It's always India. Like no other destination should figure in the search by an accounting firm or company CFO contemplating offshoring work.
And the ads invariably make it sound so easy. Effortless. Problem free. Just sign up and the benefits start flowing.

Reality, though, is a lot more complex.

Fact is, the universe of service sites to consider is expanding rapidly. While India indeed continues to top rankings of the overall appeal of competing service nations, other countries like the Philippines, Poland and Russia are attracting much attention and business. Anywhere from 28 to 40 nations now show up on studies comparing the relative appeal of countries competing for a slice of the fast-expanding global market for remotely provided back-office services.
Today, any service job that doesn't require physical presence is up for graps internationally. If a service job can be performed from another room, it can often now be performed from anywhere in the world, creating a global market for service-sector jobs. Computerization, free VOiP communication and sophisticated workflow software make it just as possible -- and a whole lot cheaper -- to provide a vast range of accounting and financial services from Mumbai as from Minneapolis, or Sao Paulo as from St. Paul.

It's no wonder the size of the global business process offshoring (BPO) market keeps expanding, in fact faster than many appreciate. (See box.) This is one revolution nobody talks about. To avoid condemnation, Western companies go to remarkable lengths to conceal their offshoring activities. And BPO service providers and developing nations know well that business flows to the most discreet.

Due to this silence, companies and CPA firms contemplating how to adjust to this globally networked service market are left to plot strategy in a partial information vacuum. They're aware of how immediate competitors are adapting. But few have broad knowledge of their many options, or of external factors to consider in deciding if, what and where to offshore.

The aim here is to help close that knowledge gap by explaining a few factors that CPAs and CFOs need to consider if contemplating offshoring.

Don't simply play follow-the-leader. The proportion of BPO work flowing to India is causing serious growth problems there. Double-digit wage inflation over the past four years is putting upward pressure on billing rates, while service quality can suffer from high staff turnover driven by fevered competition for experienced workers. Those problems are worst in India's five major BPO service centers -- the Delhi-Gurgaon-Noida region, the financial capital Bombay (now Mumbai), and the three booming southern cities of Bangalore, Hyderabad and Chennai (formerly Madras). Strong growth in those cities is also worsening problems with decrepit transport, power and water/sanitation systems. Industry experts say the follow-the-leader instinct is to blame, as all-too-many deals get done without proper consideration given to alternative sites.

Think globally, choose locally. This was a main conclusion of global consultants McKinsey, in a widely cited study of the global BPO labor market released in June 2005. It said the number of globally employable service workers is a vital site selection factor. This data is typically compiled on a national basis, thus usable to narrow the site search to one or a handful of countries. Ultimately, however, site selection boils down to choosing a locality. Following that approach, CPA firms and U.S. companies looking to begin offshoring would be wise to look to service providers in India's second- and third-tier cities, or even to well-managed service providers in other countries like the Philippines, which now offers the lowest operating costs of any major BPO service country.

Plan for the long haul. Choose a location that offers stable business conditions well into the forseeable future. Then look there for a well-managed service provider. CPA firms would also be wise to look for service providers owned and managed by professional accountants. This approach will increase the likelihood of choosing the first time a service provider for the long haul. And that's important because to make the arrangement work, you'll end up investing so much management time and effort that you won't want to repeat the process again.

So select a location where stable business conditions mean external factors won't begin causing havoc with your service provider. Civil strife or deteriorating safety or living conditions could begin affecting service dependability; or booming business conditions could cause your service provider's wage bill to rise so steeply that you're pressed to accept intolerable billing increases.

CPA firms should also choose a service provider that is owned and managed by accountants. That guarantees the service provider, no matter how small, will be able to handle increasingly complex tasks should you wish, in time, to expand the scope of work being offshored. And selecting an owner-managed service provider reduces the possibility that the BPO firm will be sold and the management replaced, possibly with people you can't get along and work with Problems like these might necessitate terminating an existing service agreement, and starting over from scratch.

Concentrate on proper fit. This is another aspect of doing everything right the first time. Many offshoring novices place too much stress on finding a service provider which is large and well established.

It's far more important to find a service provider who views your work with the same importance as you. If you contract the work out to too large a firm, you're account will never get the level of attention required for superlative service and performance. This is a particularly important factor for mid-sized and smaller CPA firms to consider. The smaller the service provider, the greater the likelihood of being delighted with the attention showered on your work. Yet finding good small, foreign service providers is difficult. Consultants can help greatly here.

Be prepared to work hard, and be patient. Advertisements lie when they portray offshoring as a plug-and-play process. It never is. There are always so many unique aspects to each engagement that offshoring is more special fit and custom engineering than off-the-shelf. You will need to spend time to help the overseas service provider understand the perculiarities of your office procedures, and of clients.

Early on thisl may cause you to doubt the cost effectiveness of offshoring. But persevere and, in months, the benefits should become apparent.
Concentrate on results, not procedures. Offshoring novices often devote too much effort trying to codify in a service level agreement exactly how everything will work. Instead focus on drawing up an agreement spelling out performance metrics. And experience shows success is highest when performance metrics are tied to compensation, or clearly stated penalties for sub-par results and bonuses for exceeding goals.

About the writer: Robin Elsham is writing a book about the rapid growth of the global business process outsourcing or BPO industry. He is a business/finance journalist who worked the past 16 years in Asia, including a recent two-year stint running corporate news coverage in India for Reuters. He can be contacted at ergastra@yahoo.com