Outsource Magazine

The sector of “mid-sized businesses” (at the recent NOA Summit such organisations were defined as those with a turnover of up to £250M) is a major driving force in the German economy. In many ways, the challenges they face and the strategies used to tackle them are similar to those seen by large corporations. However when it comes to using outsourcing solutions and service delivery from offshore locations, these SMEs have not  followed a similar pattern and success stories are still rare. It was therefore interesting to learn during the “peer-to-peer network session” on SME outsourcing at the NOA Sourcing Summit 16th & 17th November 2011 in London, and realise the SMEs in the UK face quite similar challenges.

Despite the fact that the outsourcing market is quite advanced in the UK, when it comes to SMEs, the UK seems to be trapped by the same obstacles as Germany. On the other hand, I personally believe measures to overcome them are identical and it would be helpful to highlight a few ideas we have now started to implement in Germany.

As a starting point, let’s briefly look at the likely steps a large corporation in Western Europe would take - and resources they would call upon - when defining and implementing an offshore-delivered outsourcing strategy and where they would typically go to obtain the required input or support. These are depicted in the figure below (this picture is from an actual offshore project implemented in Central Europe, with kind permission of the respective managers, OS =Offshore).

I am sure most readers will agree that carrying out all these activities would be impossible for an SME to undergo from the cost perspective alone. In addition, SMEs typically face the following challenges as were identified in both countries:

• Necessary expertise to manage outsourcing activities is often not available in house, as it is too expensive to retain or only needed from time to time
• SMEs need to realise rapidly rewards from their activities, and typically do not have either the time nor the budget for long term “strategic” projects
• SMEs are very cost-sensitive
• Assurance of a later success is vital, a failure is not acceptable
• Pricing models as well as contracts have to me simple and straightforward
• SMEs usually do not have any visibility with the major outsourcing service providers and cannot expect high priority in sales or ongoing support
• SMEs typically do not want to tackle the specific challenges when it comes to outsourcing or offshoring by themselves, and expect someone to help them
• Decision-making at SMEs is usually based on personal relationships and trust. Since that usually requires long-term contacts, it might be a challenge for “new entrants”, e.g. offshore suppliers

My proposal on how to overcome some of those obstacles and even turn them into strengths:

A medium-sized company which is

• highly experienced in successful outsourcing and offshoring projects;
• has sustainable contacts to small and medium sized services provides; and
• can act as trusted counterpart towards SMEs

will act as a “Outsourcing Services Mediator” or Service Integrator”.

This Service Integrator should provide an “outsourcing out of the box” offering which ensures the following benefits are provided and guaranteed to SME customers:

• Simple pricing models as well as a predefined and standardised contract, which is fair and commonly acceptable for SMEs and will be utilised throughout.
• A huge degree of standardisation which leads to well-defined and commonly accepted templates for services building blocks (a common “services catalogue”?) and a shared, very cost-effective technology to be used.
• One local, dedicated contact person at the Service Integrator for the SME, with sufficient level of seniority
• A common list of pre-selected set of trusted service provider partners (local, offshore, nearshore, ...) (from which each individual SME can select the best fit for its sector or business activities). Building the back office in line with the individual need of each SME. There would be no need for the SME to do any extensive tendering, negotiation etc. which will save a lot of money as well as time.
• Use of standardised, multi-tenant infrastructure, which is centrally hosted and shared for all projects (service providers and customers) and with the highest level of automation. No need for complex installations at the customer’s premises. This standard system needs to be available within a day and enable the client to see progress across all his projects and across all service providers used on a continuous basis.
• Immediate start of the project, savings on current expenditure and further benefits to be guaranteed within three months.
• If needed, the SME customer can get further, temporary assistance, such as trusted “neutral” consultancy on internal processes, change management, governance or interim project management ... up to an ongoing services governance model.

I strongly believe the above benefits are achievable and expect significant savings to be generated through standardisation across all phases of the outsourcing lifecycle. By accepting the ways of working from this standardised approach and the high degree of automation, outsourced services can be delivered using Cloud Computing / SaaS models, at a fraction of the cost of that for a single organisation on its own (see also the presentation “Successful evolution: driving continued productivity from a long term outsourcing deal” by Adrian Quayle – NOA Board Member at the event of November 17).

I am personally convinced that the aforementioned concepts will provide significant benefits to SME customers and am willing to offer the services described. Whether you agree or have a different perspective, I welcome any comments or input: use my email below to discuss your thoughts and opinions!