5 Tips to Help You Determine Whether an Overseas Outsourcing Company is Legitimate

Shaunvir Mahil March 21, 2018

When you are considering outsourcing your work half way across the world, how do you know whether you are partnering with a credible organization or a bunch of cowboys who might leave your project in tatters? In my last post, ‘5 Website Red Flags of a Rogue Outsourcing Company ,’ I shared 5 website red flags to identify a rogue vendor. In this post, I am sharing with you 5 generic tips that would help you in assessing an outsourcing company’s credibility.

Data Security

One of the utmost priorities for any outsourcing company should be to adhere to the highest standards of data security protection for their clients. Accordingly, a very good sign of a reputed outsourcing company is that it has highly secure and stringent data security protocols in place. Therefore, a good starting point when evaluating an outsourcing company is to inquire about and review their data and IP security protection protocols.

It certainly is a red flag if an outsourcing vendor lacks in-depth security protocols and primarily relies on makeshift IT measures to protect your data. Data security is a very in-depth subject; particularly so, from a legal standpoint. Accordingly, from a legal standpoint a vendor should be able to clearly cite to you the following:

  • Reference to the relevant local legislation that protects both you and the vendor from any data security breach,
  • An explanation as to why the legislation serves as a strong deterrent
  • The specific steps that the vendor will take in the event of any data theft
  • How the specific steps that the vendor proposes to take would serve as an effective remedy
  • Details of regular legal sessions that the company holds for employee sensitization

This should be coupled with i) a detailed list of the IT measures and processes which the company uses to safeguard your data ii) additional steps or measures which the company can take, should you request that they be implemented iii) an outline explaining why data security is a top priority for the company.

If an outsourcing company cannot do all of the above, you can take it as a good indication that the vendor you are speaking to isn’t a reliable one.

Review the Vendor’s Contract

To the uninitiated this might not seem like a very useful tip, but you can tell a lot about a company’s mind-set by studying the sort of contract they offer you.

When assessing the credibility of an outsourcing company, certain actions will speak volumes about that vendor’s mind-set and attitude towards business service, values and professionalism. Apart from the tips I have listed here, what you want is to take a very close look at are any actions which might reveal the vendor’s mind-set.

The first thing you want to look for is a comprehensive and detailed contract because the tell tale sign of a rogue outsourcing company is that they offer you a light and relatively straight forward contract. A simple contract might seem advantageous initially, because it means no restrictive covenants for you and also makes getting approval and a ‘sign off’ easy. But any intricate business arrangement invariably implies a comprehensive and detailed agreement; and outsourcing most certainly qualifies as an intricate business arrangement. Hence, if a vendor does not offer a comprehensive contract, it is reflective of its lack of experience and the absence of sound legal counsel (not exactly the tell tale signs of a reputed vendor). An outsourcing vendor that might have worked with many companies would have accumulated so much experience over years as to make it necessary for them to come up with a broad contract; experience is what enables you to ‘cover all bases’. So it should be apparent that a ‘thin contract’ is certainly not a good sign. The last thing you want is to partner with a company that lacks legal diligence, (think once again about the significance of ensuring data security). If you are reviewing what looks like a template contract downloaded from the internet, you ought to be worried. In all likelihood, this means that the vendor has a ‘light’ track record and it doesn’t have robust protocols and policies in place.

Also pay very close attention to contractual terms that aren’t necessarily in your best interest but sound reasonable. What do I mean by this confusing and ambiguous statement? A good example to understand this is the non-solicitation/employee poaching clause.

If you happen to find a clause in the contract offered by the vendor that states that if you were to poach a member of their staff, you would be slapped with a financial penalty; such a term obviously does not seem to be in your favour. But whilst this seems like an unfavourable term (from your perspective), it is nonetheless a reasonable one- it is not unreasonable for an outsourcing company to expect that you would not poach its staff. Even when you work with locally based recruitment companies, anti-solicitation clauses are customary. So, we should not get too worked about such clauses while offshoring either.

