Best practices | October 12, 2016
Trust is The Rock on which Outsourcing is Built
A loss of control over processes in a company is one of the most common concerns connected to outsourcing services. Another problem is that in the pursuit of lower costs of employment, the quality of work may suffer. Furthermore, the outsourcing process must involve the reorganization of the company – after all, someone has to coordinate the outsourced projects, employees, or even entire teams. So it’s still easier for companies to hire workers on a permanent basis or on contract – even if they lack the relevant qualifications and therefore make the process of recruitment even more costly, the employee is close by, so in theory the company is able to keep an eye on his work. In reality, however, such a conservative strategy does not have the desired effect. In view of the difficulties on the local labor market, employees often have a casual attitude and minimal motivation to improve their qualifications. Even if the management team is aware of this, prior to any decision to use outsourcing services, psychological factors come into play – namely a lack of confidence in this type of service.
There’s nothing strange about that. Outsourcing is, after all, inherently risky. One should realize, however, that the risks are no greater than in the case of any other type of business. And just as with any other kind of transaction – this risk can be estimated, and also minimized.
Trust, but verify
If you want to minimize the risks related to cooperation in terms of outsourcing IT services, it will be necessary to conduct a preliminary analysis, both in terms of location and the qualifications of potential business partners. In business, trust must result from calculation, not from naivety or a lack of proper knowledge.
Location: the choice of location for an IT services provider is undoubtedly crucial. The qualifications of potential employees are diametrically opposed if we take location into account – for example, in a recent HackerRank report the most valued programmers were from China, Russia and Poland, leaving professionals from countries such as Germany (14th place) the US (28th place), and the UK (29th place) far behind. Also important are factors such as the economic, legal and political stability of the region or country, cultural and legal differences, and access to experts. Most published recent reports indicate that the most attractive, and therefore also the safest, European outsourcing centers are located in Central Europe, namely Poland, the Czech Republic, Bulgaria, Romania, and the Baltic countries – Lithuania, Latvia and Estonia.
Business partner: as in any situation in which we are obliged to choose a company (regardless of whether it is a toothpaste manufacturer, or a business partner), we should pay attention primarily to the brand’s tradition, the period it has been operating, and existing customers. If we decide to outsource services abroad, a good way to reduce risk is to find a company with an established position on the local market, and thus a “good brand”. Such a company should have extensive experience in the provision of the kind of services we are looking for, meaning tradition that also results from the period it has been operating in the industry (however, in the case of IT, you need to remember that this period of time will be much shorter than in traditional industries). We should also check recommendations from the company’s customers, especially those who have similar requirements to our company.
Not convinced? Negotiate
Confidence in a business partner is above all gained, or lost, during negotiations. If you haven’t yet built a degree of trust in the other company – negotiate and find out more. It’s a simple rule, but very effective. In fact, at this stage the key is to get to know the organizational culture and the way the company operates. Perhaps not all your requirements will be met, but by negotiating you’ll find out if the outsourcing company which you are considering has the required experience, or asks the right questions, or if it can properly value its services and has a realistic approach to the project. It may turn out that the company simply wants to “catch the customer” at any price, artificially lowering the costs, or setting deadlines which are impossible to achieve. An offer which seems “too good to be true” should always at least raise some suspicions. Unrealistic deadlines cannot be kept, and reduced costs often get you work experience kids, or people of limited experience, who will not be able to ensure the quality you require.
You can recognize a trustworthy outsourcing partner by the following signs:
- Such a partner wants to get to know your business, your goals and the business environment, in order to determine whether cooperation will be effective and how best to help you. Let the partner get to know you.
- Knowledge, business experience, the people who work at the company, and also customers create a good business and are something to be proud of. Trustworthy firms are open and transparent, and don’t try to hide anything. Ask as many questions as possible and pay attention to the answers.
- Such a partner has the requisite experience to ask the right questions, which will also help you to formulate expectations and goals. Before using their services, speak with company representatives and specialists. Together you can check how, if at all, you are able to help each other.
- The growth of your business is also a means of growth for the outsourcing partner. If a company operates with this rule in mind, their employees will work for you with the same commitment as if you employed them directly.
- The outsourcing partner will help you set goals and priorities. On that basis you can create an agreement for cooperation, to ensure that the interests of both sides are protected.
A well-written contract, which protects your interests, is absolutely essential. Apart from the price and the date of completion, it should include specific instructions pertaining to what is to be done and what the control indicators are, and evaluate the work processes at various stages. But that’s not all. Before signing you need to find out what the chances are of actually enforcing the provisions of the contract. Check the legal culture in the country in which you plan to sign the contract. For example, in the European Union certain legal norms and forms of activity are imposed from above, so outsourcing to a country within the EU already gives some insight as to whether you will have the opportunity to assert your rights before an independent court which will take your argument into account.
If you have already analyzed the pros and cons, and also checked your potential outsourcing partner, but you still have doubts, it may be helpful to remember what Ernest Hemingway wrote: „The best way to find out if you can trust somebody is to trust them”.
Read more: 7 phases of the IT outsourcing process