Six Advance Warning Signs that a Service Provider is in Trouble
Twenty-five p.c of existing BPO service suppliers will stop to operate in 2012. This relies on a recently revealed Gartner research which is part of the Special Report entitled’Assess and Manage seller risks to protect Your Business’. This can be attributed to the prevailing depression, lapses in outsourcing contracts, and not being able to adjust to homogenized delivery models.
With these factors to mind , Gartner noted that BPO buyers must take caution before venturing into any new outsourcing contract, and is going to be privy to the six caution signs meaning that a service supplier is not stable enough to maintain a long term outsourcing relationship :
1. 2. Inability to get new projects – it’s a good sign if the service provider has the facility to consistently take on diverse necessities of different clients.
Loss of major contracts to other service providers – Losing a’marquee’ deal spells trouble on the part of the vendor. ‘It will always be prudent due diligence to find and gain a reference from any current anchor clients to realise how committed they’re to the seller and their experiences in working with them.’
4. Inability to bid on new BPO deals because of lack of enough funds – Some service providers can’t take on new BPO contracts because of lack of enough capital. Likewise, the supposed’lift and shift’ technique in which a business process is moved offshore to reduce costs because of lower wages will at last create Problems for service providers that rely on it because they continue to need capital for the resources required to do that outsourced task.
Exposure to banking / financial industry – With the prevailing finance crisis, those service providers with revenues coming from the finance or banking sector will be in a tight spot. If the outsourcing partner has more than 85 p.c of income from the banking sector, the purchaser should know if this will have an effect on their business operations.
Inflating levels of contract cancellation and insourcing – Gartner says that before signing an outsourcing contract, buyers must come up with a plan on what to do when contract ends. Moreover, contracts must be totally clear, tackling not just the issues that may arise for the 1st year but also the steps to do in case the buyer decides to expand or have a new project.
During these tough times when outsourcing has become an avenue for companies basically to chop costs, it is important to pay very close attention to your outsourcing partner. Know the warning signs and be consistently aware of what is happening in the BPO industry. Have a clear picture of what you need to reach before signing any outsourcing contract.