Top 50 Emerging Global Outsourcing Cities - Tholons

The gateway to the global sourcing of IT and BPO servicesSpecial ReportLocation Before Service ProviderBy Karen Tillyer and Stephen Bullas, eCodeWhat became apparent after viewingthe results of a recent poll on theGlobal Services Website, was theimportance for companies to seekfurther advice and direction when embarkingupon a long-term outsourcing strategy. At lastcount 70 percent of respondents were of theopinion that choosing the “outsourcing serviceprovider” should take priority over “location.”In this short article we will discuss whythis, in our opinion, is not a logical decisionand why pivotal providers such as eCODE andindeed industry research giants, such as Gartner,have been advocating an opposing viewfor many years.In these times of financial instability, it isincreasingly important to think about the costsinvolved in outsourcing a particular businessfunction. Different countries and indeed differentregions will have certain price bracketsfor overheads such as rent and labor. Certainskill sets will demand more or less in the wayof wages depending on the supply and demandfor the region. Choosing a perfect service provideris all very well, but if your chosen serviceprovider is situated in somewhere like WesternEurope or the U.S., this could bring withit a significant price tag. Furthermore eachcountry will offer different labour skill sets;for example, Malta is a prominent location forhousing multilingual outsourced functions. Itis important to look at the total availability ofyour desired skill set as well as the attritionrate before selecting a service provider. Whilstyou may find that your chosen service providerhas ample staff for your current needs, if youwanted to ramp up your operation in future,you might find that there is simply not enoughof the desired skill set in the region to enablethis, or that the cost is prohibitive comparedwith other suitable locations.Another financial consideration to look atis shipping costs and methods; do you want tobe near a port, main roads or an airport? It isall very well choosing the perfect provider butif you cannot get your goods to your customersor cannot visit your offshore team in timesof crisis, then major problems can occur andFinal Poll ResultsShould you first choose outsourcing location or partner?(%)LocationService Provider34to sort these out can be an ongoing and costlyprocess. Choosing the right environment cannot only be crucial when looking at logistics butalso many other issues such as governmentalfactors; FDI incentives, transfer fees, taxation,TUPE or other similar directives, future development,infrastructure and ICT capabilities, politicalissues and potential clash with client CSRpolicy. All such issues exist outside of a sin-gleservice provider and therefore must be consideredin the context of location.We do not dispute the importance of choosinga service provider that is compatible withyour company, but for the most part they arein abundance. We do concede, however, that ifyou are outsourcing a niche process, which requiresspecific skills, then perhaps you shouldbe looking at the service provider first as thereis a smaller chance of a service provider with theexpertise needed being situated in the desiredlocation; but even in this situation, the issuesconcerned with location should not be ignored.Expanding upon the issue of cultural fit, itmust be stressed that it is not only the businessculture that must be considered. Youcertainly need a strong relationship with theservice provider but it may also be importantthat you find a company that understands notonly your language but also the sensitivity ofyour culture and vice versa. Various regionswill denote a closer cultural affinity to yourown, and, therefore, it is important to thinkabout your business needs in the context oflocation. The same can be said for linguistics:Some countries will have a greater degree offluency / articulation / clarity in your chosen66Total Votes Polled: 143Source: Global Services Pollslanguage than others. It is particularly importantto think about this when outsourcing helpcenter or call-center operations.Time-zone differences are also locationdependant and may represent something thatcould impact your operations considerably. Forexample, if you are situated in the U.K., yourhead-quarters is in the U.S. and your serviceproviders in India it could potentially causecommunication issues between various teammembers and, in some cases, certain vitalmembers might be unobtainable at a pivotalpoint in the project. Further to this,different cultures celebrate differentholidays and have alternateworking hours. For example, many ofthe Muslim countries have a workingweek of Sunday through Thursday orSaturday through Wednesday leavingFriday for religious observance.However, sometimes the differencesin time zones can be advantageousas companies can position themselvesto have out-of-hours staffingand therefore problems such as software bugsmay be fixed overnight.All of the issues mentioned must be consideredwhen looking into outsourcing anybusiness operation and, as you can clearly see,many of the fundamental strategic issues arelocation dependant. Despite, therefore, indicationfrom the recent poll results, we wouldurge all those thinking of outsourcing to lookat location as a key factor, and if necessary toseek further guidance before embarking uponan outsourcing strategy. GSKaren TillyerStephen BullasKaren Tillyer, BusinessProcess Researcher, andStephen Bullas, ManagingPartner, eCODE, a leadingindependent advisor onnearshore and offshoreoutsourcing, with customersthroughout Western Europeand the U.S.October 2009 www. globalservicesmedia.com GlobalServices 7