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In our last post, we discussed the hidden costs of low-cost providers (LCPs.)  Here’s a quick recap: because of how they are structured, LCPs have very high turnover rates, so most of their consultants doing the actual work don’t have any idea of the larger context their work supports.  What you usually end up with is a lot of deliverables that technically meet their individual requirements, but don’t form a useful whole when put together.  To get the result you want, you have to either micromanage the LCPs full-time or pay them even more for lots of re-work, and in both cases, it’s normally cheaper just to hire a premium provider.

That said, LCPs are still a valuable tool when used correctly.  (And premium providers are perfectly capable of disappointing you)  In this post, we’ll outline certain situations in which LCPs can actually save you money.  The thing to keep in mind is that on any large project, your final result will include work done by LCPs, whether you know it or not.  Certain tasks are well-suited to LCPs.  Big-name system integrators know this, and will subcontract these deliverables out to cheap offshore firms.  They then bill the work to you at the same rate they bill their high-end consultants and pocket the difference.  The point is that the system integrators know which tasks that can be assigned to LCPs without a noticeable drop-off in quality.  Once you know what they know, you can safely employ LCP’s and save some money.

So what are these situations?  The best tasks to give LCPs are ones that have a high volume of work and a low level of complexity.  LCPs have very high turnover rates, but if your task is simple enough that it can be explained with zero ambiguity in a couple of paragraphs, it doesn’t matter that the person doing the work is unfamiliar with the larger context.  He can just follow the recipe and start cranking out useful results.  It’s also better to use LCPs for tasks that are high volume.  Many are located offshore.  That means a different time zone and a high probability that English will be the consultants’ second language.  If there isn’t much work, it’s better just to pay the higher rate so you can communicate without friction during coincident working hours.

Legacy data conversion is a perfect example of high-volume, low-complexity work.  Suppose you are changing to a new data format and your firm has at least one experienced individual who understands the source, target, and translation rules to direct the project.  In this case, you have the perfect opportunity to save some money by using an LCP.  Building translations and manually scrubbing data in preparation to loading and running the conversion programs is straightforward, monotonous work.  It doesn’t require high-dollar consultants or even your own internal staff.  You will undoubtedly experience some hiccups and inconveniences from language and time-zone differences, but not nearly enough to justify the cost of paying premium consultants top dollar to spend ten hours a day clicking and dragging.

LCPs can also be very valuable in a break-fix scenario.  Since their consultants are unlikely to be intimately familiar with the workings of your system, they aren’t a good choice to do the actual fixing, but when you submit a support ticket, most software manufacturers are going to request a lot of detailed information from you, such as the detailed specifications on your infrastructure, the IDs of users experiencing the problem, system trace logs, documentation on how to re-create the problem, etc.  (Check out Juichia’s blog post for tips on working the SAP ticketing system) Because you are looking for a concrete result, you can save time and money by retaining a low-cost provider and tasking them with responding to any information requests that come in.

The safest situation to use LCPs are ones in which you can hand the consultants an example and say “Make all the other instances look like this.”  You’re taking a risk when asking them to do more complex projects.  That said, there are a few other factors that can improve your odds of success.  The first is great documentation.  Documentation is always important, but it’s especially useful when the work is being done by inexperienced trainees.  After all, it’s much easier to follow an existing recipe than to create a new one.  If you have few custom objects, thorough and accurate documentation, and configuration specs that are updated regularly, the LCP’s inexperienced team has a better chance of being able to figure out how to solve the problem.

The second odds-booster is if you have a stable, internal IT team filled with members who know a lot about SAP and your business practices.  If your internal team is capable of architecting the solution, breaking it down into small-scope development objects and communicating them unambiguously, you are also more likely to get better results from LCPs than the typical enterprise.

Low-cost providers are not inherently bad.  Like any other business service, they are a tool, and likeany other tool, they are better suited for certain jobs than others.  If you have a solid understanding of how LCPs work and in what situations their weaknesses aren’t harmful, you can save money by using them.  Just don’t expect to turn them loose on any task and get premium results at a big discount.

Harrison Holland, 2016 Big Concepts

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