How to early determine if your service provider is in trouble

Author: Kelly Boyer

Twenty five percent of existing BPO service providers will stop to operate in 2012. This is reliant on a recently published Gartner research which is part of the Special Report entitled'Assess and Manage seller risks to guard Your Business'. This is attributed to the current depression, lapses in outsourcing contracts, and not being able to acclimatize to standardised delivery models.

With these elements in mind , Gartner observed that BPO buyers must take caution before venturing into any new outsourcing contract, and should be privy to the six alert signs meaning that a service provider is not stable enough to maintain a long-term outsourcing relationship :

one. Unprofitable outsourcing deals - According to the study,'Some BPO suppliers are carrying unprofitable contract portfolios, largely springing from too-much, too-soon pursuit of deals, without a lot of thought as to the way to transition them to a standardized, rationalized, worthwhile state of ongoing operations.'

2. Incapacity to get new projects - it's a good sign if the service provider has the power to continually take on various necessities of different clients.
3. 4. Incapability to bid on new BPO deals because of lack of enough funds - Some service providers cannot take on new BPO contracts because of shortage of enough capital. Likewise, the so-called'lift and shift' methodology in which a business process is moved offshore to reduce costs because of lower wages will at last create issues for service suppliers that depend on it because they continue to need capital for the resources needed to do that outsourced task.

Exposure to banking / financial industry - With the present finance crisis, those service providers with cash coming from the finance or banking sector will be in a tight spot. If the outsourcing partner has more than 85 % of money from the banking sector, the buyer should know if this will have an impact on their business operations. Increasing levels of contract cancellation and insourcing - Gartner says that before signing an outsourcing contract, buyers must come up with a plan on what to do when contract ends.


During these troublesome times when outsourcing has become an avenue for corporations primarily to chop costs, it is crucial to pay very close attention to your outsourcing partner. Know the warning signs and be constantly conscious of what has happened in the BPO industry. Have a clear picture of what you need to achieve before signing any outsourcing contract.

About the Author:

Microsourcing is one of the leading Outsourcing Companies in the Philippines.

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