different cultural approach to all aspects of business. You cannot expect your colleagues in India or Romania to automatically understand your expectations of them. Left unattended, the cultural gap often becomes the biggest barrier to effective cross-border working.
These are just a snapshot of some of the issues you need to consider when selecting an outsource partner. We would love to discuss how we could help you refine and implement you partner selection process so why not contact us.
Latest version updated 16th November 2017