The first steps to global sourcing

The business world has changed, and global sourcing is a business reality.

In this reality, small or medium businesses (SMB) have a need to outsource their technology division – either to cut costs or to manage the support for global expansion. SMB finds itself at a competitive disadvantage with large organizations, who have the resources and the experience and might already have a strong global technology presence. For SMB, starting the process could be an inundating task and without help, they might never start the process or if they do, would not get it right.

Is the global sourcing model right for you? How do you find the right partners? How do you start the initial process? What is the correct model? What would be the cost savings? What risks do you need to manage? These are questions that every organization goes through and without the right experience, there is a high risk of not being successful.

To manage these risks, it is important to

Evaluate your need: It is important to evaluate the goal you’re trying to achieve. Is this purely to reduce your costs? Do you have geography that needs support? Do you have an issue finding the right resources and want to explore a new pool of resources? It is critical that you have a clear understanding of your needs since this would drive your global sourcing strategy. A common mistake to offshoring is to use a simple cost-benefit analysis that would always be a given but discounting for the process and resource changes that accompany such large change management.

Analyze your business: Once your business goals are well defined, you’d need to analyze your business. There are 2 key items that would need to be evaluated. First, does your current business support an offshoring strategy and if it does, what is the best offshoring model for your business. If you are not aware of the different offshoring models, see my article on offshoring models. The Analysis of your business would provide you with the initial draft of your benefits and risks and also an insight into the change management process you’d need to apply internally to successfully execute your offshoring strategy. It would also provide a high-level roadmap for processes that would be outsourced. Most organizations skip this step and focus on the location, partner etc.

Finding the right partner: This is a critical step in the process. This is also the first committed step of the process and a wrong decision could lead you to be stuck with the wrong partner or the wrong model. Changing partners or the model is an expensive process and would require an exhaustive change management process. However, there might be cases where a change to the operational model could fix the issues. You’d probably need some help to implement the changes to the operational model to fix the issue.

Negotiations: A Key aspect of outsourcing is the cost model. With the right partner, the cost savings would be a given. However, a good understanding of the cost model and asking the right questions would give you the best return on investment. Knowledge of skill requirements and a good understanding of the cost model for the skills would be important data points to negotiate the right rate and maximize the investment. Common mistakes during the negotiation process is to look at the cost savings and get excited. There is always room for negotiations on these rates.

The initial setup: the correct initial setup would help in ensuring a successful operation. This would include, but would not be limited to, the correct location, the expansion model, finding the right leadership and the right resources to help in the setup. Depending on the model, setting up a business entity and the different departments would need to be factored into your initial setup.

One common mistake organizations make is to try and replicate their onsite business model offshore without factoring in all the variables. This leads to a model that is unsustainable and prone to breaking frequently.

It is not only important but critical to follow these steps to find the right model and the right partner to achieve the business targets that you set up initially.

Covalnz Advisory services is a consulting firm that works for Small and Medium businesses to help find the right IT partners to source globally.