Things to Consider While Selecting an Outsourcing Destination

Things to Consider While Selecting an Outsourcing Destination

Abhishek Prasad 11/04/2018 5

With a surge in the global economy, there has been tremendous growth in outsourcing business process. For businesses planning to outsource services, big or small, the questions that play a critical role are:

  1. What do we need to outsource?
  2. Why do we need to outsource? And most importantly,
  3. Where do we need to outsource?

Choosing the outsourcing destination is just the starting point as it paves the path to making other crucial business decisions, like choosing an outsourcing partner. As outsourcing options multiply worldwide and the potential benefits of outsourcing expand, location assessment has become a priority for companies.

In this article, we shall discuss some of the important criteria that need to be taken care of while making the destination decision for outsourcing.

Business Strategy

One of the most important questions to ask while choosing an outsourcing destination is how the partner will support your business strategy. We all know the benefits we get from outsourcing, but we need to be clear about the cost advantage, competitive advantage, process efficiency gains and every other parameter that aligns itself to the profitability of your company. In simple terms, the destination should yield the maximum strategic benefit at minimum possible risk.

Timezone and Geographical Location

A big timezone difference cannot be a positive thing for your company as there can be problems with the synchronization of tasks between the two teams. A possible delay in communication will not just delay the progress of the entire project but also build frustration in the minds of the employee as it disrupts the workflow and affects the mental productivity of the individual. For example, if you are based out of New York and outsourcing to India then the overlap will be for 4 hours (8 am EST is 5:30 pm IST). If you are based in Sydney and outsourcing to India then overlap is of 3:30 hours ( 1:30 pm AEDT is 8 am IST )

Partner Evaluation

It is important to do a thorough evaluation of the company you are planning to partner. Do they comply with your goals? Do they provide the best services in that market? Do they understand your business values and culture? The potential relationship is most probably going to be for a long-term so the assessment needs to be done keeping the long-term goal in mind.

Geopolitical Risks

One needs to consider the impact on the business in case there is a change in political arena like a new government or a new policy. It is very important to understand the functioning of the government and whether it supports outsourcing industries in terms of investment along with its reputation globally.

Culture and Language

There are a clearcut language and cultural differences which might affect the outsourcing partnership. Most of the times communication is the key factor that can make or break this partnership. There should be transparency in every work that connects the two teams and also an understanding of the culture of that particular country. It is, therefore, important to know if there is a sustainable supply engine for language skills that the business might require.

Costs

A key reason why companies plan to outsource is that they are getting the desired service, of the same or better quality, at a reduced price from the outsourced company. It is therefore important to analyze the various parameters that add up to the cost of the service keeping in mind the tax regime of that particular country. The cost differentials are subject to change depending upon the economy of the destination country.

Talent Pool

The quality of the talent pool directly impacts the success of your project. One must do a thorough analysis if the resources meet the requirements of the outsourcing initiative and are trained enough for the required service. Evaluation of the attrition rate must also be done to get a better idea of the workforce.

Technological Infrastructure

Technology infrastructure is considered in terms of networking, connectivity, quality, security, backup infrastructure and business continuity solutions that directly affect the productivity of the services that are being outsourced. It is important to understand if they are technologically sound and are in line with the latest tech advancements.

IP Protection and Legal Maturity 

Different countries have different law and regulations which is why it is important to educate oneself about the legal protections specific to the outsourcing initiative. There should be proper assessment regarding the enforcement of patents, trademark and copyright law.

Choosing the perfect outsourcing destination can be a daunting task, but a thorough analysis of all the relevant parameters is very important for the success of the whole initiative. The process needs to be structured and every factor must be looked upon with utmost care to ensure a positive outcome.

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  • Stephan Muntifering

    Every company has its own reason for doing this, with many chasing lower labor costs.

  • Claire Nance

    You don’t want to trade quality for price, but outsourcing often allows you to get the best of both worlds.

  • Liam McKessy

    Although you can provide direction in regard to what you need to accomplish, you give up some control when you outsource.

  • Oliver Pawson

    Despite all the benefits of outsourcing, it is only a good thing if you’re receiving the quality you expect. Anything less than this will be a disappointment.

  • Jamie Collungs

    I also would like to add that outsourcing doesn’t always have a negative impact on company culture, but you need to protect against this before you ever take a step in this direction.

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Abhishek Prasad

Tech Guru

Abhishek Prasad is the Director, Head of Digital Transformation at Aexonic Technologies. He has been a Management Consultant, with the first-hand experience of how technology can drive business change. Worked with Big Four accounting firm, he is experienced in advanced analytics and reporting within the professional services, Life Science, Utilities, and banking industries. Abhishek has consulted with multiple fortune 100 companies and startups, so understands the challenges faced by large enterprises and how technology can help them gain competitive advantage. He has been an SAP consultant and led multiple business transformation projects across the globe.

   

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