How to Evaluate the Risk of Your Offshoring Location

IT outsourcing (ITO) and the business process outsourcing (BPO) have developed in a rapid pace. The 2013 International Outsourcing Summit will focus on how developing countries are paving the way for innovation and business opportunities. With so many choices and plenty of risks to weigh in, how should an SME asses their offshoring  location?

Geographic Risks in Offshoring

The traditional way of assessing geographic risk is taking a closer look at the location. Factors such as political and economic stability, business environment, quality of manpower, and legislative regulations are heavily considered.

In an IT Services Survey by tech and market research firm Forrester, 48 per cent of the respondents listed controlling or lowering of supplier risk as their top priority.

However according to CIO, IT organisations should “stop assessing location-based risk in a vacuum because sometimes the 'riskiest' suppliers may have the most innovative solutions.”

Charles Green, analyst in the sourcing and vendor management practice at Forrester, argues that “ultimately it is the client's relationship with the service provider, which will determine success or failure.”

SME Offshore Outsourcing

SMEs should not focus solely on the location of the service provider. They can make better offshoring decisions by evaluating the service provider and the offshoring engagement, then weighing it against their needs and capabilities.

An offshoring location may present itself as a high risk. But its also possible that the region's market can provide good opportunities for your particular industry. The service provider may also have capabilities that can be valuable for your operations.

For example, you need to outsource non-core tasks such as bookkeeping and web development. However, a majority of the Australian public disapproves offshoring. Outsourcing itself comes with risks such as loss of control. But then again, offshoring destinations such as the Philippines provides numerous offshoring benefit.

This shows that SMEs can take a healthy degree of risk to access better options. In the end, you're going to be in business with the service provider, not the country where it's based.

Post a Comment

Template developed by Confluent Forms LLC; more resources at BlogXpertise