When it comes to making sourcing decisions, buyers have many things to consider. They need to look beyond the surface cost benefits and truly evaluate if there will be synergy between their organization and the outsourcing provider that will lead to mutual successes not only in the short-term, but well into the future. Vishal Ahluwalia, Executive Director-Head Outsourcing/Off-shoring WMA Ops at UBS Wealth Management, a recognized global sourcing evangelist, has been effectively implementing and managing outsourced vendor relationships for close to twenty years.
His extensive experience as a buyer of services from North America, Latin America, Europe and Asia Pacific has given Ahluwalia a unique perspective and understanding of what is involved with finding and keeping the right provider, and what it takes to effectively transition to a new one.
NSAM: What are the primary factors that play into your sourcing decisions?
Ahluwalia: Thank you giving me the opportunity to share my personal views.
Risk, domain capability, setting the right Service Level Agreement (SLA) and creating a pool of resources which can meet the changing demands of the market. Trust, transparency and commitment on both sides. Plan for governance, including teams working along with the vendor organizations, and possibly sitting in the vendors’ office to address the mutual issues. Tracking and reporting, push vendors to invest in the additional governance needs. Establish a proper escalation process that involves business entities as well in the client organization. Establish benchmarks and challenge the vendors to innovate and improve on the goals. Establish penalties and incentives to motivate the vendors and force them to compete with each other.
NSAM: As a buyer of outsourcing services, how do you effectively manage vendor relationships?
Ahluwalia: Buyers must establish a strong evaluation criteria. Evaluate vendors on common parameters. Utilize flexible, yet robust processes to rationalize the organizational portfolio and plan for vendors based on the portfolio (either by business lines, technology, functional organizations, regions, language, proximity to business, etc.). Involve the associated business entities in the planning process and socialize the process early in the cycle to avoid possible conflicts. Create a strong and transparent governance structure.
NSAM: When do you start renegotiating contracts with your service providers (immediately, mid-term, near the end of the term)?
Ahluwalia: Mid-term as this gives both sides time to level set futuristic expectations.
NSAM: How should buyers transition to a new service provider?
Ahluwalia: Make the selection process visible, transparent, involve associated functions in the organization. Make sure to evaluate the processes, competencies, delivery and quality credentials, vendor portfolio, culture, past experience working with the vendors, etc. And use a scoring model to compare the vendors on the same parameters that are of importance for the organization.
NSAM: Where are the strengths and weaknesses of Latin American countries when it comes to BPO and IT services?
Ahluwalia: Strengths are near shore locations, hunger to drive and meet customer demands, a lot of support from local country associations, and languages which can support the client’s needs. Weakness include creating a mass and the fact that buyers have yet to get the confidence that providers can meet multi-million dollar annuity deals cutting across IT, BPO and Infrastructure. There are too many associations rather than being a collective; it’s become a race against time. Latin American countries should look at mature offshore markets as a role model and not a threat.
NSAM: What should buyers look for when considering Latin American countries for their outsourcing needs?
Ahluwalia: They should look at Latin America as a destination where they can get sourcing done to meet company goals and objectives and to regard this region for its strengths and not as an alternative or comparison.
NSAM: Competition is heating-up between Asia and Latin America for outsourcing market share. Which countries do you think will emerge “victorious” at the end of 2012?
Ahluwalia: Again as I said, these decisions are not made just because someone likes a country. They are made based on a lot of factors and futuristic goals, so my thoughts are neutral and I as a buyer look at players and regions which can meet demands and expectations.
NSAM: Some experts believe that labor arbitrage is dead – what is your opinion?
Ahluwalia: I disagree as the fact is we all have matured in understanding the concepts of off shoring and continuous improvement has led us to achieve savings and gains in other areas too.
NSAM: What are the top five “right sourcing” strategies?
Ahluwalia: Pick a vendor /Location, Effective Transition, Governance, Stakeholder Mapping and Continuous Improvement.
NSAM: There has been a lot of focus on Shared Services recently. What are some of the elements for a successful Shared Services operation, and are Latin American countries viable sourcing destinations for this type of operation?
Ahluwalia: Yes, there is lot of focus on Shared Services, and this is one low hanging fruit and risk that can be evaluated before complex processes are set for transition. Success is established on maturity of vendor, the buyer side and how well the transition can be done.
Yes, Latin America is a viable location, and organizations like yours is bringing lot of thought process and making buyers and providers share ideas. Thank you.