Reasons for Outsourcing fiasco’s

Outsourcing has been here since ages – right from agriculture, manufacturing, accounting and almost in all the fields these days. But the over the years the process has become more and more complex. Outsourcing these days has become more critical which include outsourcing high-end tasks such as infrastructure implementation, product – design and development, outsourcing key areas and niche skills to transform their business and make it more efficient. Outsourcing has moved on from just traditional mode of saving costs, it is more of bringing value-add to your core functions and helping your business grow. There seems to be no margin for error here, but yet it faces some hurdles in its path. Below are a few reasons why –

1.       Objectives not defined clearly –

Reducing costs should not be the sole reason for outsourcing; otherwise it would lead you to the cheapest service provider thus reducing the attention to the actual core services. Cost savings should not be the primary goal of outsourcing but it should act like an outcome. While setting the objectives, you should ask the right questions. Will outsourcing leverage my business growth? What are the skills & technologies will be provided by the service provider? How will it affect my quality of service delivery & how flexible are the in providing their services? Will it fulfill my ad-hoc demands with additional capacity and meeting the market standards?

2.       Changes in workplace culture –

Outsourcing usually is referred to as change in work environment, change in personnel’s. Organizations often outsource some of the tasks, & responsibilities which were earlier done in house. This inturn will be affecting the existing jobs and might send a wrong message in the minds of their employees. The organizations think of it in this same that we if we get rid of some of the employees & outsource their work, it will save their existing labor cost. This will result in burdening the existing resources with additional work which in turn might affect the quality & meeting of the predefined target.

3.       Leverage expectations correctly –

When you are in the initial phase of outsourcing your business that is the time to set your exact expectations from the engagement. The objectives that are set must be implied & obliged to from both ends. In the long run if they are not fulfilled according to the set objectives it might be lead to cost escalations and will also lead to additional time and lowered quality of deliverables. The first baby step when setting up the objectives/expectations is to identify the business critical metrics and then define their measurement parameters for the same. Also identify the people & tools/technology on which you might be outsourcing your business. Another important aspect that needs to be followed is – equip the provider with a clear understanding your business and the objectives of your business in the long run.

4.       Communication barrier –

Communication is just not about saying but conveying your message correctly. This can cause due to difference in time zones, language barriers, and industry and technology limitations. To overcome these it is mandatory to have frequent communication by setting up an appropriate time for both parties. Phone calls should be weekly or daily depending upon your business criticality. If there’s any gap in knowledge or the next plan action, it is better to stop and confirm the same from the client. Another method is to keep a weekly/monthly reporting structure in place by means of which the client is updated upon the activities that are carried on. This will also be helpful in highlighting the pin-points and working out a plan of action to mitigate those.

5.       Transition –

Transition process is important to business. Poor transitions can cause delays in outsourcing, reducing quality of deliverables and lead to cost escalations as well. The impact can also lead to poor customer satisfaction. To overcome such problems, it is important to have a proper transition process in place. Experienced transitions managers are an important asset to the organization in this situations. They will identify the activities, technology, and infrastructure and use their managerial skills to set up your transitions processes for the above even at the offshore locations. These migrations are complex and need monitoring though out all the phases. Ensure that your transition management is run par with the same discipline as your other business or it can lead to outsourcing failure.

6.       Risk analysis –

Lack of industry experience. Inexperienced professionals, lack of industry driven technology, inadequate supply of skilful resources. The provider must be lacking in one of the above attributes. This is the reason why a thorough risk analysis needs to be done about the provider. This is where the methods of vendor sourcing strategy come into picture wherein you go through the entire phases of vendor selection. Then you can prioritize the vendors according to their rankings and select the best suitable one.

7.       Ad-hoc costs –

Once the contract is signed the overall engagement cost might not increase – this is the normal norm which might not exactly be true. The costs might increase depending upon the location where you outsourced. For example, if the contract has travel in it, then the hotel & airfare rates may differ from what you had planned affecting your executives. To overcome this it is better to identify the personnel’s who will be required for contact & state their rates & travel fare in the contract itself. Another factor which might affect you is the inflation and unemployment in the country you outsourced.

8.       Lack of management –

Once you have outsourced, it is very necessary to monitor & manage the engagement through its completion. There can be instances of the provider not following the practices which are followed in the organizations and would not comply on the same. The main reason behind this can be lack of communication, poor transition, and inadequate knowledge about the organization’s working culture and also the industry standards. This might lead to over-management and can create a hindrance between the two parties involved.

9.       Altering demands –

Change is in the air. That’s how everything’s changing these days and so is your business. Customer satisfaction is the key aspect to any business and to do that you need to adapt as per the customer. This means the provider has to change according to the buyers needs. The provider has to be flexible and sustainable to these changes of the buyer without affecting the quality of the deliverables. This should be considered into account while getting into the contract with the provider whether the provider will be able to meet these additional demands on a regular basis. Another way to approach this is by making the provider your partner & sharing the business developments. This will enable the provider to keep an eye on the growing needs and come up with plans to mitigate the same.

10.   Client – Provider relationship –

Relationship is one of the important aspects to any business. A good relationship between the client and the provider can sometimes be the backbone of that engagement. If the engagement is going through a bad phase then it is the duty of both the parties to comply and help out each other to overcome such situations. Also it imperative to treat the provider as your partner in the long run so that they are aware of the organization’s vision and when the business demands are more the provider is ready to meet those demands.