SME Outsourcing

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The current economic climate has focused many decision maker’s thoughts on minimising cost and maximising efficiency. As a result, interest in outsourcing and offshoring is increasing rapidly.

Every day we hear about how huge corporations having signed multi million dollar deals with the likes of TCS, Infosys and Wipro, outsourcing huge chunks of their IT or back office processes. This is all relatively common practice with the multinationals, but what about managers and directors of SMEs?

First, it is worthwhile pointing out that the large outsourcing vendors will consider organisations below US$1 billion in revenue an SME and will generally not see these within their radar, and even if approached will ignore potential business from these organisations – too small to bother with.

This leaves a large market open to smaller vendors (tier 2 and 3 in outsourcing speak), with end users without the option of turning to the big players for service.

For SME’s, efficiency and tight cost control is what differentiates them from the rest and enables them to survive the turbulent times. With this in mind SME’s should be able to take advantage of outsourcing some of their functions and processes.

Unlike the larger corporations, who will have already outsourced these and will now have moved up the value chain so to speak, SMEs are still outsourcing the traditional areas like call centres, email support, software development and some IT.

However, given the intent, most SME directors are not sure what to do or where to turn for help when considering outsourcing. This can often lead to a hurried, poorly led, procurement process ultimately resulting in the wrong outsourcing deal for the wrong reasons, which can cause more damage than good.

Taking advantage of onshore outsourcing is usually the first avenue that is explored. This allows for better control and management of the deal and first time outsourcers will feel more confident knowing that their processes are not going too far. However, the temptation for going offshore in order to cut costs further is great.

This is a potentially a more risky option and without suitable experience finding a trustworthy, suitable vendor, can be a difficult process.

In this case sourcing a credible advisor or consultancy, who understands the SME market would be a good step – better still someone who can help implement and manage. Keeping an eye out for benchmark qualifications would also help during the procurement stage.

Many SME managers are concerned about the loss of day to day control and worry about conflicting management styles. This identifies the need for strict, clear cut, SLAs and metrics – with good measurement systems as the backbone.

This is one of the most crucial elements of a successful outsourcing deal, both the SME and the vendor must thrash out exactly what is expected of each organisation and what metrics need to be met in order for the deal to be considered successful and working. A regular review of the SLAs is imperative in order to ensure a dynamic strategic partnership.

Despite the great savings that SME’s can achieve through outsourcing, they need to understand that outsourcing is not a fix all remedy. It can work exceptionally well provided that the correct procedures are carried out during the procurement and contract negotiation stage – and clearly managing the vendor (governance) is crucial for a successful long term relationship.