While it is desirable of a business agreement that the terms be stacked in our favour to the extent possible, when it comes to outsourcing, we are faced with something akin to a catch 22 situation. This is so because a complete lack of unfavourable (albeit reasonable) contractual terms indicates that the outsourcing company lacks business acumen. Why? Because, if an outsourcing firm isn’t mature enough to protect its own interests, then it is highly unlikely that they would prove to be legally competent enough to protect your interests either. (again think in terms of data security; is a vendor, that fails to protect its own interests in a legally binding agreement, likely to have stringent data security provisions built-in, in its own internal employee contracts? If the vendor’s service agreement is a downloaded template contract, it is highly unlikely that it has even begun to think along these lines).

By contrast, a vendor that has unfavourable, albeit reasonable contractual terms in place must be a well established business. A company that is prepared to walk away from a deal to safeguard its interests is a company that isn’t desperate for business. Further, a company that is not desperate for business is nine out of ten times likely to be a successful company- and these are the sort of companies that you want to partner with- these are the companies that would fetch results for you.

On one occasion we had a prospective client claim that they were reluctant to partner with us because they had found another vendor that wasn’t charging them for a highly priced bespoke engineering software that they needed their offshore team to use.

However, probably he didn’t realize that this other vendor was not charging him for this software because it was using its cracked, illegally downloaded pirated versions. He needed to understand that if the prices offered by this company were lower, it wasn’t out of generosity. It obviously never occurred to this prospective client that a) this company was committing theft and b) if they were willing to break the law to get a client, they would not have any moral scruples about fleecing him as well, if they found an opportunity to do so. This takes us back to my earlier point about looking beyond what is immediately apparent. Certain actions and modes of thinking might seem appealing in the first instance, but if we look deeper, we realize that they reflect the hidden motives and mind-set of the organization. In this instance, the actions of the vendor reflect that they wouldn’t hesitate to cut corners and bypass the laws for even small and immediate gains. If some weeks or months down the line, the said company comes face to face with an opportunity to increase its profits by cutting corners with respect to the client’s work, most likely they wouldn’t hesitate from making full use of that either. Cases like this one are frequent; leading dissatisfied clients to complain about how outsourcing doesn’t work, and that, most offshore companies are unprofessional. The truth however is more complex- some of the clients are quite happy to compromise on diligence and ‘look the other way’ if the blatant red flags happen to favour their immediate interests. Using pirated software should have been taken as an obvious red flag, but because the client I just mentioned stood to benefit from this malpractice, i.e. reduce his expenses, he was happy to ignore it. If you don’t want to fall into this trap, it is important for you to appreciate that whilst the action a vendor takes may seem advantageous in the immediate future, you must also consider what that action says about the vendors mind-set and whether such a mind-set is indicative of good business practice on the whole.

A company that comes to you, hat in hand, reflects the mind-set of a ‘desperate for business’ company; and that for sure, is not the hallmark of a well establish enterprise.

Review Testimonials, Case Studies & References

I know firsthand just how tough it is to acquire testimonials and case studies from clients. Many clients are reluctant to give outsourcing testimonials even if they are very happy with the service they are getting from their offshore vendor. This is so because:

1Outsourcing backlash

Some clients don’t want to publicly associate themselves with offshore outsourcing out of the fear that they would be criticised by their clients and/or face the brunt of anti-outsourcing rhetoric. However, this fear is unfounded. We, (VirtualEmployee.com) have collected well over a 100 video case studies and testimonials, and some of these videos have been online for over 5 years. Till date not a single client has come back to us and reported any backlash they might have faced for endorsing our outsourcing services. Despite this, some clients still hold reservations.

2Competitive Advantage

Some of the other clients are reluctant because they do not want their competitors to learn of their competitive advantage. This is no exaggeration. We have had clients openly admit to us that they don’t want to give a testimonial because they don’t want their competitors to start outsourcing as well.

3Confidentiality

Reluctance to disclose in public the nature and details of their ongoing projects is another reason why some of our clients refuse to write testimonials. This is particularly true of case studies wherein the client is required to divulge a lot of project details. On one occasion we had a client share with us a video testimonial, but a year later when we asked him whether we could film a case study with them, (and when we started asking a lot of detailed questions about the software they were developing with us) they changed their mind and pulled out. The concern for this company was not so much publicly endorsing an outsourcing firm, (as they had already done that) but rather publicly sharing detailed information about their software. Often the work, (particularly in software development) can be mission critical, the details of which companies will want to keep private.

