Tough outsourced supplier questions #1 – Amit Somaiya interview with Steve – Part 3
Amit Somaiya is co-founder and CEO of IMS People, a part of the highly regarded Empresaria Group plc UK. Amit discusses the Do’s and Don’ts of outsourcing, what it’s like to build up businesses including dealing with failure, and personal attitudes and philosophies that got him where he is today.
This third part asks: 1. Are you concerned that India is becoming more expensive, and could approach parity with the US or the UK? 2. What work do you do to change the outsourced perceptions to India? Part 4 will feature more tough outsource supplier questions…
Steve: We are talking about changes in India. 20 years ago, the cost of outsourcing to India was much lower than it is today. Are you concerned that there’s going to be a movement towards a cost parity between outsourcing to India or keeping the resources inside the UK/US etc. Is that a concern to you?
Amit: It is a concern. But the concern is pretty long term, not in the immediate future. Outsourcing needs to yield the cost advantage. If the cost advantage does not exist then there’s no real need to outsource.
Steve: What is the cost advantage?
Amit: Typically anywhere between the 60 to 70%.
Steve: That’s saving 60 to 70%? Versus a local resource?
Amit: That’s right. Cost saving can be measured two ways. One, it can be measured as a function of pure cost saving, and the other way is to measure as a function of ROI delivered. If its a sales function done back in India, you would want to measure it as a ROI delivery. Cost is definitely a concern for us. But I think the timeframe is far away. We are talking 10 to 15 years from now. As an offshore partner, we need to create a USP where we are able to mitigate the disadvantages of costs over a period of time. And we need to find ways and means which we can start reducing this cost – that could be by investing in technology or by identifying other locations where the cost is even lower, so we’re able to maintain the cost base and pass on the benefit.
Steve: It’s great to have a cost advantage – but if you could couple that with technological leadership the IMS service would be much further out in front?
Amit: I agree with you.
Steve: What do you do to change perceptions of outsourcing to India? There are examples where it doesn’t work so well, for example BT where all the call centres were outsourced to India. If you look at something like the sales process, what aspects of the sales process would IMS get involved in which work to your strengths and what do you do to change that perception of outsourced quality?
Amit: The only way perception can be changed is by evidence and by experience because howsoever we might sell our services or whatever testimonials we have, that is not going to change the perception. A perception is psychologically ingrained. So until that person has an experience or is given evidence to the contrary, perceptions will not change. That’s the first part of the answer.
The second part of the answer, if I understand your question correctly, how do we ensure that the processes which are outsourced can be delivered well enough. The first step is first-class definitions. You mention the BT example. Personally I believe that the BT case study – those activities can be outsourced. The reason why it was not successful was not because it was the wrong function to be outsourced, it was because the process was not properly setup to be outsourced. You need to think of all the problems which you will come across before you start outsourcing.
Outsourcing is not going to give you the same quality that you expect when you are talking to a recruiter back here in the UK. Outsource services are cost effective and there can be an impact in quality of services. So you need to be realistic in terms of your expectations as to what an outsourced service provider can perform but at the same time, have measures to balance that out – all the negative connotation or the negative impacts or whatever might be regressive to that function. Take good care of that, create a process around it, take care of the people who are actually going to deliver that function, and then it will just sail.
Steve: I think a good example is your office in Ahmedabad, your main IMS location where all your sales operate out of. In terms of you providing a sales function, there’s some working proof in the business growth you’ve achieved for IMS.
Amit: Exactly, yes. We’ve been growing 30% year on year. Our sales function is entirely based in India for non-American markets, for the UK, as well as the Australian markets. Its a question of ensuring that the team working on these markets is properly trained. And like any other sales function – they see failures, they see the same amount of challenges, they see the same hurdles – all you need to do is ensure that the processes are set right and you’ll be able to deliver.