Developing An Effective Offshoring Strategy
Offshoring isn’t as straight forward as many would like you to think!
The demand for offshoring services is booming, so much so that where it was once something big companies considered, much of the growth today is being driven by small to medium enterprises.
The savings can be substantial … but at the same time it can cost your business money and a lot of customer dissatisfaction if not handled correctly.
We get calls regularly from very experienced marketers (online and offline) lamenting how things aren’t going well with their BPO provider.
The fault comes back to the customer if they don’t focus on these three fundamentals right from the outset:
#1: Identify the RIGHT Provider
Whether you are after a freelancer or Business Process Outsourcing (BPO) operator, this function takes time and it can work out to be quite expensive.
For example, one Internet Marketer recently advised that he had spent $20,000 to identify and establish a base of proven “offshore” freelancers he could work with.
This was a refreshing admission as too many online marketers peddle the line “there’s an army of low cost freelancers out there waiting to do work for you”. There is … but finding people who can actually deliver takes time and costs money!
Business Process Outsourcing (BPO) needs are much more demanding and require a higher level of due diligence.
It’s very different to using a freelancer for a specific on-off task such as banner development, graphic design, basic research, website creation, etc. BPO by comparison involves appointment of dedicated staff on a full time basis – an extension to your team even though they may be based offsite / offshore.
Many companies perform this due diligence process by travelling to centers such as the where they spend up to a week talking to various suppliers in order to identify the most suitable supplier for their needs. In other words, they are undertaking “research”!
This initial visit can cost around $2,500 / person (travel, hotel, meals, out-of-pockets expenses, etc) … and often it is undertaken by 2 staff members rather than by an individual.
That’s the 1st visit … and generally a 2nd is required to firm up a relationship and do some testing. The all up cost may end up being in excess of $10,000!
Of course, you can always reduce the cost by eliminating the first trip – by sending out a broadcast to all your connections asking for referrals and / or tap into offshore outsourcing discussion groups on services like Linkedin.
However, as one group we deal with who did the latter found, you get inundated with responses (in their case, they had 35 responses) and end up no better off – you still need to go through a qualification process which takes time and often puts you in the same position of having to visit the offshore center to get a first hand appreciation of what is on offer due to the enormous confusion which talking to too many people can create.
The key is not to be taken in by slick sales pitches, fancy infrastructure / offices, or esoteric factors.
And most importantly, don’t make a decision based on price. Always remember, that for any relationship to work effectively, there has to be something in it for both parties!
I’ve been working in the outsourcing sector for more than 27 years now and have seen service provider after service provider go broke, change ownership and / or change focus … and each time the customer is left in hanging on a limb.
#2: Get “On-the-Ground” Input
When exploring options, every outsourcing provider will tell you they can handle everything you need … and in some cases they can.
However, they are selling you THEIR facilities and therefore you have to expect them to say that.
If you don’t understand the alternatives plus how things actually work in the local market, then you may end up dealing with the wrong provider. It’s no different to what happens in your domestic market!
On the ground knowledge goes well beyond finding the right partner. It covers many other aspects including staff selection, technology, cultural and local business practice.
You need to consider all these areas when determining your offshoring strategy!
#3: Manage the Process Properly
If you have a big requirement (and associated budget), you should go to companies such as IBM or Accenture who have the management / corporate structures you most likely want.
However, many smaller companies do not have the budget required to deal with groups like this and therefore need to work with 2nd tier operators. In many cases, it is not about budget as your needs can often be better met by these smaller providers as they can be more focused.
Many of the 2nd tier operators are very good … but don’t expect the same management structure the big boys provide. Yes, the costs are lower but you cannot expect everything to “just happen”.
You will most likely hear some amazing stories from service providers – e.g. “no need for a full-time manager unless you have 35 or more staff working on your project” – which are basically sales pitches designed to give you a comfort feeling (i.e. lessen the perceived cost).
Quite simply, you need to plan and implement a management structure based on knowledge and the vagarities of the local workforce!
The above – plus more – are taken into consideration by our Offshoring CONNECT service!
Make sure you address all the above in your offshore outsourcing Action Plan?