The last decade witnessed a remarkable growth in outsourcing. Buyers focused on cost reduction, improved time-lines and better productivity, while service providers automated processes, adopted best practices and explored new destinations to set-up delivery centers. In spite of the growth in outsourcing and its maturity, risks have only increased over the years. Newer forms of risk have emerged and it is important to factor those in when new outsourcing deals are struck.

Top Risks Perceived In Early 2000's 

Top Risks In Current Times 

According to Saugata Sengupta, Senior Analyst at Tholons, some of the intangible factors are:  the quality of equipment used, the quality of training, time-taken to respond to a situation, number of times there have been political issues and public demonstrations in the country. He further says, “It is difficult to substantiate risks in the industry with real data. The major challenge lies in measuring the quantitative part of the qualitative aspects of risk management. Very often, we have clients (during a location assessment), who give 40% weightage to data security. This would mean that if a credit card issuing company wishes to outsource F&A activity, which requires high IT levels, India and China will never make it as the probable destinations.”

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Advice

The numbers of intangible risks are higher in the current times. This makes it important to look within and organize (if possible, document each process) the sourcing operations. Further, there is a greater need to analyze various options for the right business model (Joint venture/ Captive/ Third Party). At a time when outsourcing is considered, the company must invest in educating its stakeholders and staff on the benefits of outsourcing. It always helps to have a team member with prior exposure to outsourcing.

For now, as the buyers continue to worry about the risks and commercial factors, SP's are expanding in different locations for cheaper talent pool and better economics. As times goes on, the risks will continue to grow, and greater globalization will make way for a new set of rules for the same game.