A vast majority of SMBs are either contemplating offshoring part of their IT, or have already done so, often to India or China.

An outsourcing provider focusing on SMBs, I am always trying to refine our market segmentation.

I would classify SMBs looking to outsourcing their development / maintenance into 3 different categories, each of them yielding to very different results:

1. Companies in the first category (the largest one by far) are obsessed by paying the lowest price. I call them the Wal-Mart buyers: they want more for less. When a prospect belongs to the first category, I walk away from the deal, as a deal purely based on cost savings is set for failure. Interestingly enough, the bulk of outsourcing companies are fighting for these customers.

2. SMBs who fall in the second category are often first timers, therefore with a very limited experience of outsourcing. There are so afraid of potential failure that most of the time, they choose a supplier based on its apparent stability: the larger the better. The worst part of this choice is that a SMB is too small to be strategic for a large provider; [I elaborated on this risk last year].

   Being obsessed by the potential downside, they do not pay enough attention to the upside, an attitude yielding to mixed results at best.

3. Companies in the third category usually already have a solid experience of outsourcing, and make their decision based on a series of benefits they want to get from the operation. Unlike the companies of the second category, they want the highest upside possible, and will only work with suppliers that can guarantee their expectations will be met.

This last category is the one on which I focus my efforts; the risk of failure is extremely low, since expectations have been clearly stated at the beginning. In addition, and that is the icing on the cake, there is little competition on these accounts since a very few outsourcing companies are in fact able to demonstrate their ability to deliver.

These customers are fun to work with; the employees assigned to these projects are very loyal and will do whatever it takes to make these projects a success, no need to ask and/or push.

Remi
www.outsourcing-vsc.com

Business | 7 Comments »

The Business Week article by Stephen Baker titled “Managing by The Numbers” is a must read.

The article describes how IBM, the world leader in outsourcing services with almost 400,000 employees worldwide, is introducing mathematical models to help assemble the teams best suited for a job, manage employees’ time, etc.

A team of scientists, headed by Tamer Takriti is in charge of collecting as much data as legally possible, and extracting from this huge amount of information the patterns that will help increase productivity.

So what type of information is Takriti’s team using?

It is quite simple: almost everything. It includes employee resumes, project records, phone call backlogs (including cell phones), emails (recipients, cc’ed people, bcc’ed ones), etc.

Takriti explains that the system should eventually allow a project manager to sit at a computer and rapidly assemble the best-suited team of engineers to start a call center in Manila for instance.

My first reaction was to think of Big Brother, but then I gave it second thoughts.

Since the dawn of humanity, and in small communities around the world, everybody would know about everything on any other member of the same community.

It has been like that for centuries, always with some excess, but globally human beings have been able to live with this situation, and enjoy relative freedom. The emergence of the Internet just takes this concept of community to a global level, where everybody will soon have access to virtually any information on anybody, and I do not see why this other globalization would yield to a society similar to the one described by George Orwell in 1984.

I find more interesting the fact that IBM has reached a size where they cannot even rapidly assemble a team of 5 developers to start a call center in Manila!

This seems to prove my point that a global world calls for companies that are global, yet not monolithic anymore. I would be a company looking to outsource some IT functions, I would rather trust today a “federation” of smaller size outsourcing companies than IBM, Accenture or HP to deliver high-quality flexible applications.

IBM and the likes look to me like giant dinosaurs. Granted, they are the biggest, but will they be able to adapt to what’s coming? If they do not manage to get rid of their their rigid monolithic structure, their fate is sealed, even if it might take years before they effectively disappear.

Remi
www.outsourcing-vsc.com

Business | 5 Comments »