CIO — Agents. Intermediaries. "Pivotal providers," one analyst calls them. By any name, third-party brokers are now serious players in the burgeoning offshore outsourcing marketplace. From eager-beaver startups to big-name systems integrators, these brokers come in all shapes and sizes but offer the same value proposition: to negotiate, manage and even take financial responsibility for outsourcing projects sent offshore to India, Eastern Europe and other foreign outposts.
In return, they want a cut?maybe even half?of the cost savings CIOs go offshore to achieve.
Where’s the value in giving up savings to get savings? For small to midsize companies new to outsourcing, brokers offer the big benefit of offshore projects?good work done cheap?but without the cross-cultural vendor management headaches. Even some larger companies going offshore for the first time can benefit from a broker if their first consideration is accountability that the work be managed correctly. But to the big, experienced players, the idea of a middleman is as compelling as throwing money out the window.
Clearly, the answer to the new question of whether to use a third-party broker is the age-old "It depends." There are risks: Brokers vary in offshore experience, and any time you add a middleman to a transaction, communication can get bungled three ways, not just two. There’s also the chance that brokered vendors may be of lesser quality or experience than ones you might attract if you outsourced directly. Key points for CIOs to consider when weighing offshore options are: Know your own vendor management capabilities; do your homework on your prospective broker’s experience and talent pool; and if you do opt for a broker, be prepared to make a business case that’s rooted less in the hard numbers of cost savings and more in the softer concept of peace of mind.
1 When Harry Met Sari
In 2000, when Harry Margolis launched ElderLawAnswers.com, a Boston-based Web portal offering legal advice to senior citizens, he couldn’t afford a big-name Web developer. So Margolis, who is president of ElderLawAnswers.com, hired Providio Technology Group, a Boston-based offshore broker and consultancy, to outsource the work to less-expensive developers in India. Beyond matchmaking, Providio managed the project from beginning to end, relieving Margolis of the burden of having to learn outsourcing on the fly. "We’re just too small an operation to think about [going offshore directly]," Margolis says. "For us, the [broker] model makes a lot of sense."
But even the presence of a broker doesn’t guarantee success?particularly when communication issues arise, as they do in any outsourcing relationship. Margolis’s project almost fell apart over the initial vendor’s inability either to understand or perform the tasks requested through Providio. "We’d give [the vendor] a list of things to get done, and half would, half wouldn’t," Margolis says. "And then there’d be a couple of things added that we hadn’t even talked about." Providio was unable to improve the relationship and was forced to replace the vendor with a much more responsive (also Indian) company, a job Margolis didn’t have to do.