4Camera Shy

In this day and age, video testimonials/case studies are by and large what we all want to review. While written testimonials still can carry a lot of weight, we are most definitely living in the video era. Some clients however feel uncomfortable appearing in front of the camera.

5Time

Case studies demand of the client a huge amount of time. When we film case studies we actually go and visit the client on site and typically spend 4-5 hours at the client’s offices! Setting up the camera equipment, often going through as many as 30-40 questions and doing re-takes, all of this takes a lot of time and effort not just on our part, (the outsourcing company) but also on the part of the client. Not to mention that typically the client also has to invest 1 hour on a call even before we reach his office, (this is so because a preliminary call is necessary for us to be able to prepare before hand, as we like to go in-depth, discussing their projects, objectives, challenges, company background and so on). In short the client has to invest a fair amount of time and energy into the entire process; something that some of our clients cannot afford.

To sum up, trust me when I say it, in the outsourcing industry acquiring a video testimonial is very difficult and a case study is even harder to get! Typically, one must approach several happy clients, before one can get even one client to agree to vouch for you publicly. So, it is no mean feat for a company to be in possession of a good portfolio of testimonials and case studies. That a company has it may be considered a very strong sign of its credibility.

Also, take into account the fact that filming case studies on-site entails a fair amount of investment on the part of the outsourcing company – it typically costs a few thousand dollars to produce just one case study, (when you factor-in the cost of travelling and hotel expenses, renting cameramen and the cost of editing the footage). So any outsourcing company, based in a country like India, the Philippines or Ukraine, which has a strong portfolio of case studies from around the world, (filmed over several years’ intervals), is unlikely to be one of the Mom and Pop outsourcing enterprises that you would like to avoid working with.

Don’t just review the testimonials and case studies. Dig a little deeper. Review the reputation and credibility of the companies endorsing the outsourcing firms as well.

In the small to medium sized business outsourcing industry, a significant percentage of the companies outsourcing are in actual fact start-ups. So it is also necessary to be careful to check upon those giving the endorsements. If the company giving the case study or a testimonial is also a well established and reputed business that has been in operation for a number of years, that is an extra bonus. This is so because, in general, a well established company will be more diligent, more knowledgeable and better at assessing talent than a start-up. Hence, if a well established business has vouched for an offshore company, you are in a way piggy backing off the due diligence they have already done. In this sense, testimonials/case studies, particularly from well established businesses, help you affirm your evaluation.

As an aside, I would like to add that by well established businesses I do not necessarily mean a large corporation. But, if you reviewed a testimonial from the CTO of a software development company in say Chicago, that has been in operation for 10 years and has a 30 strong staff based locally, and the CTO says, “they outsourced software development with XYZ company and had an excellent result” then that certainty counts for a lot. You are not exactly outsourcing “rocket science” and so the judgement of the CTO of such a company should most likely suffice to assure you that the vendor would be able to handle the complexities of the type of work you are trying outsource.

But don’t just stop at reviewing the endorsing company. At times you could go even further and find out more about the actual projects that were outsourced. For instance, in the following case study

I filmed, Malcolm Piace, the COO of Keystone Employment Group, mentioned the name of the web portal our programmers developed. A prospective client watching this case study would most likely not go as far as to check out the url/portal for themselves. But if he did take the trouble, he would have gained an even better insight into the complexities of the work that was outsourced. Often there is much more to case studies/testimonials than mere words of praise.

Lastly, you can ask for references and this again is a good indicator of how well-established an outsourcing company is. Just like testimonials and case studies, it is not so easy for an outsourcing company to find references, owing to more or less to the same reasons outlined above. Because one must approach senior decision makers, sometimes just getting an appointment with them is a difficult task (due to their hectic schedule), let alone getting them to take some time off for you. And secondly, there are only so many clients one can ask to act as references for you (it soon gets a little impolite to ask the same person every month for it). Thirdly, clients move on- a client may have been very happy with your service, but they may have availed your services only for a year (hence you can only ask you present clients to act as references). In short, an outsourcing vendor would have to have a wide range portfolio of clients, for them to be able to arrange references you can speak with. So, if they do manage to identify a couple of references, it is most certainly a good sign.

