To most critics, outsourcing is an exhaustible source of cheap labour. It's an unethical practice that comes with loss of control and substandard work. However, this isn't why outsourcing doesn't work.
The “Best Deal”
Some clients opt for a traditional approach. A detailed and pre-defined set of specifications is given to service providers to bid on.
While this is understandable, it doesn't fit outsourcing. It's a complex process that's delivered over time, and in that period, the needs of the business and market conditions change. Service providers can only work with what they're given. So all offerings are the same and their expertise is underutilised. When a service provider finally scores the deal, they may end up re-designing the solution to deliver the requirements.
Solution: Co-develop a viable solution. This way, the outsourcing arrangement becomes feasible on both sides. Clients should focus more on the desired outcome instead of the processes.
Haggling
Offshoring provides cost savings, so why not make the most of it?
Service providers also have to manage costs on their end. If the pricing does not match the underlying economics of the project, it becomes unsustainable. It's either they find a way to increase the price to make up for the shortfall, or they cut back on services to save costs. In both cases, the deal fails.
Solution: Don't focus on the bottom line. Yes, offshore staffing enables you to save through labour arbitrage. But in the end, every successful undertaking needs the right investment.
Toxic Negotiations
Service providers oversell to prevent clients from negotiating the lowest price possible. The client sets unrealistic expectations and short-changes the service provider.
Both parties waste a huge amount of time and legal fees. In worst cases, the toxic negotiation is carried out by a middle man on behalf of the client. As a result, the client and service provider fail to establish a working relationship.
Solution: Vested Outsourcing.
Out of Sight, Out of Mind
According to a live poll by BPO outcomes, only 14% of their respondents place governance as a focal point of their BPO efforts throughout the duration of the contract.
Lack of due diligence will inevitably lead to loss of control and stability. If you're an SME who wants to become a market leader, such ambition needs tighter governance to succeed. The output still needs to be monitored for compliance even if it's a short term project.
Solution: Governance, Risk, and Compliance Management.
Conclusion
Both the client and service provider needs to establish a strong partnership for the outsourcing arrangement to succeed. Outsourcing, where it's offshore or near-shore, is a business tool. You can't expect it to deliver if it's not used and maintained properly.
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