Even though outsourcing is a legitimate strategy to cut costs and add a competitive advantage to your product, some companies still hesitate to delegate their business processes to third parties. You also might have heard of or even faced outsourcing problems that keep you back from this business model. The experience of market leaders doesn’t make things look better, as even the best outsourcing companies can show a lack of communication skills or a lack of expertise.
- Missed deadlines
- Failed quality expectations
- Quality control issues
- Communication challenges
- Language and cultural barriers
- Lack of trust and partnership
- Management issues
- Security and legal concerns
- Recruiting and hiring issues
- Budget overrun
- Summing up
However, “practice makes perfect,” and today, thanks to decades of development of outsourcing business practices, we can foresee most of the outsourcing problems and avoid them by simply knowing that they exist. Check out the most common issues businesses have with outsourcing and how MWDN experts offer you to prevent and eliminate them.
1. Missed deadlines
The fear that your contractors won’t meet your deadlines is well justified. As a matter of fact, this is the most common reason for penalties and disputes, especially in software development and IT outsourcing. The main reason failed deadlines are such a problem is that the deadlines the customer sets are almost always unachievable. They have a reason to be tight – customers don’t want to pay the extra money and want to motivate their IT vendor to work as hard as possible.
Another reason behind failed deadlines is the vendor’s wrong estimate of time they will need to perform a particular scope of work. Some vendors demonstrate “extra fast development” as their unique offer for the market.
What’s the solution?
Be realistic, don’t set overly ambitious deadlines, and ask your vendor to stay realistic in their estimates. To force your vendor to stay realistic, set severe penalties for failed deadlines. Discuss the scope of work thoroughly and appoint milestones meetings where you will control your vendor’s progress.
2. Failed quality expectations
In 2016, Hertz hired software development giant Accenture to amend their app in a way that it can be used all over the globe. Due to the poor job performed by the IT vendor, Hertz got a product that could only be used in North America and couldn’t be scaled to other countries. After years of lawsuits, Hertz made Accenture pay them over 30 million dollars. This is just one of many loud examples of outsourcing failures.
Is there a way to protect yourself from failed quality expectations?
As the example above shows, ensuring your IT vendor is an experienced company with a good track and positive feedback is not enough. The ultimate solution is to be more engaged in the workflow and control the progress of your contractor.
- Draw a detailed roadmap of the project you want to develop.
- Set regular sync meetings to make sure that your IT vendor does what you need.
- Have an experienced project manager on both the customer and vendor sides.
3. Quality control issues
Let’s be honest, “be more engaged” is easier said than done. Ensuring consistent quality of work is challenging, as monitoring quality control remotely is difficult.
What’s the way out?
To ensure quality control, you should establish clear standards and communicate them effectively to your IT vendor. Additionally, you can implement periodic but regular quality checks or audits to ensure the work meets the agreed-upon standards.
4. Communication challenges
Lack of quality communication is often a root cause of most problems with outsourcing IT. Alas, even after millions of years of evolution of the articulation organs and written language, modern people still might have communication challenges that can lead to misunderstandings.
Can we do anything about it?
- Make sure your contractor is fluent in your language, as a language barrier will surely lead to more misunderstandings during your cooperation.
- Write everything down. Fix your expectations on paper, share all the information your IT contractor might need, and ask your vendor to act the same. They should complete regular reports, log their working time on different tasks, and have comprehensive documentation on the working processes.
- Set regular meetings with project managers and the tech team. This will help ensure that everyone is on the same page.
- Develop interpersonal relations with key specialists in the team of your IT vendor.
5. Language and cultural barriers
If you opt for offshoring, the chances are, you will face language and cultural barriers.
Quick linguistic example. “Maybe” in English and, say, in Ukrainian mean different things. When Englishmen say “maybe,” they often mean “No. However, I don’t want to offend you with refusal, so instead of direct No, I will say Maybe.” For Ukrainians, “maybe” means “I’m almost sure I can do it, but there might be obstacles, so insha’Allah.” There are no chances you can know this if you don’t spend a lot of time in the multicultural surrounding.
Language and cultural barriers can lead to miscommunication, misunderstandings, and delays in project completion. It can also impact the quality of the work delivered and the overall success of the outsourcing engagement.
What can you do about that?
First, realize that people in other countries may have different perceptions of life, work, leisure, and contractual obligations. Analyze the cultural codes of countries where you’re about to outsource your business processes and communicate your expectations at the beginning of cooperation.
A more proactive approach to dealing with this challenge is providing cultural and linguistic training to the outsourced team. This will help them better understand your company’s culture, values, and expectations. It will also help them communicate more effectively with the in-house team and avoid misunderstandings.
