Outsourcing Fails: Common Mistakes to AVOID
Even if numerous companies are already reaping the benefits of outsourcing, there are still many who aren’t convinced. No one can blame them. There’s a long list of discouraging myths and misconceptions – and then, there are also several, very real outsourcing fails.
Case in point: 2010’s IBM vs the State of Indiana debacle. Both parties went to court over a ten-year outsourcing contract valued at 1.4 billion USD. Two years into the partnership, Indiana decides to pull out, citing that systems IBM implemented were problematic. It was a costly misunderstanding – a $78 million-dollar one, to be exact. Big, public disasters like these are more than enough to scare off the average entrepreneur. The silver lining is, though, that these widely known blow-ups also leave behind lessons that can help new business owners re-think their outsourcing apprehensions.
Here are some of the most common mistakes to A.V.O.I.D.:
A – Abruptly choosing just any service provider
One of the first decisions companies face after deciding to outsource is choosing their outsourcing partner. There many things that should be considered – from cultural fit, to expertise, to specific need – and it can be a long, time-consuming deliberation. Some companies make the mistake of jumping in too fast and not studying all the essentials. The right vendor can make or break an outsourcing strategy, which is why it’s important to take the time to find the right one.
V – Vague expectations
Statistics show that 50% of outsourced projects flop outright or don’t quite reach expectations. One of the main factors contributing to this is the fact that many companies don’t really know what they want in the first place. When expectations are unclear, the whole process doesn’t come together – hires aren’t the right fit, metrics aren’t correctly measured, goals aren’t met – and it inevitably ends in conflict and breakdown.
O – Overlooking security risks
With today’s rampant breaches and data leaks, security should be a top priority. Many outsourcing fails involve some form of security issue, especially when these matters were not explicitly discussed in the beginning. It is important for outsourcing partnerships to agree on how information is shared and stored; as well as to have systems in place to fight off security risks.
I – Inconsistent and irregular communication
Some companies fail to realize that outsourcing is a progression. They think that when they find a vendor, express what they need, and start paying for the team, they can already wean off involvement immediately. The truth is that there are going to be hiccups along the way, no collaboration is perfect – so it’s important that there is regular communication for check and balance, improvement, and alignment.
D – Deciding based solely on price
For 82% of US companies, the primary reason for outsourcing is to save on costs. It’s normal to go for the option that gives the most bang for the buck. The danger is in thinking about pricing too much that everything else is sacrificed. Most often, the lowest rate possible, unfortunately, also comes with lower expertise and lower quality of work.
Like every other business decision, outsourcing has its pros and cons. In the case previously mentioned, many of the challenges were avoidable and could have been handled differently. For many successful companies, the benefits far outweigh the costs. A company’s outsourcing journey can be another cautionary tale or a success story – depending on business owners doing their due diligence, learning from the experiences of others, having safeguards to mitigate risks, and remembering what to avoid. Done correctly, outsourcing is a great, profitable strategy for any organization.
Considering outsourcing? FGC+ has helped many clients who are new to outsourcing by being the ideal partner, guiding them every step of the way. Let us help you get your outsourcing journey started.