Outsourcing Engineering Services - Risk or Safeties?

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Outsourcing has existed for as long as one can remember, but it has garnered greater attention due to the revolution brought in by the Internet. Outsourcing of engineering services has not reached the scale attained by the IT services Industry yet, but it has the potential to do so.

The principle driver of outsourcing is the availability of low cost resources in developing nations coupled with competitive pressures exerted on organizations in developed nations. While the benefits of outsourcing are evidently manifold, it is not immune to risks. An effective outsourcing strategy, therefore, should have risk management built into the supply chain.

The ecosystem of service providers in the developing world can be aptly described as 'a few islands of excellence in the sea of mediocrity'! The trick, therefore, lies in identifying agencies that represent these islands of excellence. It is the intent of this article to enable the reader to spot the lighthouses and icebergs on their way to those islands.

Resources: In its essence, the agency to which an assignment is outsourced is as good as the constituent team that is engaged for delivery of that assignment. Therefore, an effective way to differentiate winners from the 'also ran's is to assess the key team members. Educational qualifications, diversity of work experience, number of years with the firm and a list of assignments executed by them are good indicators to assess the competence of the team.

Free lancers Vs Organization: If good employees was the only check point, one could easily get hold of 'free lancers' who do not have the backing of any organization. Free lancers suffice for small jobs once in a while, but they cannot be relied upon for large assignments requiring diverse skills in a sustained manner. Especially in the services industry, where the requirement could be generic or specialized depending on the type of assignment, it is imperative that execution be undertaken by a team comprising multiple resources (with diverse capabilities and points of view). Therefore, one should look for organizations which have been in the business for at least a few years. Size of the organization, registration with local statutory bodies, web presence and client list are some of the aspects to be examined.

Quality of interaction: Before engaging any firm from a developing nation, it is advisable to interact with the customer facing professionals from the firm. Insignificant though it may seem, clarity of communication, promptness of responses, understanding of cultural differences, professionalism in approach and ability to provide legal documents for entering into contract are very important signals and leading indicators of success of the association.

Location: The quality of infrastructure varies greatly from place to place in the developing countries. Uninterrupted power, access to high speed internet, availability of competent engineers and the ability to swiftly add or replenish the competent resource pool have a significant impact on the capability of an agency to fulfil customer requirements. Location of the agency in a major metropolitan city is obviously desirable from this perspective.

Software Licenses: There are many free lancers and small time organizations that flout the requirement of buying licensed software with impunity. Most engineering services require special software to be used and almost every client from the developed country has a policy of full legal compliance. It is therefore important that a commitment be obtained from the agency regarding legal technical compliance.

References: Assessment of resources, existence of an organizational entity and quality of communication are all process indicators but are not sufficient predictors of the result. In this regard, there is nothing better than a history of past performance. A client list indicates only names of the clients, but does not reveal the quality of delivery and satisfaction of the client. It is best to seek out contact persons from amongst the client list and obtain a first-hand feedback about the firm's capabilities and quality of delivery. A positive reference from satisfied customers should be given high weightage in the selection of an organization to outsource your engineering services to.

Incremental approach: Even with a rigorous assessment, there would always remain some risk in outsourcing engineering services assignments to developing countries. This arises from differences in the professional eco-system, the method of execution, time zone differences and business cycles variations etc. It is therefore prudent to start small and ramp up the association with the experience gained through a complete cycle of pre-award engagement, delivery, invoicing and payment.

Carried out effectively, successful outsourcing engineering services has the potential of not just cost saving but also of helping organizations to move up the value chain and aim for much higher growth.