Outsourcing: Bigger Isn’t Always Better

Bigger isn’t always better

Article by Robert Duff

Sudin Apte, Senior Analyst and head of India Operations for Forrester Research, Inc., does not advocate bigger as better when it comes to outsourcing. He suggests that large organizations should incorporate tier two providers into their supplier mix for the diversity and leverage they provide, and for the specializations they can bring. But too often, clients use tier two suppliers for the wrong reasons. Apte says “. . . sourcing teams need to revisit their approach and reasons to select small partners . . . (They) need to understand the character and type of (the outsourcer’s) specialization, as well as the situations in which they are most useful.”

The primary reasons that organizations cite for using tier two providers are:

• Lower rates
• Flexibility in responding to client needs and terms
• Better, more personal attention
• Niche capabilities

All good reasons and often true. But client and service provider expectations can be at odds, and clients need to do their homework when looking for tier two partners to complement or even replace their tier one suppliers. For instance, more than a few organizations have learned that low billing rates do not necessarily translate into lower overall costs. Experience, productivity, and getting it right the first time figure heavily into the real cost of a project. So when looking at rates, clients need to carefully assess overall work quality as well as transparency in project execution and billing.

Flexibility too has its pitfalls notes Apte. Tier two suppliers looking to please clients and grow their business can be tempted to accept work that is outside their expertise or comfort zone. In doing so they get pulled away from what they do well and can wind up building a new practice on the backs of one or two clients. The result can be substandard work and/or cost overruns.

Finding the perfect fit

The most important thing to look for in a tier two supplier, says Apte, is a unique value proposition. Choosing a technology or industry specialist, or even a service line specialist, is relatively straight forward. The most difficult specialty to evaluate is arguably the most valuable — a customer experience specialist. Firms in this category offer a responsive experience and go the extra mile to delight clients with:

• A flexible engagement model
• Client-friendly style
• Transparent pricing
• Top management involvement

About Coherent Solutions

Since 1995, Coherent Solutions have helped large enterprises, software vendors, and SMBs save development and maintenance costs, and bring products and complex applications to market faster. With offices and highly experienced teams in both the U.S. and Eastern Europe, the company’s outsourcing model yields superior results because it uses its industry leading delivery management in the U.S. to create strong integration from its development center to the client’s doorstep. For more information about our offshore software development outsourcing capabilities, please visit www.coherentsolutions.com.