Offshore Outsourcing Vendors Upsell Customers to Increase Market Share

CIO — If there's a sure sign that offshore outsourcing has hit the mainstream, it's that it's increasingly hard to distinguish the sales techniques of a Wipro or a TCS from an Accenture or IBM (IBM). Indian IT service providers have joined the ranks of large U.S.-based outsourcers in leveraging their relationships with existing clients to increase their market share using that tried-and-true technique—the upsell.

Offshore outsourcers are attempting to expand and diversify their offerings, and there's tremendous temptation for IT departments to use an existing provider for add-on services.

"An agreement is already in place and requires little more than a new statement of work from the account manager—whom the company is already comfortable dealing with," explains David Rutchik, a partner with outsourcing consultancy Pace Harmon. "Vendors foster this relationship and familiarity by playing up a customer's high satisfaction in their core area and parlaying it into expansion areas."

Offshore providers are pulling out all the stops in their sales pitches. "Several of the offshore outsourcers are offering very low-cost pricing to take on work they haven't done before or are very inexperienced with doing," says Phil Fersht, founder of outsourcing analyst firm Horses for Sources. "Their attitude is to 'sell it and then work out how to deliver it.' [That] strategy is worrying the Western providers greatly."

Indian companies are also playing up their reputations in the application development arena and offering customers more flexibility than their U.S. counterparts to increase their market share, Rutchik says.

But buyers must beware. Offshore providers may not be qualified to deliver the new work IT departments need. Indian providers that made a name for themselves delivering application and development services are aggressively expanding into other IT towers today, but it will take time for them to reach full maturity.

"The offshore providers often fumble through at first," says Rutchik. "But they listen, learn and evolve."

In the meantime, customers should proceed with caution as the offshore IT industry works through its growing pains.

"Indian providers often have trouble providing mature, integrated offerings and corresponding processes, since they generally need to partner with third parties or [rely on] recent acquisitions in order to provide the required service," says Rutchik. "These scenarios create problems and risk because of integration issues and less streamlined control across the organization's service delivery."

Offshore outsourcers also may lack industry knowledge in their new areas of focus. Adds Rutchik, "This is particularly evident in regulated industries where items such as validation are often not well understood and sometimes addressed on the fly."

Offshore outsourcers may be incapable of providing real end-to-end services in certain areas, like end-user computing for example. "They are able to provide a robust service desk offering, but must rely on third parties thousands of miles away to provide on-site desktop support," says Rutchik. "This creates problems in coordinated service delivery, meaningful business SLAs and other areas."

In addition, being too quick to award extra work to your current provider—offshore or otherwise—can send the wrong message. "The danger is [you may get] the 'B' team as the vendor doesn't feel any competitive pressure to provide its best and brightest," Fersht says. "It's dangerous to let them think they can get away with giving you second-rate service."

While there's nothing inherently wrong with expanding the scope of an existing outsourcing contract, due diligence is critical. "Even if a company wants to consider an existing outsourced provider for new types of services, it should still engage in a sourcing event that covers the technical, commercial and business requirements," advises Rutchik.

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