Single Versus Multiple Country Outsourcing Risks To Consider

Clare Anderson
26th January 2021

When you’re looking at outsourcing risks, a key part of your risk mitigation strategy is to evaluate the countries and geographies that an outsourcing partner provides. Whilst you don’t contract and outsource to countries per se, location-based risk is an important part of your business continuity plan.

There are more viable offshore outsourcing destinations than ever before, a great boon for companies seeking new sources of talent, language capabilities, nearshore (outsourcing in countries in close proximity with similar time zones) support and risk diversification. The most often looked at criteria for assessing geographic risk in an outsourcing location include: geopolitical stability; the general business environment; the quality of human capital; the legislative and regulatory environment; prevalence of natural disasters and the broader IT landscape. Economic risk might reflect things like potential turbulence in inflation and exchange rates or taxation policy changes. Political risk may take the form of political instability, emergence of regional or international conflicts, possible changes in labour market, international business and trade or environmental regulations. Developing countries, where offshore outsourcing locations are often based, are more inclined to have governments that could suddenly impose various obstacles and barriers to international outsourcing. (Bear in mind that the opposite is true as well - they may also provide investment incentives by using a range of tax and fiscal instruments and subsidies.) Risk mitigation analysis of offshore outsourcing locations should also assess the substantial differences that might be encountered in terms of time zones and holidays. These can pose hurdles initially, but once overcome could mean your business is able to work around the clock. 

According to Charles Green, an analyst in the sourcing and vendor management practice of Forrester Research, all of these commonly used criteria to evaluate an offshore outsourcing location are a good starting point, but considering them alone is too simple. The geographic location analysis needs to feed into a further analysis of specific vendor risk to be truly useful. Remember, you are contracting and outsourcing to companies, not countries. First prize in your business continuity plan is engaging an offshore outsourcer who has offices in more than one country around the world. And this genuinely means multiple countries, not multiple locations. Different cities in the same country do not provide the same risk mitigation that different countries do. Your outsourcing risks are significantly lowered with staff available in multiple time zones, and all of the other classic risk criteria will also be spread out to varying degrees. Widening the talent pool available to you and taking advantage of different cost arbitrages are obviously big benefits. Add to this the different COVID pandemic environments in different countries globally and you start to see a value proposition worth taking note of. 

When evaluating your outsourcing business continuity plan, also look for outsourcing partners who use risk-mitigating factors like having a local presence and management team on the ground in the hubs they use. Do they have IT backup and disaster recovery plans in place? What about cultural and language training? Is culture overall important to them? A healthy and positive culture that genuinely engages staff leads to higher retention and ultimately a higher return on your investment. Will the outsourcing provider ‘hustle’ and ‘make a plan’ if and when the local operating environment gets tough - and - importantly - do they offer you more than one - and substantially different - local operating environment? Whilst every service provider is partly reliant on its local environment, assess how hard they work to mitigate or exacerbate location dynamics.  Ultimately, the countries your outsourcing partner works in and the way they manage their operations will determine your success or failure. Never was it more important to choose wisely. 

If you’re looking for an offshore outsourcing partner with local, on the ground expertise and who provides outsourcing services in multiple countries, Sharesource could be the answer you’re looking for. Download our eBook, '30 Essential Questions to Ask a Provider Before You Outsource’ to ensure you're informed and have the right questions to ask when considering the next step.

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