Bigger isn’t always better
Sudin Apte, Senior Analyst and head of India Operations for Forrester Research, Inc., does not advocate bigger as better when it comes to outsourcing. He suggests that large organizations should incorporate tier two providers into their supplier mix for the diversity and leverage they provide, and for the specializations they can bring. But too often, clients use tier two suppliers for the wrong reasons. Apte says ". . . sourcing teams need to revisit their approach and reasons to select small partners . . . (They) need to understand the character and type of (the outsourcer’s) specialization, as well as the situations in which they are most useful."
The primary reasons that organizations cite for using tier two providers are:
- Lower rates
- Flexibility in responding to client needs and terms
- Better, more personal attention
- Niche capabilities
All good reasons and often true. But client and service provider expectations can be at odds, and clients need to do their homework when looking for tier two partners to complement or even replace their tier one suppliers. For instance, more than a few organizations have learned that low billing rates do not necessarily translate into lower overall costs. Experience, productivity, and getting it right the first time figure heavily into the real cost of a project. So when looking at rates, clients need to carefully assess overall work quality as well as transparency in project execution and billing.
