I have already been a strong advocate for the little guy. Maybe it’s my small town upbringing in rural New Hampshire or possibly it’s the continual injustice that I see happening regularly. Almost every newsletter, monthly report or research study highlights something about the Tier 1 big guys. I suspect that some of their recognition is fueled by their ability to pay for exposure. The little guys (Tier 2 and 3) while representing 80%
of the sourcing population compete over 20% of the sales revenues (Pareto Principal). Their visibility is based almost entirely on their capabilities and not their war chest of funds. In some respects I think of this David & Goliath relationship much as I thought about the Weakling and the Bully in school (or in the context of sourcing Tier 1 vs. Tier 2/3 players and Mature vs. Emerging Markets). Fear, misinformation and intimidation ruled the day but in the end a form of justice prevailed. Maybe it was success that was long overdue or simply gaining the respect that was deserved from the onset.
Why should big buyers look to the small guy? The first question that should be asked is whether the small guy is capable of meeting the expected standards set by the buyer. In most cases the sheer size of the engagement eliminates the smaller providers from being able to. When this isn’t the situation then the smaller providers can start to have some real appeal. They offer greater operational and pricing flexibility with a high degree of adaptability to the changing needs of their customers. Larger organizations, in order to maintain control, require a much more elaborate framework for operating their business. This isn’t bad, this is simply a reality of managing a larger enterprise that spans multiple locations. For smaller buyers Tier 2/3 service providers offer a matched advantage in both pricing and operational compatibility. Although some would argue about the perceived risks associated with this smaller providers (let us not forget the Tier 1 Satyam fraud case of January 2009) it remains a requirement of buyers to exercise appropriate care. Take the time to measure the viability and capability of the candidate suppliers, whenever possible utilizing consistent independent evaluation models.
My concern is about the awareness of the general public about the information they are taking in and how that information is then used in their decision making processes. Apply sound information but against the wrong group can produce problems. I read a report produced by a leading outsource advisor concerning the health of the industry in an East African country. In that report they compared the country against India and pointed to the challenges that would be faced. This type of comparison is dangerous for a couple of reasons. First, comparing a mature market against an emerging market is equivalent to comparing a grade school child to a university graduate. More important however the report failed to put forth the state of the nation against similar emerging market countries. While some market developmental good might come of it I worry that the buying public will not understand the injustice that has been served by a ‘credible’ source. The repercussions can be damaging, what might be achievable in the short term will require a much longer period to realize. All for the sake of a misinformed report.
Education is the seed for knowledge. Learning fuels the ability to discern the limits of information value and how to properly apply it. The simplest form is reading and the most ambitious form is extended education. In either case using the knowledge must be applied with reason and responsibility.
Until next time feel free to contribute your thoughts or send an email to me at jdurant@Int-IOM.org.
