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4 Tips to remember when Outsourcing to China and beyond

Behavior, Economy, Investments, Management, Outsourcing, Partnerships, Risk Management, StrategyEdward KiledjianComment

I have spoken and written about outsourcing to China for a couple of years now. Although China does require special handling, many of the high level recommendations are the same as regardless of where you decide to outsource.

So here is a summary style high level overview of some of the important considerations:

Ask Why: Ask yourself exactly why you are outsourcing. It is because you want to reduce your costs, access specialized skills or as a risk management exercise? Understanding exactly why you want to outsource should be your first question. Take the time to get granular and as detailed as possible. If you want to save money, then decide exactly how much and how? Time spent thinking about this will help your decision making and later negotiations.

Ask Who: Once you’ve decided why you want to outsource, then the next logical question is who. What type of provider is best positioned to meet your why requirements? What is the ideal size of the provider? What is the ideal geographic footprint of the provider? What type of experience or client list does the ideal provider have?

Ask How: If I had to pinpoint one reason why most outsourcing deals fail to meet client expectations is SM&G (aka Service Management and Governance).  You should have as much SM&G that you need to keep the delivery adequate and the relationship healthy but no more.  Think about how you will measure successfully delivery and how you expect the vendor to report on it. What methodology should they use? How will you periodically check their reporting? Some aspects of SM&G that get forgotten are data privacy, IP handling, financial performance, etc. When dealing with offshore providers (India, Malaysia, Philippines, China, etc.), this can get doubly complicated because many times the small to mid size providers won’t have local presence and may have communication issues. Make sure all of this is clearly thought out and documented in your contract. An ounce of prevention is worth a pound of cure.

Chinese Model Cities: The Chinese government has built the concept of Chinese Model Cities. These cities are locations where government encourages a specific type of product or service. When dealing with China, it is important to consider this fact and deal with organizations that deliver the product or service you want from the designated Chinese model city for that product or service. Failing to do so may lead to huge headaches.

This is not an exhaustive list but hopefully it has given you food for thought. If you have questions, feel free to contact me using the Contact Form.