The prevalence of outsourcing in business

Recently, outsourcing has become a hot trend revolutionizing businesses across industries. It’s considered a real game changer for small businesses as well as large corporations. 

As the economy is going global and technologies are evolving at a frantic pace, keeping up with the changes gets more and more challenging. If you want your business to grow, you must transform it as per the latest requirements. It is an endless cycle of improvements, expansion, and modernization.

When it comes to developing all the high-end solutions, relying solely on your in-house team is not the best idea. There may not be enough capacity, skills, resources, etc. And that is when outsourcing comes into play. Well, it comes with a whole pack of benefits, we should say. 

Companies that opt for outsourcing services get the chance to their operational efficiency, improve the quality of their products or services, ensure customer satisfaction, and gain access to specialized knowledge or resources while saving expenses and time.

All in all, outsourcing seems to be a win-win solution if compared to the recourse-consuming process of hiring employees, training the staff, and going over procurement operations. 

But there’s a tough pill to swallow: things never go as smoothly as we’d wanted them to. There is always room for risks.

Spoiler: you can avoid big problems and complete failures as long as you read this guide and prepare well before outsourcing tasks to an external vendor.  

Pitfalls and challenges to be ready for

So you decided to go with outsourcing because of the numerous advantages that it offers. But do you know about the risks that outsourcing also involves? In case you don’t, you better study them thoroughly. You don’t want to fail to get your investment back, do you?

In the most general sense, outsourcing fails when handled incorrectly. 

According to Dun & Bradstreet’s Barometer of Global Outsourcing, “20 to 25% of all outsourcing relationships fail within two years, and 50% fail within five”. 

Companies experience delays, budget overruns, low-quality services, and even contract termination. 

First and foremost, it’s not always an outsourcing team’s fault. Problems might come from an inaccurately organized working process, unrealistic expectations, communication gaps, and so on. But let’s take it step by step and explore this topic deeper. 

We’ve compiled a list of the most common reasons for outsourcing failures. Take a closer look at them in order to save your next project from a catastrophe. 

Lack of Clear Objectives

Realistic goals, expectations, and clear a understanding of what the future product will be are essential. Without them, orders are constantly changed leading to delays and cost overruns. A common problem: having too high expectations while setting deadlines or budgets that cannot be met. This can only lead to disappointment. 

Make your objectives as transparent as possible and ensure a vendor gets them the right way. 

Poor communication

Outsourcing tasks to a team that is not under your direct supervision and, in most cases, is located far away from you is quite a challenge. Here ongoing and high-quality communication is a must. Communication gaps lead to misunderstandings and eventually unmet expectations. 

Stop considering things obvious. What is clear to you might be confusing to others. You should communicate every detail and share all your thoughts to make sure you and an outsourcing team are on the same page. It’s important to hold regular video conferences and exchange feedback all the time throughout the development process.

Insufficient Due Diligence in Vendor Selection

Some companies base their choice solely on the service’s price and that’s a losing game right from the beginning. there are many more factors to take into account when selecting a vendor to outsource tasks to. Skills, experience, implemented projects, and testimonials are just some of them. 

Take enough time to explore the talent pool and find the team that sees eye to eye with you and meets your requirements completely. Insufficient technical expertise might bring about a big mess so you will end up with a low-quality product and unmet demands.

Research takes time but the right choice comes with long-term gains.

Overemphasis on Cost Savings

Time and money are the two most precious assets and you don’t want to overspend. That’s quite reasonable. But what you should know is that investments pay off if managed properly. 

Going with the cheapest option is not the best way to save money. May seem illogical but here’s why. With the cheapest provider, you can get low-quality code, numerous delays, and communication problems. And eventually, you might spend even more trying to get everything right and “save” your project. So isn’t it better to invest more at the beginning and therefore prevent further pricey failures? It is so. 

Cultural and Time Zone Differences

Outsourcing tasks to remote teams from different countries is a common thing today. The world is getting tightly connected these days so finding a partner on the other side of the world is not a problem at all. Or is it? Differences in mentality and work culture can impact the working process significantly leading to conflicts and misunderstandings. 

Recognizing and considering cultural variations as well as ensuring continuous communication can make cooperation seamless and highly productive. 

Lack of Flexibility and Adaptability

It’s quite rare when everything goes strictly according to the initial plan. Changes do happen and in some cases, there are too many of them. It’s okay to rethink and reconsider certain processes and change one’s mind. However, frequent changes should not impact the process globally. Furthermore, they should not pose a detrimental effect on the final result. If a team lacks flexibility and adaptability, even slight alterations may lead to big problems. Issues can be eliminated or at least minimized with a detailed plan and strategy for a new task and the list of experts required. 

make sure your vendor is flexible and ready to adjust to your emerging needs. It might take time but the productivity won’t be hurt.

Security and Privacy Concerns

Outsourcing tasks to an external team by default means sharing some sensitive information. This, unfortunately, might come with several challenges. If the outsourcing partner doesn’t have robust security measures in place, it could lead to data breaches, unauthorized access, or theft of confidential information. 

Insufficient compliance with regulations is another thing to take into account. Different regions and industries have specific regulations regarding data privacy and security. If the outsourcing partner does not comply with these regulations, it can expose the business to legal issues, fines, and reputational damage.

Finally, if the outsourcing partner does not maintain strict confidentiality, there’s a risk of leaks or misuse of this confidential information.

Still, risk mitigation is possible through rigorous due diligence when selecting outsourcing partners, clearly defining security and privacy requirements in contracts, implementing strong security protocols, conducting regular security audits, and maintaining open communication to ensure that security concerns are addressed.

Over-reliance on Outsourcing

Over-reliance on outsourcing can have detrimental effects on a business and potentially lead to failure. While outsourcing offers various benefits, excessive reliance on external providers for critical functions or processes can negatively impact in-house processes.

Businesses should strike a balance between outsourcing and maintaining critical capabilities in-house. This balance ensures that the organization retains control, key expertise, and the ability to adapt to changing circumstances while benefiting from the advantages of outsourcing.

Conclusion

When it comes to outsourcing, there are both pros and cons. While outsourcing offers compelling advantages, it is not devoid of potential pitfalls. Recognizing the circumstances where outsourcing might fail is crucial for businesses seeking to harness its benefits effectively.

You can never be 100% safe from issues but with the right vendor, you will have fewer headaches. 

You, in turn, should be clear with the requirements, set realistic expectations and goals, provide a strong vendor management process, and maintain open and transparent communication.

Take outsourcing responsibly and enjoy the perks it will bring about.