We are in the era of outsourcing. It is rare to find any business, that does everything in-house with full-time employees. Everyone outsources to some degree no matter what they call it including subcontracting, freelancing, and virtual assistants. All outsourcing mistakes happen like any other mistake in business. They happen when businesses try something new or when their staff does not have an adequate training to do what they have to do. Outsourcing mistakes are no different.
If you want your business to succeed, you must avoid making outsourcing mistakes and to avoid them, you have to know what those mistakes are. To get you started, here are a few IT outsourcing mistakes that the experts believe lead to business failure:
Many people fail to understand the true costs of offshoring your product development. Many small businesses that lack sufficient funding or profits will be quick to look overseas when finding a development team. Unfortunately for these companies, in the long run in can do more harm than good. The lowest rates often come with a high cost-poor quality. Hence, never compromise quality to save a few dollars.
Failing to properly manage the team
Contractors, freelancers, and other outsourcing solutions providers cannot help you manage your business. They can manage their own internal processes, but they do not have the staff or time for yours as well. Remember, if you completely rely on managers from your outsourcing vendors, they, not you, will be managing your company and its objectives. While you should never over-manage anyone, you need your own management team to keep your internal and external projects moving forward.
Using fixed price bidding on all outsourcing projects.
Related to cutting costs, many business owners believe that they can use fix pricing bidding on everything. Fixed pricing is only an effective compensation for well-defined short-term projects such as blogging or programming. You will not get far if you try to use it on call centers, affiliate marketing vendors, or even data entry. You have to be flexible and do the necessary research with your peers to check all the alternatives available to you.
Having the wrong mindset.
Companies tend to use fix pricing on everything because they outsource with the wrong mindset. They see their remote workers as employees and can be treated like employees. Other companies see their outsourcing partners as temps, or startup staff that they can eliminate as they please. But, these abusive RFP processes, ruthless negotiations, or treating your vendors poorly will only lead to disaster.
Ignoring potential personality mismatches.
Business owners tend to outsource without considering the possible cultural clashes between their in-house people and their remote vendors. They expect their vendors to adopt their business culture, and their employee the stress that come with outsourcing. While your vendors will always try to adapt to your situation, the success of your projects will depend on their cultural work ethics, time constraints, social status, language quirks, and an overall attitude. Remember, cultural adaption goes both ways. You have to learn how to embrace your vendors’ cultures as well to establish a mutually successful business relationship.
Communicating with an in-house development team is hard enough. Sending this information to someone in a different continent makes you vulnerable to miscommunication and error. Software and hardware development is an extremely intricate, involved process that involves social interaction and the frequent exchanging of non-objective concepts that often require in-depth communication.
Lack of commitment.
You might not think of it as an issue, but not having the commitment to follow through with your outsourcing endeavors is a disaster waiting to happen. Changing your projects needs and switching between vendors’ mid-project will lead to defective products, longer development times, and confusion for everyone. Organizational commitment, executive sponsorship, and stakeholder buy-in are the keys to any successful initiative.
Outsourcing for the sake of outsourcing.
The biggest outsourcing mistake is outsourcing for the sake of outsourcing. That is outsourcing tasks and problems that are better addressed in-house or through other more effective tools and measures. While outsourcing is a powerful tool that can help you meet your business goals, you can abuse it if you are not careful. Outsourcing without caution or appropriate knowledge can backfire causing irreparable damage to your business and your reputation.
With modern technology, and worldwide reach, outsourcing should be an important tool for building your business into the efficient, lean, and competitive business of your dreams. You just have to avoid the pitfalls of believing that it is easy and inexpensive. Keep this in mind, and your efforts will lead to business success instead of failure.