It’s easy to make mistakes in outsourcing. True, outsourcing can save your company time and money, and for many companies that’s the only appeal. But there’s a lot to consider beyond cost, and not taking those factors into account will almost certainly spell disaster for your projects.
In this post, we’ll look at the 7 biggest IT outsourcing failures you can make, then present the ways you can avoid them.
1. Not Having Managers
Outsourcing providers are here to help you complete your projects, not run your business.
You still need managers to ensure your projects are meeting business objectives. By putting this responsibility on providers, you’re essentially putting your company in their hands.
Providers can manage their own internal processes, but they’ll still rely on you for guidance and direction. The overall direction of the project depends on leaders who can communicate between you and your provider, and that’s where managers fit in.
While you should trust your outsourcing vendor to handle the day-to-day details, the larger decisions and should be determined by your own management team. Not doing so puts your entire business at risk.
2. Hiring Workers from Anywhere
The Internet has made it easy to outsource globally, but that doesn’t mean you should hire workers from anywhere in the world.
Despite globalization, there are still cultural and communications gaps that can ruin projects before they have a chance to take off. Hiring foreign workers might save you money in the short-term, but if you don’t understand their culture or language, those savings can quickly turn into costs.
Even if you get past these roadblocks, you still have to work around time zone differences. An inexpensive vendor will do you no good if their workday is opposite yours. This only slows communication and makes it difficult to collaborate. As with real estate, it’s still about location, location, location.
3. Outsourcing to Save Costs
Outsourcing isn’t just about saving money. Some entrepreneurs even make the mistake of outsourcing their entire business operation.
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While cost is a factor, by no means is it the only factor. First, outsourcing doesn’t guarantee savings, and the initial upfront cost is often higher than your expenses would be otherwise. When you factor in the cost of collaborative tools, increased bandwidth and phone use, and additional hardware and software resources, the cost of outsourcing adds up quickly. Cheap is never a good deal.
You’ll want to find a balance: higher than the current market price for outsourcing, but lower than the cost of a full-time employee. Remember that your outsourcing vendors have their own business needs and interests, and will need decent compensation in order to stay engaged.
4. Outsourcing for the Short Term
Viewing outsourced workers as temporary workers or startup staff is going to lead to failure.
Approach outsourcing as less of a short-term solution and more of a long-term partnership. You’ll want a vendor who will want to work with your business, not just finish the job. If you treat your vendor poorly, the work they provide will reflect the relationship.
Plan on outsourcing for the long-term, and keep your remote workers happy.
5. Ignoring Personality, Technical, and Process Mismatches
When outsourcing to foreign vendors, culture clashes are always possible.
Understand that vendors have their own work culture, time constraints, and obligations. While they will try to adapt to your needs, not all vendors will understand your business culture. This could stress out their employees, resulting in lower quality work.
To ensure a mutually beneficial relationship, you have to accept their culture just as much as they accept yours.
This might require training your staff, providing extra ramp up time for your teams to learn about each other, and setting protocols for communication. Make sure managers on both sides are onboard with working together.
Once the cultural aspect is overcome, you’ll need the technical and process aspects in place to ensure business transactions go smoothly. Make sure you have the computers, hardware, and systems in place to collaborate smoothly and continuously. Never assume your vendor uses the same technology as you.
Each vendor has their own setup and preferred way of working, and ensuring compatibility now will prevent disaster later.
6. Not Being Transparent
Transparency is a necessity in outsourcing. Yes, the vendor is a third-party, but in order for them to understand your needs, they will need to understand your business.
Many companies hide their needs and intentions from vendors to protect intellectual property and business secrets. This only hampers the relationship and forces the vendor to guess about the direction of a project, further damaging the relationship and increasing the time to market.
7. Not Committing
When you agree to outsource a project, you need to be fully committed. Each minute you spend in uncertainty after hiring will cost you time and money.
Changing vendors mid-project only leads to longer development times, higher costs, higher defect rates, and slower startup times. An outsourcing endeavor requires organization-wide commitment, executive sponsorship, and stakeholder buy-in from both sides.
5 Ways to Avoid Making Outsourcing Mistakes
Now that you’ve read some of the biggest outsourcing mistakes, here are ways to avoid them.
1. Avoid Using Fixed Price Bidding on All Projects
Many business owners use fixed price bidding as a cost-cutting technique. While fixed price is good for well-defined short-term projects like blogs and small programs, it doesn’t scale well to long-term projects.
Like any business, outsourcing vendors want fair compensation for their time and expertise. Fixed price has its place, but it’s certainly not usable everywhere.
2. Follow Through
After you’ve outsourced a project, the worst thing you can do is stop halfway through.
Breaking ties with a vendor is like firing your development team. It will take a lot of time and effort to bring on a new team. Meanwhile you’re spending money and your project is going nowhere.
Before canceling a contract, consider deeply whether or not you can succeed with your current team. Communicate with your vendor, and try to work out a solution. Chances are you can come to a deal.
3. Spend Money Upfront
Cheaper is rarely better, especially when your company depends on a project’s success.
Yes, outsourcing can be cheaper in the long-run, but it still requires an upfront investment. After finding a vendor that you’re comfortable with, don’t be afraid to invest in the resources you need to collaborate. It may be expensive at first, but the savings over time will recuperate the costs.
4. Manage Your Project
Outsourcing vendors can only work with what you give them.
Although they’re capable of building your project, they still need guidance on its direction and objectives. You should have managers on your side helping to guide the vendor and ensure their work meets business objectives.
Without good management, the vendor will ultimately decide where the project is going. More likely than not, this won’t be the direction best aligned with your business.
5. Help Your Vendor
Outsourcing isn’t always a one-way street. While your vendor can manage their own internal affairs, they may occasionally need your help.
If a problem arises, work with your vendor to resolve it as quickly and effectively as possible. It may be as simple as answering a question about the project, or as involved as resolving a complex product defect.
In any case, make sure the problem is communicated quickly and clearly to both sides.
Software outsourcing is an increasingly useful tool for businesses looking to become more competitive, but it’s important to understand the risks. When outsourcing your own projects, make sure to avoid these mistakes. It could mean the difference between success and failure.