Offshore outsourcing Strategy
5 Signs That You Have Chosen the Wrong Outsourcing Partner
Outsourcing specific business processes to offshore destinations has grown over the years while deriving major benefits for businesses. Though cost-saving has been a popular idea in the past, outsourcing today portrays a much larger picture with serious implications for your business. There are many reasons why companies choose to outsource. It is a strategic decision made by the company for the following reasons:
- To focus on core activities by optimizing internal resources – It is a common practice to outsource task, which are not your expertise. But here we are talking about those tasks that consume unnecessary time and administrative cost of your business. For instance, as a life insurance company, you can outsource the task of managing bills and receipts, customer care etc. This way you can focus more on marketing, developing new customers, policy design and research.
- Shifting to new technology – You might not be aware of emerging technologies in software development even though it is crucial for your business to stay ahead in the market. Perhaps, it is not your fault. When you rope in an experienced outsourcing partner, they help you to invest in new technology. This makes sure that you don’t compromise on product quality and improve productivity of your processes.
- Increase your capacity to bear risks – In the event of any natural disasters or a major human error, your IT system can get damaged, thus, affecting your operations. Outsourcing partners are very well-equipped with a back-up plan and turn around the system in no time.
- Cut down infrastructure cost – Shifting to new technology or maintaining existing technology requires huge investment on machinery, office space, license, hardware and software. To get rid of all these additional costs, it is a wise decision to leave it to the expert outsourcing partner who can do so at a much lesser cost.
- Access to highly skilled talent – Outsourcing destinations in Asia has a surge of qualified professionals. They understand your needs and deliver a high service quality.
Besides that, other reasons for outsourcing include cost-cutting without compromising on quality, overcoming seasonal shortage of labor and scarcity of talent. Despite selecting a partner of your choice, it is common to find dissatisfaction with the work of your partner. It is quite possible that your partner started off well but deteriorated in quality later.
The first step is obviously to analyze the situation by pin-pointing the areas of improvement. But if it does not work out and your partner fails to listen to you, then it is time to re-consider your decision. A common sign that you have chosen a wrong outsourcing partner is when your partner starts measuring success through savings and efficiency at the expense of service & product quality.
Apart from that, following are the five signs you need to observe that indicate you have chosen a wrong outsourcing partner:
- Reduced client satisfaction – Client satisfaction is your top priority. Only a satisfied client will recommend your services to others. The outsourcing partner needs to give the same level of importance to your client as you do. To understand your business needs, he needs to understand the needs of your client. But when your partner does not care about your clients and is not flexible enough to bend his approach to serve your customers better, it often aggravates to client dissatisfaction.This consequently leads to poor service quality for your clients. If your outsourcing partner is taking care of front-end services i.e. facing your clients directly, then the issue escalates very quickly. On the other hand, in case back-end services are dispensed by your partner, you get a timely warning from your clients through their valuable feedback or complaints. Remember that the outsourcing partner carries your brand image by delivering his services. Apart from that, there is another concern when your partner keeps your clients lower on his priority list. This is a case when he is serving multiple businesses like yours. This practice leads to unnecessary delays for your clients.
- High attrition rate – A healthy company always takes care of her employees with a long-term perspective in mind. In return, employees also show their loyalty to such companies which reflects in their tasks. They are ready to go an extra mile in times of need and meet project deadlines.But when your outsourcing partner is short-sighted and starts looking for cheap labor without giving any perks, nobody is willing to work for a long term in such an unstable work environment. His only focus becomes cost-effectiveness. Though it is a great place for a fresher and a temp to gain some experience, an experienced person is unwilling to work for such a company.Employees are the one who take the company forward. A long association with the employees means they understand your old customers and their needs very well. They are the ones who train new talent. Moreover, your clients look for consistency and stability when they associate with your business. Employee base with a high turnover rate means fluctuations in service quality. If your outsourcing partner is marred by poor labor policies and continuous labor conflicts, it poses a threat for your clients.
- Lack of intent – An outsourcing partner is supposed to give you full support to keep up the level of service delivery. Your outsourcing partner could be plagued by lack of intent when he is quite often citing contractual terms and conditions. He fails to deliver the projects on time and gives excuses.It leads to conflict between your in-house and offshore team wherein the offshore team leader becomes reluctant to pursue his team members. It turns out to be impossible to work with such a partner who is not putting in its full potential. One reason could be that they are overloaded with other projects and take you for granted.While the other reason could be they just don’t want to do it because the management is too lazy to implement and are looking for easy money. It is better to give up a relationship when the intentions, on the other side, are not good.
- Poor financial health of the outsourcing partner – It is your duty to verify the financial records of the company you associate with. Such records include balance sheet, current assets and liabilities, current ratio, non-current assets and liabilities, book value, bottom line etc. Financial health of the company is a major determinant to whether it is suitable to work with or not.A company with poor financial performance shows its incompetence to manage its resources. Such partners will try their best to compromise on quality to save cost. They will run away from investment and follow obsolete technology and practices. So, instead of alleviating your burden, it will become a liability for your business.
- Unexplained and rising budgets – Another concern that can put a blot on your outsourcing partner’s image is constantly rising budgets. The budgets need to be pre-decided for the respective financial year and their hike needs to be fully justified. Whenever your partner raises budget, always question the reason for its rise. Is it to offer consistent service quality or to improve the level of service?Let them explain and justify it. If you find them coming up with vague answers, it is time to scrap the bond. It is quite possible they are taking advantage of your unawareness and trying to dupe you. It is better to step cautiously rather than letting your money go down the drain.
Developing economies like India are flooded with companies promising to offer all outsourcing solutions under one roof. Don’t go by their words but go by the specifics. You get to hear many failed outsourcing associations in the market. The reason is failure to judge the capabilities of the partner or developing a blind trust on their rapport.
Depending upon your business requirements, outsourcing can be a permanent part of your business strategy; else it can come into picture depending upon the needs of the project. The five signs discussed above will surely help you to decide if you really made a wrong decision.
As a long term strategy, you need to prefer to keep your outsourcing portfolio diversified. Avoid putting your entire stake on one outsourcing partner, especially, when your business starts growing. It is wise to keep a “plan B” in place, in case you need to change the partner in the middle of the project.