In To Make Or To Outsource? A Strategic Perspective, we discussed the important Make or Buy decision. This was from a manufacturing perspective. Services can be outsourced too. In fact, services are increasingly being outsourced, particularly in the IT and ITES industries.
The finance industry outsources services too, in a large way – particularly in the areas of research and customer handling. The communication industry, including the film industry, also outsources services.
Why Choose A Partner?
- Domain expertise
Some assignments call for a specific set of skills. These skillsets could be in the areas of finance, taxation, technology or even design. The need for such expertise could be long term or short term.
- Cost economics
Overheads and standardisation can lead to cost concerns. Outsourcing often solves this problem. When you outsource to a good partner, you get the benefit of indirectly using several additional but hidden resources, such as supervisors, IT etc. For instance, while using the services of a call centre, even hiring one agent actually gets you more resources since you also get the support of the IT person, the supervisor and even the quality control person. This is the reversal of the hidden cost syndrome – this is the hidden resource advantage.
- Learning curve
When you land a short term assignment that needs to be executed quickly, or have time sensitive assignments, getting people up to speed requires an investment in time and money. Outsourcing to experts solves this problem.
- Complementing service bouquet
You may wish to extend your company’s bouquet of services. For example, a hotel may want to add a business centre or a travel desk. In such cases outsourcing the function makes eminent sense.
- Service presence
You may want your company’s presence in another city. The high cost of setting up and running a small office as well as the cost of learning the nuances of a new city do not make economic sense. In such a case, outsourcing is the best option. For example, a hotel wanting a booking office in a small town may resort to such an option.
- Temporary requirement surges
This could be the result of a surge in demand, or a new project win. For example, call centres often find that a certain process needs a few extra seats, perhaps because of the season – during the Christmas season, the call centre may require more agents. At such times, outsourcing is the best, if not the only option.
What To Look For When Choosing A Partner
A partner should complement your team. They may bring in domain expertise you don’t have or may complement your existing resources. Ensure that they have the expertise to match your requirements or the ability to come up quickly on the learning curve.
Your partner’s reputation can be a key criterion. After all you are entrusting a service process to this partner and service needs a certain attitude to match your own.
- Cultural fit
Since service is about people and people operate within a culture, it is important that you understand the work culture and even the business culture of your partner before outsourcing
Pricing may not always play a crucial part in the selection process. The pricing is governed by
- Urgency of the assignment
- Criticality of the assignment
- Skills required
- Quality requirements
- Top Management
It is often the top management that drives the culture, performance and the environment within the organisation. They also directly or indirectly affect the quality of work and the results. The smaller the organisation, the greater the influence of the top management in every task.
- Client base
This is often a good indicator of the quality of the vendor. A good client base gives a level of comfort since it is an assurance that due diligence has been done. This reduces the cost of due diligence.
- Conflict of interest
This could be a make or break call. If there is a conflict of interest or if for some reason, your partner is a competitor, it may be best to think of partnering someone else.
- Quality fit
This should be taken in conjunction with the cultural fit. Adherence to quality need not imply that the organisation is necessarily quality conscious. The desire to produce quality could either be the result of a good attitude, or it could be merely compliance.
- Service orientation
Does the organisation have a service orientation that is in sync with yours? If it is better than yours, are you willing to invest in, learn and adapt to this? Conversely, would you be willing to invest in transferring this culture to your potential partner if they need to come up to speed? What are the risks involved till they match your needs? Do you plan to partner with them on critical areas or non-critical areas?
What Your Partner Will Expect From You
Long term outsourcing is a meeting of cultures, minds and a host of other soft aspects of business. Aside from revenue, a partner will also expect
- Transparency and trust
This is the hallmark of a good long-lasting partnership. For partners and their teams to operate comfortably, transparency and trust go a long way in encouraging performance and even create a sense of ownership.
- Expectations outlined
A partner needs to beclear about what you expect from the partnership and the various people within their team. This is not just SOPs but also larger expectations in terms of behaviours, culture, attitude, shared goals and vision.
- Initial handholding
A new-found alliance is quite often accompanied by expectations of support and initial nurturing. This is in your interest as well.
- Team spirit
The partner will expect that their people be given their due in terms of respect, facilities and infrastructure and that they will be treated as an integral part of the team.
The best way to arrive at the partner’s expectations is to outline what you would have expected had you been seeking to provide your services to a larger partner.
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