- The growth of the outsourcing phenomenon has given birth to many large, mid-sized, and small outsourcing companies worldwide, thereby making vendor selection and management a difficult task for businesses and individuals in the MENA region.
- In such a scenario, following a structured approach while selecting your outsourced partner can prove to be really helpful.
- This article highlights key tips which can help individuals and businesses select the right outsourcing vendors.
Over the past few decades, the abundant availability of skilled labor at low cost has helped India become the de-facto outsourcing destination for a variety of core and non-core business tasks. These functions range from Information Technology Outsourcing (ITO) to Business Process Outsourcing (BPO) to Knowledge Process Outsourcing (KPO), whose key services are shown below. In this first article of a two part series, we will share some tips which can help individuals and businesses select the right outsourcing vendor for these services. And in the next article, we will elaborate on how to manage the relationship once you have chosen your outsourced partner.
Assuming you want to outsource one of the above or any other tasks, we recommend following the below steps to select your outsourced business partner.
Step 1: Clearly define what you want to achieve out of the outsourced relationship. Keep in mind that identifying the task(s) to be outsourced is not equivalent to the defining the desired end-result – rather, the desired benefits of outsourcing typically include freeing-up management time to focus on core competencies, adding capacity or specialized skills or both to your business, increasing efficiency, managing fluctuation in workflow, lowering costs, among others. Therefore, clearly defining the scope of tasks to be outsourced and their intended benefits is extremely critical, and organizations that do not understand the difference between the two – and focus only on scope & cost – are more likely to end up having unhappy outsourcing experiences. Once the scope and objectives are defined, follow the below steps to assess the potential organizations/individuals you are considering outsourcing to.
Step 2: Check experience. Find out the vendor’s experience of delivering services similar to the one you plan to outsource. This could include number of projects executed, types of clients worked for, and sector/function expertise for knowledge intensive tasks. You can also ask for experience and qualifications of the management team, project managers and other team members. If you are entering into a long-term or large contract, it is also advisable to interact with the proposed team members prior to signing the deal to ensure fitment between your requirement and the team chosen to execute it (consider it a mini-interview but do not think you need to micro manage the team).
Step 3: Ask for references and work samples. Seek client references and speak with them to better understand the vendor’s scope and quality of services, timely deliveries and turnaround time, client engagement practices, customer support etc. Be sure to check about potential challenges that might come-up and how best to avoid/overcome them. Further, ask for samples of work done by the provider in the past to get a feel of the end output. Note that it may not be possible for the vendor to share actual deliverables owing confidentiality agreements with other clients, so respect that constraint and ask for prototypes/samples prepared for marketing purposes, as feasible.
Step 4: Ensure good communication and client management practices. Communication, or the lack of it, can single handedly make or break your outsourced relationship. Therefore, understanding your partner’s communication practices is critical.
- Does your partner operate in the same time zone as you? What is the degree overlap in your and their working hours? For Middle East firms outsourcing to Indian vendors, ensuring minimum overlap in the working week is important since most Indian firms operate from Monday through Friday. A 100% overlap may not be feasible, but certain overlap is essential.
- Do you speak a common language (usually English)?
- Is the team available on standard communication channels like e-mail, phone, VOIP (Skype), etc.? What is the best way to communicate?
- Who will be the single point of contact for your queries, feedback, concerns, etc.? What is the typical response time to such queries?
- Have you communicated- and does your partner understand- your organization, your team members, and your long term vision beyond the scope and benefits of the immediate project? It may sound trivial, but is very important to build a string business and cultural relationship with your partner.
- More on communication in our subsequent post on managing outsourced relationships, but at this stage it should suffice to say that importance of communication cannot be and should not be underestimated.
Step 5: Assess financial stability. Usually important in the case of large relationships, where it is important to make sure that your partner has sufficient working capital and is financially secure. Cases where a complete business function in being outsourced also merit an in-depth risk assessment of the vendor’s business and financial health, and its ability to develop and deliver the services in question.
Step 6: Ascertain intellectual property ownership. Depending on the nature of the work being outsourced, it is important to define the owner of IP being developed/re-produced as part of the relationship. For any custom work being done for you as a client (higher-end KPO work or specialized IT development), the IP should belong to you; whereas for lower-end or commoditized work (BPO or ITO services), IP may belong to either the client or the vendor, as the case may be. In either case, it is important to clarify and define at the outset.
Step 7: Check IT infrastructure and quality certifications. Once again, this is applicable for large outsourcing relationships where the use of best-in-class IT infrastructure and data security is imperative. E.g. if your relationship involves sharing of confidential client/customer data, then ensuring information security is important. Business Continuity Plans (BCP) to ensure uninterrupted support/services is another typical requirement of a large relationship. Also, check if your provider has accreditation like CMMi, ISO certificates, Microsoft competency certificates that ascertain processes to manage projects, maintain quality and deliver the work.
Final advice – select specialists, start small and reduce risks. Big outsourcing vendors are likely to meet all the above criteria, and if you are a large organization looking to outsource a standard task, then going for a large vendor makes sense.
- However, if you are an individual or small organization looking to control outsourcing costs, need flexibility in engagement models, and seek senior attention, then smaller vendors fit the bill as opposed to larger players who are likely charge more and may not give the requisite attention to a smaller client.
- Secondly, if your requirement is niche which can be met only by an industry/domain specialist, then you should opt for smaller specialised provider who will have greater experience in delivering services you need, and will innovate at a much faster pace to deliver best-in-class specialised services. Overall, the need for smaller and specialised vendors delivering custom work is there and is likely to grow even further in future.
Irrespective of the vendor you choose, start small (with a pilot project or a smaller team) and scale-up with time as you assess on-ground fitment of the vendor with your business objectives and culture. Finally, we leave you with a graphic depicting “Client Expectations from Leading Outsourcing Vendors” (as per a report by Gartner). All these parameters may not be applicable all types of outsourcing relationships (big/small), but most of these are important and should help zero-in on the right partner.
We hope the above pointers will help you choose the right outsourcing partner, and will follow-up on this article with another one on best practices for managing outsourced relationships.