It wasn’t easy, but over the past two decades business embraced the offshore outsourcing of various functions, including laborious back-office tasks, call-center activities, and routine business processes. Now a more cerebral function – decision making – is being added to the offshore services menu, as third-party providers structure decision alternatives, analyze data, and recommend or even take courses of action.
Are businesses really ready to outsource their thinking? The answer may depend on how much confidence-building experience they have had with analytics generally, since third-party decision making is an analytics-intensive undertaking.
The trend began quietly in the mid-1990s, at General Electric’s captive offshore center in India. Though the center was set up to do back-office work, managers realized that employees there could also help with decision algorithms. Soon the operation had become the primary provider of decision tools for credit and risk analysis. When GE sold a stake in its offshore unit in 2004, the resulting company, Genpact, began to take on decision analysis for other clients.
Today several other offshore firms – Mu Sigma, MarketRX (acquired by Cognizant in 2007), and Inductis – also specialize in decision analysis; their clients include some of the largest U.S.-based fi rms. They’re helping a major retailer to decide where to build new stores, a large auto insurance company to set rates for different customer subsets, a pharmaceutical giant to decide how to deploy its salespeople, and a leading office products retailer to decide which promotions and products to offer to which customers. Even large offshore vendors that previously specialized in IT, such as Cognizant, TCS, and Infosys, are beginning to develop an expertise in decision making.
Companies that outsource decision making report improvements in their decision processes and results. But how did they get comfortable with the idea of turning important business decisions over to third parties? Some say that the project structure was critical. The office products retailer, for example, recommends “4-1-1”: four offshore analytics consultants, one consultant at the client site, and one well-connected client employee on the team. The onshore consultant is responsible for communication and coordination between the offshore team and the client. The employee’s job is to ensure that the analysis is consistent with the decisions the organization wants to make, and to communicate the outcome to the appropriate executives. The result of a decision analysis is useful only if it’s implemented, and offshore analysts can’t easily influence executives to adopt a recommended action. It’s also important that consultants on the vendor’s team have deep domain expertise.
With a shortage of analytic skills in the United States and Western Europe and a ready supply in India, Eastern Europe, and China, it’s perhaps not surprising that organizations are now outsourcing these more cerebral functions.
Read More: Harvard Business Review
Photo: Corbis
Posted by: Andreea Hirica
Posted on: Contagious Ideas
