In today’s sourcing market we hear how this location needs to ramp up talent, that IPA must offer better incentives, or this vendor is not performing up to scratch. What’s often left unspoken is the mistakes made on the buy-side.
According to IT consultancy Harvey Nash, 38% of outsourced projects today fall below expectations – which reflects as much on buyers as it does on providers. Nearshore Americas sat down with Marty Pine, former Senior VP, Global Strategic Sourcing at ACE Group to find out what buyers are doing wrong, and how they can pre-empt an outsourcing marriage going sour.
Doing your homework
The saying ‘Don’t work hard, work smart’ applies to your due diligence as well. There are two things to keep in mind when deciding whether and what to outsource:
- Look beyond cost savings – Outsourcing must be viewed holistically. In other words, look at total workflows in your company, where best to optimize, and how to improve your entire business while leveraging the gains from that outsourced project. Finally, configure what the retained organization should look like by the end of the project. Ask the question – What do we want to have two years from now?
Most importantly, says Pine, be realistic about costs. “Many firms fail because they don’t plan for the expense of managing the vendor. That usually comes out to 8-12% of the potential savings from that project, and this needs to be included in the equation”.
- Get help – In many cases buyers decide what they want to outsource without having any background in outsourcing. “They do the work internally and self-select, without the experience to make that decision. If you want free consulting, put an RFI (Request for Information) out on the street and have people come in and give you advice on your business. Just don’t go into it blind”.
Destination selection versus choosing a provider
With the amount of information being thrown around about different Nearshore locations, it’s common for companies to choose the country first, and then look for vendors within that country. But a growing segment of the market believes it’s the choice of provider that’s key to the success of your project. This is why Google hired Globant, a software dev firm in Buenos Aires, in spite of some negative perceptions of Argentina outsourcing. The two companies’ innovative work cultures were a good fit, and a happy partnership ensued.
“Vendors differentiate themselves in vertical experience. Determine first the solutions you want, then look for providers that can give you exactly that”, says Pine. “Forcing things into a region is not the best way”.
Maintaining the relationship
Once the signature is on the dotted line and work has begun, make sure you invest in maintaining that relationship. This includes clear and constant communication, relationship management, recognizing differences in culture, and creating a strong governance and monitoring structure.
“The single point of failure is the contact between your project manager and the vendor’s project manager. Make sure you have the right person on the job”, says Pine. “We’re always quick to fire the vendor’s guy – often it’s our own guy”.
These days every country offers outsourcing solutions, and so there’s a lack of differentiation according to Pine. Countries will always try to sell economic advantages, but it’s the providers that need to distinguish themselves in terms of solutions that they offer. Companies in turn, should focus not just on cost-savings, but on those specific solutions and how well they can be delivered.
Read more advice on this topic in our previous story “Six Ways to Produce Better Outsourcing Outcomes”