It’s no secret that outsourcing engenders trepidation in a lot of constituencies at most companies: employees who fear for their jobs, managers who worry about sagging morale should workers fret obsessively.
At entrepreneurial companies, however, the fear is more likely to emanate from the founders themselves, who don’t necessarily understand the process and thus fear losing control if they engage in it. At the heart of their concern, we feel, is a lack of trust when it comes to turning over important company functions to an outsider.
As outsource providers in the information technology industry for the past 12 years—we founded RedSalsa Technologies, Inc. in 1993—we believe the fear is unwarranted. Working with numerous entrepreneurial companies, we’ve learned that strategies abound for building trust and retaining control of the process.
A Compelling Case
What’s more, we feel that the advantages make a compelling case for outsourcing at entrepreneurial companies. At RedSalsa Technologies, Inc., a fair number of our 40 clients are entrepreneurial companies that have reaped significant savings by turning to an outside vendor for IT services. Indeed, we estimate that savings range from 30 percent to 60 percent for work done offshore, where 50 of our 150 employees are based.
For entrepreneurial companies backed by venture capitalists, the savings are even more critical as founders are constantly pressured by their VCs to keep costs under control. In addition, the savings increase exponentially because entrepreneurs don’t need approval from layers of managers and thus can act expeditiously to implement recommendations.
A Matter of Trust
With advantages like that, entrepreneurs need to understand and get a handle on the issue of trust that underlies their reluctance to turn to outsourcing. In one case, a prospective client had considered, but eventually decided against, retaining our firm to handle the fulfillment of its packaged foods orders. The founder had expertise in that area and didn’t think an outsider could do it as well—essentially, he didn’t trust us to handle a job that was critical to his company’s well being.
To build trust, we recommend that entrepreneurs be educated or educate themselves about the process. Then we suggest that they turn, at least at first, to providers with whom they already have a mutually beneficial business relationship. Recently, for example, we were able to bring a publishing company on board as a client because the founder already knew us through the Entrepreneurs' Organization. He indicated that he was able to work with us because he could trust us.
Tactics for Maximizing Trust
For our experience at RedSalsa Technologies, we’ve learned that to maximize trust, founders would do well to consider the following tactics.
- Understand your rationale for outsourcing. In the past decade, companies have been taking a strategic, rather than tactical, approach to outsourcing, implementing the modules of analysis, design, and mapping rather than handing off an entire project to an outside provider. We consider that beneficial. If a company understands where the job it is outsourcing fits with its long-term goals, the provider will be better equipped to deliver meaningful results.
- Frame requirements. Decide what you want your outsource provider to do for you, and document those details in a written contract. Providers need to know specifically what they are responsible for delivering and within what time frame.
- Identify the right strategic partner. Use references or an existing business relationship to narrow candidates and select wisely. In some cases, you might consider asking a prospective provider to handle a pilot project so that you can evaluate results.
- Treat your provider as a partner. Include your provider in your discussions about the project and its fit with your company’s goals. Allow the vendor to make a fair profit. With outsourcers from abroad, make sure you retain an on-site liaison to mitigate the inevitable cultural misinterpretations that will arise.
- Be patient about results. In the beginning, expect your provider’s knowledge about the field to bump up against company’s needs, expectations, and budget realities. It will take time for your provider to understand the nuances of your business, so allow for extra overhead. Assign an experienced project manager to drive the process to your desired return on investment (ROI).
- Communicate, communicate, communicate. In other words, you must manage the relationship. Hold regular meetings—weekly, monthly, or quarterly—to review goals, assess progress, provide feedback, and make any adjustments. That will keep the project on course and eliminate unpleasant surprises.
Ultimately, understand that outsourcing is a process, not a project, and that trust lies at its core. To reap the significant advantages that it will provide for your company, understand the steps necessary to build trust—and take them.
Hari K. Valluru Cofounder RedSalsa Technologies Inc.
Kiran Vallurupalli Cofounder RedSalsa Technologies Inc.