Dedicated Development Centre
At the end of the day outsourcing is plain business and if the Client grow to 700-1.000 employees in a Dedicated Centre, a threshold is reached where it become attractive for the Client to start on their own.
One of the advantages SME’s in the IT outsourcing industry have compared to “big brothers” with much larger accounts are that the Client seldom grow big enough to make it practical and advisable to start an outsourcing centre on their own. But nevertheless, be aware that the figure around the threshold is only a guideline and depends on many factors like Client brand, country, development technologies, contract, present pricing and strategy ( or – change in strategy)
Build, Operate & Transfer
It is only very few outsourcing providers that offer clients a Build, Operate & Transfer service as an add-on to more streamlined outsourcing services, simply because it is an unhealthy business case. On the paper it could look like any other service offering: You offer a Client to establish a development or support centre by offering Administrative, Legal, HR and Management services – so what is the big deal? Well, next to price, the biggest battlefield, now and especially in the future, will be qualified resources. To find the best resources for your Client, find the best location (and price), give the best legal advice on local conditions and offer your most skilled managers to get it up and running, just to find out that tomorrow your Client is your competitor regarding finding the best resources on the marked. Even typical outsourcing countries like India will at some point be in lack of resources
So, you offered BOT services anyway?
This post was inspired by the announcement that Danske Bank, the largest bank in Denmark, has established an IT and support centre in Bengaluru, India. The announcement mention nowhere about BOT services, but it is public known that Danske Bank established a dedicated development centre through ITC Infotech back in 2006 and grew the “team” to 700 employees as of today. 1. August 2015 Danske Bank start there own Centre with 800 employees. So, even a long lasting relationship can transform to a BOT service overnight if the Client strategy changes or some of the parameters in the common business case make it attractive for the client.
What should/could the outsourcing provider do?
First of all this case only apply to strategic partnerships that aim at long lasting relationships, not all businesses cases do, but if you have engaged with a Client in order to establish a dedicated development team/centre there are a few paths you can take:
- Redefine ‘long lasting’ to 5-8 years and make the business case accordingly
- “Never put all the eggs in one basket”. This consideration apply to both Clients and Providers during the initial matchmaking: It is in both parties interest that you can grow together and that the Client staffing needs vs. present total number of employees at the provider has a ratio in the range of 1:5 to 1:10 as best practice.
- Even though you have had a good relation to your Client for years and delivered a reasonable quality/price ratio, always be up on the beat regarding changes. Local market changes as pricing, salary, etc. but also regional changes and/or changes in Client forecasts of future needs. If you define ‘long lasting’ as forever, don’t wait a year to long offering the Client a new contract that reflect the changes (including lowering of prices or increasing service level – a good business case is vital for both parties) – for sure the Client will appreciate this gesture and the ‘threshold’ will never be reached.