Additionally, hiring a vendor that has experience working with clients from different cultures and regions can help mitigate these issues. Choose a vendor that understands the nuances of having cultural and linguistic differences and can provide the necessary training and support to ensure a successful outsourcing engagement.
6. Lack of trust and partnership
Traditional outsourcing usually means customer/vendor relations where every part is interested solely in its own success and development. This approach deprives the parties of mutual trust and partnership relations, which can be extremely helpful for efficient cooperation.
Is there a way out?
Apart from traditional outsourcing, there are many other business approaches you can apply to delegate some of your business processes to third parties. For example, you can opt for operate services or managed services. Another way is to try outstaffing, the business approach when you reinforce your team with unique remote specialists. By choosing the latter option, you will get partnership relations, as your success and development will be vital for your outstaffing vendor, which will make them more willing to offer you extra services and provide you with extra support.
7. Management issues
Some customers state that outsourcing results in losing control over project management and decision-making processes. Apart from that, for some customers, it is important to have control over their outsourcing team and make sure that they abide by the customer’s business values.
What can you do to avoid management issues?
- Appoint an experienced project manager for the outsourced project. Ask your IT vendor to do the same so that you have a responsible representative of the vendor solely dedicated to your project.
- Implement regular status reports and meetings to ensure that you’re still in control of the project and the team that works on your tasks.
- Ask your IT vendor to sign a contractual obligation to share your principal values. For example, providing their employees with high-quality working space, labor rights, and training on dutiful business practices and labor law issues.
8. Security and legal concerns
A lack of security guarantees is one of the most common outsourcing problems examples, as this issue can be delayed in time, meaning you will find out that there was a problem with security or legal issues months or years after the IT vendor deployed your project.
Is there a way to omit data breaches, intellectual property theft, and violation of intellectual property rights?
To address security concerns, you will have to establish clear data protection policies and protocols. Regular checkups of your IT vendor security policies and penetration tests might be an efficient additional tool to ensure the security of your data.
To address legal issues, sign a clearly defined and detailed contract that outlines the terms and conditions of the outsourcing agreement. Ask your IT vendor to sign a non-disclosure agreement and adhere to strict data protection measures. The outsourcing contract should also include provisions for dispute resolution and intellectual property protection.
9. Recruiting and hiring issues
When opting for the traditional outsourcing approach, you will most likely be pushed away from the recruiting and hiring processes. Theoretically, this can lead to staff turnover and loss of key knowledge and expertise by your remote team.
What’s the way out?
- First of all, you can choose outstaffing instead of outsourcing. In this case, you will have full control over the recruiting and hiring processes and will be able to ensure that your new remote employees share your business values.
- Apart from that, you can hire an IT provider with a strong track record of retaining staff.
- You can also engage your outsourcing vendor in teambuilding events of your company and provide some benefits to your outsourcing team.
- To avoid loss of key knowledge in the case of staff turnover, you should establish clear knowledge transfer procedures and documentation requirements.
10. Budget overrun
When evaluating outsource pros and cons, we always talk about cutting costs, one of the main reasons why companies around the globe choose outsourcing. However, cost overruns are also quite frequent with this business approach. They can result from insufficient expertise of your IT vendor, improper planning, or unclear expectations. Acts of God are also possible. For example, a key expert of your outsourcing team fell sick, or there were unexpected shifts in the market that forced you to change the roadmap of your project.
What can be done about that?
Actually, most outsourcing companies already do a lot to avoid budget overruns. For example, they put into the budget all possible risks (which often make the prices of traditional outsourcing software development tremendously high).
Other ways to prevent cost overruns include establishing a clear budget and communicating it to your IT vendor. Apart from that, you can implement cost controls, including milestone payments and regular cost reviews.
There are other outsource management problems like lack of communication, time zone issue, or vendor dependence, but you can eliminate them all by sticking to some simple yet efficient business practices:
- Establish clear working hours and schedules with your IT vendor.
- Assign tasks with enough lead time to allow for potential delays due to time zone differences.
- Establish exit procedures and transition plans to reduce the risk of vendor lock-in.
- Stay engaged in your project and appoint regular meetings with your vendor.
- Implement efficient outsource project management by leaving yourself ways to control and manage your outsourcing team and check our EXAMPLES OF IT OUTSOURCING IN 2023
- Consider other outsourcing models that don’t have as many downfalls as traditional outsourcing. For example, pay attention to outstaffing, the approach that allows you to reinforce your team by hiring experienced specialists with unique skill sets.
Overall, don’t let existing outsourcing problems stop you from trying this approach out. Remember that for every outsourcing issue, there is a solution, and even if we haven’t mentioned it here, rest assured that our experts will find it for you.