There have been numerous reports in the media about the challenges that client firms and vendors have struggled with as COVID-19 spread around the globe. Some of these reports raised concerns about client firm’s offshore operations struggling to execute a viable business continuity plans to resume services as normal, while others suggested that vendors in some regions faced similar challenges when attempting to quickly switch from well-equipped and secured delivery centres to working from home. It is obvious that COVID-19 as a global pandemic has presented nearly impossible challenges to both client firms and vendors to smoothly execute business continue plans and ensure seamless services. One might argue that in fact no business continuity plan can mitigate all the risks COVID-19 have presented the business world. Others would rightly argue that COVID-19 created the ideal scenario for vendors to behave opportunistically and exploit clients’ vulnerability, in particular as many clients were looking to secure cloud capabilities and procure software packages that enable remote work.
While many commentators have emphasized the need to update business continue plans in order to cope with similar crises in the future, an alternative strategy that we offer in this article is to see what has made the difference for client firms and vendors in the early stages of the pandemic as they quickly restored their operations, often from offshore locations. We spoke with several IT executives from the client and vendor side and based on the recount of events and their reactions, we propose 5 actions taken that have made the difference for both client firms and vendors in restoring and resuming services during the early days of COVID-19.
- Early warning systems: There is no doubt that having global footprints has been considered as an advantage. For vendors and clients, global spread of delivery services allowed more flexibility in labour arbitrage but also in creating pockets of specialisation and withering regional crisis by shifting operations from one site to another. Interestingly, in the case of COVID-19, presence in China was both a challenge and an early warning system. IT executives told us that having delivery centres and captive in China during lockdown quickly introduced them to a crisis that has never been dealt with before. Both vendors and client firms with presence in China were able to quickly gather information about the crisis, improvise solutions as the crisis folded and set-up taskforce teams onshore and in other regions in anticipation to COVID-19 becoming a global pandemic. These early warning signals were critical in these vendors’ and client firms’ reactions to the pandemic as it hit other geographies such as USA, Australia and Europe.
- Trustworthy communication is king: vendors and clients usually maintain regular communications but nothing like what was required during the first days of COVID-19. Trust has been consistently mentioned as the cornerstone of client-vendor relationships, but can trust withstand the impact of such crisis? Just consider the limited transparency that clients would have to the vendor’s supply line during COVID-19. Obviously, vendors were affected by COVID-19 to no lesser degree than client firms and at times without clear overview of how severe the impact was on their ability to resume services as normal. This lack of transparency would only shake trust between the parties. Indeed, we learned that that vendors who were completely transparent about their enablement capacity when working from home, even with alarming support levels, have been viewed positively by their client firms. On the other hand, vendors that were viewed to be behaving opportunistically at this point in time, are now (during recovery) at the risk of not getting their contract renewed or triggered their clients to think about introducing competition in their specific line of expertise. It did really come down to communicating openly and ensuring that information about both sides abilities are shared as restoring services required both sides to make the extra effort.
- Think out of the box: Reports in the media have unveiled how challenging lockdown has been for captives and vendors in some geographies such as India and the Philippines. In one case, an Australian firm had to bring onshore their operations and rebuild their service support in a matter of days. In other cases, both vendor centres and captive centres sought ways to support employees working from home, however, with great difficulties as often secured IT equipment to take home, power cuts and limited broadband bandwidth were still an issue in some locations. So how do you overcome such challenges? Some companies scan various solutions and pursued an alternative approach than most of the world. For example, one company rented an entire hotel to ensure that all employees are in one bubble, getting tested for COVID-19, provided with appropriate accommodations and having access to food supply and a stable broadband. Other companies have initiated talks with local governments to ensure that power cuts are limited to where they employees were working from. COVID-19 has challenged IT executives to think out of the box with regard to the range of solutions.
- Good will: Signalling good will quite early on in the crisis has been a major differentiator between ‘hero’ and ‘non-hero’ vendors. This mainly comes down to easing the financial pain but also concerning various aspects of the relationships, often beyond what the contract specifies. As one IT executive put it simply—COVID-19 was like a litmus paper test. Now that recovery starts, it is clear to this IT executive which vendors will remain in their vendor pool and which vendors will be replaced by others. Vendors that saw the challenges of COVID-19 as a sales opportunity scored low on their ‘good will’ scorecard. While those that were 100% focusing on getting the operations up and running as quick as possible, these were viewed as the ‘hero’ vendor. These vendors showed ‘good will’ on their behalf simply because it was the only way to ensure trust and continuation of good relationships. Not surprising, these were also the vendors that were willing to share the financial pain by differing payments, scaling down operations or engaging in early conversations about how the service will look like in post-COVID era.
- Know your supplier: It is taken for granted that suppliers should invest in learning about their clients in order to provide seamless service and offer improvements to their value chain. In fact, during the early days of COVID-19, disappointment and frustration has built up mainly because the lack of familiarity of the client with the supplier’s supply line of talent and materials. It seems that over the years, there has been an unbalanced approach towards familiarity where suppliers invest in learning about their clients, while clients take the suppliers’ supply lines for granted. Indeed, IT executives described the steep learning curve in which they had to acquaint themselves with their suppliers’ supply line during the early days of the pandemic in order to enable solutions to emerge. It was only then that these client firms have realized the criticality of this information in enabling solutions.
So what is new about these 5 differentiators? Many of our readers would argue that these differentiators were relevant prior to COVID-19 and very likely remain relevant after the pandemic. We agree with this observation but would like to point out that while client firms and vendors strive to apply best practices such as trustworthy communication and familiarising themselves with their partners, other aspects have proven to be more challenging. Becoming a hero vendor during such a global crisis requires a systemic approach in which early warning signals are quickly translated into actions in both offshore and onshore locations and are communicated to client firms in order to embark on an informed improvisational plan that applies out of the box solutions and demonstrates good will on the vendor’s behalf. As it is unclear for how long and to what extent COVID-19 is likely to affect businesses, and as costs pressures are only going to magnify, it is imperative to develop such differentiators to ensure business and outsourcing resilience on firm relational foundations.
About the authors:
Ilan Oshri is professor of technology and globalization at the University of Auckland Business School.
Heiner Himmelreich is a partner and director in the Melbourne BCG office.
Hrishi Hrishikesh is a partner and director in the New York City BCG office.
Evelien Scherp is a consultant in the Melbourne BCG office.