Offshore Vendor Selection: Choosing the Destination

Selecting a destination could be quite simple if you have strong drivers pushing you towards certain geography. Maybe your engineering team is predominantly Chinese, or maybe the board of Directors is firmly set on India, or maybe you have vast network of industry connections in Romania… Almost any geography can offer a variety of companies among which you could find that great match for your needs. And what if you do not have strong bias towards a particular location, where should you go? Let me start with a few quick tips here:

  • If your risk tolerance is low and/or your organization is new to outsourcing go to India, you can not get fired for hiring IBM.
  • Go to India if you have to choose on a spot, or have little knowledge of outsourcing, or have to deal with large scope ERP implementation, or … as a matter of fact if you have to ask this question chances are you should consider India as your top destination.
  • If you are not an outsourcing neophyte and ready to invest time in research and vendor selection a whole new world opens up to you, with some decision shortcuts:
    • If you are looking for partner that operates as extension of your team on an agile project consider near shore, e.g. Latin America
    • If you are looking to outsource large volume of manual regression testing consider China or Philippines.
    • If you have IP intensive engagement consider Israel
    • Are you looking for resources for mobile development? – Consider Eastern Europe.
    • Are you very cost sensitive and ready to deal with immature vendors, consider nascent territories: the countries such as Pakistan, Vietnam, Macedonia, etc.

Of course those tips are just ideas, the country selection needs to be taken exceptionally serious as it is one of the most decisions you make in the vendor selection process. While selecting the country I recommend using weighed selection criteria approach:

  1. Identify your selection criteria; keep in mind that the criteria should be country specific rather than company specific.
  2. Give each of the criteria weight – the rating of its relative importance for your organization.
  3. Define an initial list of countries you are willing to consider. Keep it relatively short to limit the rating efforts.
  4. Rate each of the countries using latest information you can find. Industry analysts’ reports would be the most helpful, consider Internet research and outsourcing associations, as well as the common sense.
  5. The rating for the country is derived as a sum of ratings for each criterion times the weight of the criterion.

Below is an example of such analysis performed for a mid-sized software development company in Washington, DC area. The company was looking for a partner to perform substantial on-going customizations of their SaS product. Scope of each customization project would keep a small team of Java developers and QA engineers busy for ~3 months.

After the list of the countries has been agreed upon we started with a very rough analysis and then detailed ranking for a shorter list.

Initial List


Country

Infrastructure

Operating Environment

Skills Availability

Cultural Compatibility

English Skills

Rates

Resource Turnover

Political Climate
Time Zone

Brazil
Med Med Med High Med Low Med Med High

China
Med Low Med Low Low High Low – Med Med Low

India
High High High High High Med High High Low

Israel
High High Med High High Low Low Med Low
Pakistan Med Low High Med High High Med – High Low Low

Philippines
Med Low Low Med High Med Med Low – Med Low
Romania Low Med Low Med Med Low Med Med Med

Russia
Med Low Med Med Med Low Med – High Low Med

Ukraine
Low Low Low Med Med Med Low – Med Low Med

Refined detailed rating


Country

Infrastructure

Operating Environment

Skills Availability

Cultural Compatibility

English Skills

Rates

Resource Turnover

Political Climate
Time Zone Country Rating

Weight:
4 8 10 5 8 6 9 4 7

Brazil
7 8 6 8 7 6 8 8 10 458

China
6 6 7 5 3 10 10 7 6 411

India
10 10 10 10 10 7 4 10 6 510

Russia
7 5 6 8 6 4 6 7 7 371

Ukraine
6 4 5 8 5 5 7 6 7 352

Based on this analysis we narrowed our search to 3 countries (Brazil, India, China), which in my view was still excessively broad and could result in a very expensive vendor selection process.  By the way the winner of the engagement was a vendor from Brazil, and it remains to be seen how well the project works out.

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