Offshore outsourcing companies based in countries like India and the Philippines must approach a lot more of their happy clients to get hold of potential references than you would have guessed. This is why, the ability to furnish impressive, detailed and referenced case studies and testimonials is such a great indicator of a well-reputed outsourcing company.

It must also be kept in mind that a classic red flag to identify a rogue outsourcing company is their propensity to produce fake testimonials. Typically, it would be a written testimonial that is not referenced with any company name, company website or designation. The testimonial will typically say something like, “They put me first, they are terrific” Bob Brown – the CEO of a leading Media company in New York. As to how clients manage to overlook such obvious Cowboy signs and despite all red flags still choose to work with such rogue entities is something that baffles me. That an outsourcing company could seriously believe that such statements can pass for legitimate testimonials tells us a lot (and all the wrong things) about its mind-set. If they think they can pull a fast one with such blatantly made up testimonials, one can only imagine where else they might try to cut corners. Potential clients are best advised to steer clear of such rogue vendors.

Live Tour

This tip really is as basic and simple as it sounds. If you are worried about the legitimacy of an overseas outsourcing company, then why not ask them to give you a live tour of their offices? A well maintained office with a good look and feel cannot be faked so easily. Taking a closer look at a vendor’s facilities would also better equip you to compare it with its competitors.

Since 2007, we have had only one prospective client ask us to give him a live tour of our offices, (which I find surprising). I wish more of our clients did the same. Not only would it help us to allay their fears but it also makes a comparison among vendors more objective. I know many clients who will compare a 500 strong outsourcing company with a 5 man strong vendor and not realize the vast gulf in size and capability between the two. It is for this reason that I always recommend a live video tour. The process might seem a little tedious and even unnecessary, but simple steps like these help make the selection process more objective and transparent, than is currently the case for most.

Making a live tour is very easy and it takes just around 15 minutes. Another advantage of making one is that it gives a reputed vendor the opportunity to showcase the fact that its standards are not merely ‘good’ but actually at par, (if not of a higher standard) than what one would expect of a small to medium sized business in the US or Europe. In many instances some of our clients have felt that our facilities are of a higher standard than what they have. If only more of our potential clients knew about this, they would have considered hiring our services!

Accomplishments

This tip might come across as being rather obvious, but I have included it because again I have come across very few clients who actually take the pain of checking about the company’s accomplishments. Some good examples would include:

  1. Certifications such as ISO and CMM Level
  2. Special Economic Zone Status
  3. Media appearances/Business awards

An outsourcing company is unlikely to attain any of the above if they are a rogue vendor.

Certifications such as ISO and CMM reflect that a vendor has robust processes in place, something that should give you peace of mind. And, to acquire special economic zone status in a country like India, (other offshore destinations in developing countries I assume would also have similar programs for export driven businesses) means going through several rounds of intense auditing by the Government of India and requires clearance from a senior government civil servant.

Thus, accomplishments like those listed above are good indicators of an established business, and clients should certainly do more to examine these closely if they happen to be in two minds about the credibility of an offshore entity.

Concluding Notes

There are several indicators to assess whether an outsourcing company is well established or not. As I discussed at length in the foregoing, don’t just focus on what is apparent. Rather, try to analyse and think deeper about what certain actions reveal about the level of professionalism, quality of service and the mind-set of a vendor. This is the overriding principle, (you can think of it as my 6th tip) as the most important principle to apply if you wish to truly find out how well-established a company is. Once you calibrate your attention to this line of thinking, you should be able to tell a well-reputed outsourcing company from a rogue establishment, very quickly and with relative ease, by focussing attention on the tell tale signs we have identified above.

Now that you are equipped to identify a legitimate and proven offshore company, how should this change your approach to outsourcing? Click here to learn about it by reading my next blog post How & Why you should shift your mind-set once you know an Outsourcing company is well established

Always Remember

Finding out whether a vendor is well-established or not, is the not the sole prerequisite to ensure that you outsource successfully. Outsourcing diligently also includes (though it is not limited to- i) thoroughly assessing the outsourcing company’s technical ability ii) ensuring that the offshore vendor’s service model is compatible with the way you want to outsource iii) ensuring a good level of rapport and relationship between you and the service provider, (this is something even most diligent clients more often than not, do not focus on).

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