Outsource the Outsourcing
By now, nearly everyone understands the logic of offshoring. Why keep noncore functions in-house when you can contract them out to lower-cost providers overseas? Less obvious is how to put that understanding into practice--that is, how do you actually create a global organization able to operate across multiple time zones and tricky cultural and linguistic divides? Few owners of fast-growing companies have the time or expertise to find, let alone manage, contractors in the Philippines or India. And if it's not done right, outsourcing can turn on you, leading to bigger problems than those it was meant to solve. Hmmm. If only you could outsource the outsourcing...
It's not as absurd as it might sound. As the offshoring trend has gathered steam, a cottage industry of brokers and consultants has emerged. Not only can these intermediaries hook you up with the right contractors, they help ensure a good fit, managing the relationship and handling any problems that pop up. Such firms are especially important for growing companies, which "can't afford for their outsource projects to fail," says Catherine Mann, a senior fellow at the Institute for International Economics in Washington, D.C.
Vinay Gupta is a good example of this new kind of middleman. A veteran of corporate America turned serial entrepreneur (he sold one of his start-ups, an Internet billing company called BlueGill Technologies, in 2000 for a reported $250 million), Gupta believes there is no reason small companies can't take advantage of the global economy just like big ones. In 2003, the Ann Arbor, Mich-based entrepreneur launched Janeeva, a company dedicated to that proposition.
Gupta's first move was to take a series of trips back home to India to identify a handful of best-of-breed companies ready to do business. His New Delhi office now has nine employees. "They get the inside scoop on whether a call center, transcription service, or programming shop is doing good business or not," he says. The company also developed a Web-based software program called Passport that functions as an information dashboard for clients. With just a few mouse clicks, a U.S. company can track the volume of customer service calls or check on the status of a software project.
In early 2004, a Janeeva salesperson paid a call on Joe Hymes, the executive director of Business Health Services, which coordinates on-site medical care for six occupational health centers in southeast Michigan. Hymes was under intense pressure either to cut costs or cut jobs. One way to do the former was to get a better rate on BHS's medical transcribing services, which were currently being handled by a nearby contractor. Hymes knew that sending the work overseas would be a lot cheaper. But he had no idea how to take the first step.
The Janeeva salesperson told Hymes that in India, he could expect to pay about 11 cents a word to transcribe BHS's doctors' notes and other medical documents--five cents less than his current rate--and set out to broker a perfect match. Two months later, Janeeva came back with a list of 12 vendors and worked with Hymes to pick the right one. It also created a customized computer system, so that finished transcripts arrive as PDF documents. When a few technical glitches occurred early on, Janeeva stepped in to work with the vendor to solve the problem.
Janeeva charges clients an up-front consulting fee--BHS paid about $8,000--and also takes a 25% premium on top of the vendor's rate. Nonetheless, BHS now pays 11.5 cents a word for transcribing--a savings of about $7,000 a month--and Hymes did not have to cut a single job. Needless to say, he's a big fan of what can be accomplished by offshoring. "How else could I have trimmed $80,000 from my bottom line without lifting a finger?" he asks.
Janeeva is relatively small, with about 10 clients, but Gupta has big plans. He's adding to his network of vendors, which now numbers about 350, and is also broadening the geographic scope by tapping into companies in the Philippines and Costa Rica. He's even started working with outsourcers in such exotic locales as Phoenix and Omaha. "The dynamics of outsourcing are the same no matter what country you're in," he says.
Resources The National Association of Software and Service Companies, an Indian trade group, offers help on finding outsource partners, at nasscom.org. Read the U.N.'s survey on trends in foreign investment.
Darren Dahl is a contributing editor at Inc. magazine, which he has written for since 2004. He also works as a collaborative writer and editor and has partnered with several high-profile authors. Dahl lives in Asheville, North Carolina.