The Pros and Cons of Offshore Outsourcing… Continued

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India is undoubtedly streets ahead in the offshore outsourcing game, but there are other countries close on its heels. China is growing at an astonishing rate, whilst the Philippines is also a big player, and other countries are queuing up to get in on the act. From Egypt to Brazil, South Africa to Mauritius, countries are looking at their infrastructures and skills sets to see what services they are able to offer. Many of these countries have high graduate numbers and good language skills and are therefore able to supply a whole range of outsourced services.

But outsourcing doesn’t have to involve sending your business processes off to some far-flung location. Companies have historically tended to favour local companies when it comes to outsourcing a business process. And this trend for offshore outsourcing in no way signals the end of onshore outsourcing (outsourcing to a company that is based in your own country), or a near shore location, such as somewhere in the EU.


Despite most companies being happy with their offshore service, offshore outsourcing has received some bad press. There have been media horror stories flying around about poor offshore service and fraud, and research showing companies could be damaging their reputations and losing market share by offshore outsourcing call centre operations. As a result of this, some companies have publicised their anti-offshoring stance and used it as a marketing ploy to win customer favour.


And the benefits of onshore outsourcing are multiple. Again, the argument is to use the expertise from another company to conduct your accountancy back office operations, for example, which means that you don’t have to provide any resources in-house and frees your organisation to concentrate on its core business. Using an outsourcing partner in the same country also means that cultural hurdles and language problems are evaded and legal and technical processes will all be familiar.


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Whether onshore or offshore there are pitfalls to avoid. The first rule of thumb is careful vendor selection. Whoever the supplier is and whatever service they offer, from cleaning to marketing, there are a number of considerations. Company culture is first. Understanding your working methods and expectations is imperative to the success of the outsourcing partnership. For example, if they operate a flexi time system and you insist on people being in the office at 8.30am, this could cause problems down the line.


"Cost isn’t the only driver. Many companies cite offshore outsourcing as a way to heal the skills gap that will become a greater and greater problem in the UK as the population ages. Offshore outsourcing is an integral part of the rising tide of globalisation." Martyn Hart, NOA


Once you have a supplier, the next step is contract negotiation - sitting at the table and hammering out the ground rules. Again, this is an area where many outsourcing partnerships fall fl at. Unrealistic goal setting can be a problem, from businesses that want to get the most from their money and suppliers who are too eager to please. But if unrealistic SLAs are set and the supplier can’t meet them, this can cause bad feeling and could spell the end of the relationship – a waste of time and money.


Contractual points have to be clear, concise and adhered to. Periodic revision of the contract and how both parties feel about it can help build a harmonious relationship. Similarly with SLAs – these have to be realistic and regularly reviewed. Slotting key performance indicators in to your contract can also help as they provide a benchmark against which you can measure your supplier’s performance.


But success is a two way street in an outsourcing relationship. Think twice before bartering your supplier down to the last penny. If you insist on unrealistically high targets at a low cost, you may compromise on service quality. For example, some procurement teams have been so draconian that the suppliers can never hope to deliver the service, as the penalties are cheaper than meeting the SLAs. Being too hard-nosed where it comes to costs could mean that you lose out on your own cost savings and the supplier loses the incentive to do a good job.


Clear communication is paramount. Whether this is careful communication of objectives to everyone involved, to regular meetings between your business and the supplier, regular communication is vital to the success of outsourcing. Details on the level and type of communication should be incorporated into the contract. It is also important to have one person at your business responsible for managing the relationship – if there are too many people directly involved, responsibilities become blurred, which can have an effect on the efficiency of the operation. Clear lines of communication and good account management are pivotal factors in successful outsourcing.


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Transparency of operations and costs is also key. Secrecy, back biting and unfeasibly large bills cause bad feeling and can be the downfall of your outsourcing relationship. If everyone knows what everyone else is doing, is upfront about any niggles and is prepared to give cost and activity breakdowns for invoices, this smoothes the path for a better relationship.


Whether the public, politicians, commercial and public organizations like it or not, it is undisputed that outsourcing, and offshoring, is here to stay. But in order to make the most of it and limit damage of any sort, it has to be managed in the best way possible. Thorough research of potential partner and destination, airtight contracts and achievable SLAs are all part and parcel of sensible outsourcing practice. Offshore outsourcing could well initially appear as the enemy of the UK economy and employment, but harnessing it in the correct way and embracing the rising tide of globalization could be beneficial to all businesses and countries concerned.


The NOA is an organisation which advises companies on outsourcing and lobbies on best outsourcing practice. For more information on outsourcing please go to:



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