In outsourcing product engineering, the most important thing that companies need to consider is vendor skills. Choosing the right set of skills can serve as an effective strategy for companies to achieve business objectives such as reducing time to market or lowering costs. On the other hand, choosing the wrong set of skills can cause sub-par project outcomes and mire companies in regret. Taking the necessary steps to ensure all projects are in good hands makes the difference between failure and success in PEO.

1. Six Important Skills
Needed in PEO
Author: Girish Gaitonde, CEO, Xoriant Corporation
Contact: girish.gaitonde@xoriant.com
© 2007 Xoriant Corporation info@xoriant.com 408.743.4400

2. Six Important Skills Needed in PEO
In outsourcing product engineering, the most important thing that companies need to consider is
vendor skills. Choosing the right set of skills can serve as an effective strategy for companies to achieve
business objectives such as reducing time to market or lowering costs. On the other hand, choosing the
wrong set of skills can cause sub-par project outcomes and mire companies in regret. Taking the
necessary steps to ensure all projects are in good hands makes the difference between failure and
success in PEO.
As Peter Griffith, president for the Americas at DataWorkforce puts it, “The breadth of skills needed is
a challenge. Many clients have extremely specialized technical needs. Outsourcing allows them to
plug into highly qualified specialists.” These specialists are outsourced workers, or the temporary staff,
which provides an economical alternative to training programs.
Since the main purpose of PEO is to hire specialists to work on product engineering projects, the
outsourcer should decide which projects or tasks to be outsourced and analyze certain skills that are
important for a vendor to posses so that he or she can complete the company’s project successfully.
Thus, it allows the company to reap the benefits of outsourcing, instead of wasting time and money
hiring an incapable vendor for the job.
Expertise in the Task, Process or Project Being Outsourced
According to a Dun & Bradstreet survey, 70% of companies respond that their chosen providers “did
not understand the tasks they were supposed to do”. Companies should prioritize evaluating the
vendor’s understanding of the project or task involved in the outsourced process and the vendor’s
ability to execute them.
The standard for vendor’s performance should always be equivalent with the company’s existing in-
house process. However, it is also important for companies, which are deciding to outsource a process,
to consider if they truly need external resources to have the same level of experience, knowledge or
education as their in-house counterparts. Although majority of manufacturing tasks require limited skills
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3. Six Important Skills Needed in PEO
and there is an enormous pool of software development talent to choose from, the average worker in
most countries (i.e. India, China) to which a company decides to send business processes or projects
may not have the same level of education or experience as a U.S. employee.
In outsourcing product development to vendors that lack experience and expertise, clients will have to
take extra time in explaining the tasks involved, method of communications used and protocols to be
followed. Because of these inefficiencies, the vendors will weigh down the resolution process, drive
costs up and push quality down, instead of saving costs and increasing productivity.
Extensive Project Management Skills
Many companies will agree that it is always a good idea to have a single vendor managing all the
company’s infrastructure and network requirements. However, not all companies will be comfortable
in giving a vendor total control over their complete infrastructure. Moreover, not all vendors would
have extensive project management skills and expertise to fulfill all kinds of work.
“A vendor knows his limitations and if he puts up the network, he is in a better position to take its
responsibility. Cross-vendor services are still in their infancy and as such, would take some time to
evolve. Until then, single-vendor management is best for the companies,” said Sudhir Prasad, assistant
vice president, mobile networks, Siemens Public Communications Network.
Today, many companies still prefer “discreet outsourcing” rather than handing over the entire network
to a single vendor. Whether or not a vendor has extensive project management skills, it is best that a
company outsource a particular component of the business process wherein the vendor specializes and
hence, becomes focused and does a good job.
Understanding of the Outsourcing Organization’s Business
According to the research performed by Ovum for the Department of Trade and Industry, IT
professionals and vendors need to become more business-focused because outsourcing of basic IT
skills continues. The research suggests that the number of employees in software development and IT
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4. Six Important Skills Needed in PEO
services in the United Kingdom is expected to drop by 15,000 people (a 6% equivalent of the existing
UK workforce) by the end of 2008.
Due to this trend, companies should increasingly demand their vendors to have higher-level business
skills in order to translate processes into booming business projects. Companies should select vendors
based from their experience and knowledge of your organization’s technology and business models. As
such, vendors should take the necessary steps to update their business skills based on current trends
and company’s standards.
“It is a question of making sure you get involved in projects where you are closer to customers,
translating customer requirements and solutions,” said Phil Codling, senior analyst and service manager
at Ovum. He advised IT professionals and vendors working in the supplier industry to become much
more business focused. This way, a new breed of workforce that has extensive IT skills and business
expertise can easily finish outsourced projects, saving companies significant costs and increasing
productivity.
The Ability to Integrate Best-In-Class Service Providers into the Process
While clients should be responsible in making sure that their IT directors work effectively with their
chosen vendors to agree on project completion, vendors should provide best-in-class service into the
business process without hassle. A successful partnership between client and vendor occurs when both
parties have excellent negotiation, problem-solving and negotiation skills.
The advantage of PEO and looking for skilled vendors is that companies can hire the best candidate -
people who have experience on the kind of business process needed. In addition, vendors with
extensive experience and vast industry knowledge can bring first-rate service into the table for as long
as the company needs them and no longer. In this case, companies are secured that their chosen
provider has the ability to jump right into a project and work with your best internal staff to arrive at a
cost-effective and successful project.
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5. Six Important Skills Needed in PEO
The Willingness to Establish Performance Measures
According to the book Outsourcing Information Technology Systems and Services, written by Wendell
Jones and Robert Klepper, every contract should include performance measures so that managers can
use it as criteria for supervising the outsourcing relationship. “Managers whose organizations lack such
performance measures should include provision stipulating that both parties agree to establish a
baseline and begin using that particular metric starting on the specified date.”
Organizations looking for vendors should see to it that the candidates are willing to establish
performance measures and understand expectations of the company. This way, failure of vendors will
not slow down internal IT department because certain metrics are achieved and followed throughout
the project. Vendors should be willing to undergo periodic performance measurements to allow
companies to set the metrics based from past mistakes and future projects. As such, both parties are
aware that the company has the right to define expected vendor performance, track their performance
and report it periodically, take action for vendor improvements or remove vendors from the team due
to poor performance.
Knowledge or Expertise That Your in-House Team Lacks
One of the most important skills that a vendor should have is the knowledge that your in-house team
lacks. If the reason for outsourcing product engineering is the company’s resource constraints,
temporary short-staffing issues or a lack of technology, expertise, equipment or infrastructure to fulfill
the business process, the vendor should have the qualifications to fill this gap and execute the project
beyond company standards.
By hiring a person or team highly qualified to perform the organization’s non-core activities, the in-
house workforce can focus on activities central to its values and increase productivity. Outsourcing
product development gives the company access to resources that are not available internally, such as
up-to-date technology and superb IT skills.
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6. Six Important Skills Needed in PEO
When It Comes To Choosing Vendors…
Companies should remember that the success of outsourcing product engineering lies in the
relationship of the in-house team and the skills offered by the chosen vendor. When a vendor shows
expertise in the project being outsourced, executes impressive management skills, has an
understanding of the organization’s business, has the ability to integrate continuous first-rate service
throughout the project duration, provides the knowledge that your in-house team lacks and
understands the need to establish performance measures, you may have found the right candidate for
the job.
Although the most qualified vendor can get the project done timely and error-free, companies should
take note that not every task or business process is suitable for outsourcing. By choosing tasks,
processes or projects carefully and outsourcing them to good hands, there’s no question that your
organization can take advantage of cost savings and IT expertise that adds value to your team.
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