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Outsourcing: Technology demolishes geographic barriers.
A recent trip to India to meet with our outsourcing team led me to reflect on my experience of outsourcing, the benefits it has delivered to the firm and how it has become an essential part of our company. Outsourcing has become a common practice for businesses across a range of industries and services and will continue to expand and develop as technology demolishes geographic barriers.
Ten years ago, when I was a relatively new comer to Gilligan Sheppard, I was a little surprised when one of the firms’ partners announced he was going to India for a visit. I thought on this for a bit and decided that he didn’t strike me as the type of person to have an interest in Eastern philosophies and I asked him, a little tongue in cheek, if he was going to outsource our accounting work to India. His reply was vague, in his very typical style and I was left none the wiser.
So, it wasn’t a great surprise to me when, a few months later, he announced we were indeed going to outsource some of our accounting preparation work to India. Thus began our ten year (and we are still going strong), relationship. At the time, the stated reasons for outsourcing were cost reduction, freeing up our team to do more interesting and challenging work and solving the problem of finding enough skilled and loyal employees – because many of our young and talented accountants move overseas. These were all compelling arguments and are still relevant ten years on.
Implementing outsourcing has many challenges and barriers to overcome and I am often asked about our experience. How did we go about it? Has it delivered the outcomes we expected? Documenting this would require a lengthy article. There are many factors that come into play including commitment, change management, culture, communication, training, team work, technology, experimentation, time zones, persistence, patience and the choice of outsource model/partner.
Of these I place commitment, outsource model/partner and communication as being critical for success. Any business owner or board looking to implement outsourcing as part of their business operations must have an unwavering commitment to its success. This coupled with a nominated champion to lead and oversee the implementation is vital.
The choice of both the outsourcing model and outsourcing firm requires decisions. Whether you will contract the work to be completed off-shore, employ people directly in an overseas location or use an outsource agent to recruit and manage employees for you off-shore. Whichever model you choose, finding an outsource firm or employees, building strong and enduring relationships are fundamental.
Effective communication needs to occur at all levels. The outsourcing champion is pivotal in building relationships between the outsource company and relating information to owners and business leaders as well as ensuring communication lines are implemented and utilised at the operational level.
Our experience involved the start-up of an outsource operation in Chandigarh, India, with the support of the partners and existing relationships with people living in India who wanted to establish an outsourcing business. This established relationship, their understanding of how to operate a business in India and their determination to make it work were key in the ultimate success.
Once the operation in India was established, communication across all levels was bedded down. In New Zealand, an outsource manager was appointed and was the key communication point with the team leader in India. This allowed for any problems to be fed to a central point, resolved and communicated back to each team. Over time this eliminated conflicting work priorities and opinions on technical matters leading to improved work flow and consistency. This is not to say the two teams did not communicate with each other on a one to one basis, they did, but there was a communication channel in place to resolve problems as they arose.
As for the benefits, all the original reasons for outsourcing have been delivered on and there were also many unanticipated benefits. It forced us to improve the documentation of our systems, our work became more uniformed as we worked on resolving conflicting approaches and errors and turnaround times reduced.
Something that I never anticipated were the benefits for our outsource team and the relationships we have built. This I will explore in my next article.
If you are considering outsourcing and want the benefit of our own experience please give me a call.