We are in the era of outsourcing. It’s rare to find a company that does everything in-house with full-time employees. Everyone outsources to some degree, no matter what they call it, including outsourcing, freelance work, and virtual assistants. All outsourcing mistakes happen like any other mistake in business. They occur when companies try something new or when their staff do not have the proper training to do what they have to do. Outsourcing mistakes are no different.
If you want your business to be successful, you must avoid making outsourcing mistakes and to avoid them you have to know what those mistakes are. To get started, here are some IT outsourcing mistakes that experts believe lead to business failure:
Many people don’t understand the true costs of offshoring their product development. Many small businesses that lack sufficient funds or profits will quickly look abroad when they find a development team. Unfortunately for these companies, in the long run it can do more harm than good. Lower rates are often high cost and poor quality. So never compromise on quality to save a few dollars.
Not managing the team properly.
Contractors, freelancers, and other outsourcing solution providers can’t help you run your business. They can manage their own internal processes, but they don’t have the staff or the time for their own. Remember, if you completely trust the managers of your outsourcing providers, they, not you, will manage your business and its goals. While you should never over-manage anyone, you need your own management team to keep your internal and external projects moving forward.
Use of fixed price offers in all subcontracting projects.
In relation to cost reduction, many business owners believe that they can use fixed price offers on everything. The fixed price is only an effective compensation for well-defined short-term projects, such as blogging or programming. You won’t get very far if you try to use it in call centers, affiliate marketing vendors, or even data entry. You have to be flexible and do the necessary research with your colleagues to check all the alternatives available to you.
Having the wrong mindset.
Companies tend to use fixed prices on everything because they outsource with the wrong mindset. They see their remote workers as employees and can be treated as employees. Other companies view their outsourcing partners as startup time or staff that they can eliminate as they please. However, these abusive RFP processes, ruthless negotiations, or treating your suppliers poorly will only lead to disaster.
Ignore possible personality mismatches.
Business owners tend to outsource without considering the potential culture clashes between their internal staff and their remote suppliers. They expect their suppliers to embrace their corporate culture and their employees the stress of outsourcing. While your suppliers will always try to adapt to your situation, the success of your projects will depend on your cultural work ethic, time constraints, social status, language quirks, and general attitude. Remember, cultural adaptation goes both ways. You must also learn to accept the cultures of your suppliers to establish a mutually successful business relationship.
Communicating with an internal development team is hard enough. Sending this information to someone on a different continent makes you vulnerable to miscommunication and error. Software and hardware development is a complicated and intricate process that involves social interaction and frequent exchange of non-objective concepts that often require deep communication.
Lack of compromise.
You may not see it as a problem, but not being committed to moving forward with your outsourcing efforts is a disaster waiting to happen. Changing your project needs and switching vendors mid-project will lead to faulty products, longer development times, and confusion for everyone. Organizational commitment, executive sponsorship, and stakeholder buy-in are the keys to any successful initiative.
Subcontracting by subcontracting.
The biggest outsourcing mistake is outsourcing for the sake of outsourcing. That is, outsourcing tasks and problems that are better addressed internally or through other, more effective tools and measures. While outsourcing is a powerful tool that can help you achieve your business goals, you can abuse it if you’re not careful. Outsourcing without proper caution or knowledge can backfire and cause irreparable damage to your business and reputation.
With modern technology and global reach, outsourcing should be an important tool in turning your business into the efficient, lean and competitive business of your dreams. You just have to avoid the pitfalls of believing it is easy and inexpensive. Keep this in mind and your efforts will lead to business success rather than failure.