Location Risk Monitoring

Risks Involved in Outsourcing Analytics

Avatar Written by Janani Balu

In the field of outsourcing, analytics is the latest to join the list. Owing to the growing availability of data and the competitive edge it has provided to a few companies, a large number of organizations are looking to realize revenues through collected data. According to MIT Sloan Management Review, the percentage of companies that seem to be using their data insights to improve business was declining but is currently picking up pace.

Source: http://sloanreview.mit.edu/projects/analytics-as-a-source-of-business-innovation/

Therefore, it only seems wise to capitalize on available data and consider the results while developing a strategy for the business. However, it involves huge costs in setting up analytics centers and requires a large number of experienced high-end analytics professionals to come to a meaningful decision. Under these circumstances, it is sometimes essential for these organizations to seek for BPOs that deal with analytics.

In addition, in countries like India, where people are traditionally talented in statistics and can speak English fluently, it is a natural transition from call centers and IT into the analytics sector as they are better paying and are expected to be in business for a long time.  Moreover, given that they already have a network in place, it is easier for them to tap into their connections and pitch for analytics projects.

Despite seeming like a smooth arrangement for both parties, analytics outsourcing carries a few risks of its own.  Obviously, the risks that apply to outsourcing in general like hidden costs, weak supply side management, technology differences, absence of in-house innovations, cultural differences etc. also apply to analytics outsourcing as well. However, there are a few that are specific or more prominent in analytics outsourcing.

People Risk

According to a research, some of the employees in these BPO analytics organizations are straight out of college and do not have any experience in analytics. Given that employees are these BPOs’ selling point and clients expect a certain amount of prior knowledge, it poses as a hindrance.

However, after encountering this situation and bringing the offshore folks up to speed, some of the clients feel that the lack of experience can also be an advantage in disguise as they bring in a new perspective.  This gives the clients a chance to ‘mould’ analysts to their requirement and capitalize on their natural mathematical skills. But all these apply only for a client that already has a well-structured in-house analytics team in place. For a client who has underdeveloped or no in-house analytics, this is totally unfavorable and can leave displeasing effects.

 Process Validation

In a typical analytics process, data from the client is given to the BPO dealing with analytics and a solution/strategy/inference is suggested to the client based on the data. How can the client be sure about the process and suggestions from the vendor? In IT, deliverables themselves speak of the quality of work and customer satisfaction is instantaneous. But in analytics, the solution suggested by the BPO has to be put to test. It can also happen that the client is unhappy with the data (though it depicts the truth), is unable to stomach it, and does not want to follow the results. The resources spent on the analytics process then go to waste.

Security Issues

Apart from the usual data security issues of IT outsourcing, there is also a risk of letting out the ‘learnings’ from the data. Innovation or the approach suggested is not exclusive to a single client and it is implemented to other clients to add value to them as well. By the end of the day, the other client is also a competitor and therefore, the edge created through analytics is no more an ‘edge’ and simply becomes a norm.

Sometimes, what the companies get out of the BPOs largely depends on how sound their in-house analytics team is. Some advanced analytics clients use offshore BPO resources to perform the grunt work so that their in-house employees need not start from scratch. However, the findings from these in-house analytics teams are rarely shared with the BPO employees, thus protecting the information. Also, in some cases, the clients clearly mention an ‘exclusive’ clause in the contract to protect the information.

Like in the case of most outsourcing services, analytics too requires intense planning and understanding of how it can be implemented to extract the best. The client and vendor must have complementing analytics systems that will add value to client’s process. Therefore, it is pivotal to choose the right partner and monitor the partnering company’s progress or risk subsequently.

Supply WisdomSM is a cloud-based data, alerts, and guidance solution that helps companies to proactively monitor their partners in order to make rapid, informed decisions about sourcing, third-party oversight, vendor management, and ongoing governance.