Selection Criterion of Offshore Outsourcing Vendors after BREXIT

July 13, 2016 8:17 pm | Updated 3 months ago.

Given the maturity of the Offshore Outsourcing industry and also the technological advancements in breaking the barriers of distance, time zone and to some extent even the cultural differences, today the customers have a much wider option of choosing offshore development partners, spreading across different continents. Given the events that the western countries have had to go through in the last 10 to 15 years – Nine/Eleven, Global Financial Services Market meltdown that saw companies like Lehman Bros being wiped out and now Brexit, in D2E’ opinion it is more critical that the Offshore Vendor is aligned to the goals and objectives of the customer than simply its technology and process competency. The customers also need to take into account the implications of the Bimodal IT Architecture proposed by Gartner, while going through the process of finding the right Offshore Outsourcing partner.

Before we start discussing the steps in D2E’ opinion that the customers need to go through in selecting the right offshore outsourcing partners, to set the context, let us briefly look at why do the customers outsource, what do they outsource, what are the basic qualifications to look for in a vendor company and what are the pitfalls to avoid. Having discussed these briefly, we will then analyze how to find the right vendor(s) that are aligned to customer’ goals and objectives and are also mapped properly to Gartner’ Bimodal IT architecture.

Why do customers outsource?

  1. Gain access to a bigger pool of talent
  2. Lower overall cost of software development
  3. Faster time to market with technological innovations
  4. Allow Customer’ personnel to focus on core business competencies

What functions are typically outsourced?

  1. IT and Software Outsourcing (ITO): Outsourcing of development and maintenance of both Core Applications (Gartner’ Mode 1) and Digital Applications (Gartner’ Mode 2) fall into this category.
  2. Business Process Outsourcing (BPO): Here the focus is primarily on improving productivity, efficiency, and competitiveness of the business processes of customer’ organization.
  3. Knowledge process Outsourcing (KPO): This typically involves the offshore outsourcing partner (s) to provide advanced analytical skills, business knowledge including judgment factors.
  4. Outsourced Product Development (OPD): This typically involves the customer outsourcing the entire product development and maintenance to the outsourcing partner, while the customer organization is focused primarily on the operational aspects relating to the growth of the business.

What basic factors to look for in an offshore outsourcing partner?

  1. General company background
  2. Specialization and company size
  3. Business model
  4. Methodologies
  5. Industry knowledge
  6. Track record and reliability

 What pitfalls to avoid?

  1. Over promising
  2. Under-staffing
  3. Security breach
  4. Cultural mismatch

Having looked at the basic factors relating to selecting the right offshore outsourcing partner, let us now take a look at what steps the customers need to take to ensure that there is alignment to goals and objectives and also proper mapping to Gartner’ Bi-Modal IT architecture.

  • Alignment of Partner to Goals and Objectives of Customers:
    • Track record of vendor’ response in a crisis situation: Almost all offshore vendors today have a DRP in place. What, however, the customers need to evaluate is how the vendor had responded or is likely to respond in a crisis situation, either at the customer end or at the vendor end. The vendors that are willing to go that extra mile to keep the customer’ business running during the crisis are likely to be more aligned to the customer’ objectives.
    • Willingness to put skin in the game: Is the vendor willing to get paid, in part or in full, depending on the success of a business initiative of the customer? If so, there is a clear alignment to the Customer’ goals.
    • Ability to constructively challenge customer’ strategies and give meaningful recommendations: Does the vendor have a track record of simply following instructions from the customer, or is willing to constructively challenge the business decisions taken by the customer and, at times, comes out with valuable recommendations of its own relating to growth in customer’ business? This is another factor that will demonstrate alignment of the vendor to goals and objectives of the customer.
  • Mapping to Gartner’ Bi-Modal Architecture:
    • Mode I: Core Applications: The vendors that have deep industry experience and the process maturity to develop and maintain core business critical applications are more suitable for Mode I delivery.
    • Mode II: Digital Applications: The vendors that are more nimble and have the ability to quickly learn and successfully deploy applications using cutting edge technology are more suitable for Mode II delivery.

In conclusion, it is D2E’ opinion that vendor selection being a critical function that will have a long-term impact on the outcome of the strategic outsourcing initiative, should be done with careful considerations being given to the nature of work being outsourced and the alignment of the vendor to the customer’ business direction. All delivery partners in D2E’ ecosystem, have been carefully chosen taking these into consideration.