An Efficient Business Strategy and the Benefits of Outsourcing - Essay Example

Top 7 Outsourcing Risks and How to Avoid Them

Outsourcing is becoming more and more popular from year to year among small start-ups as well as big enterprises. And there is no surprise as this is an efficient business strategy used to reduce recruitment and operational costs, focus on core processes, increase quality and bring in innovations. Besides, it is an excellent opportunity to bring talented specialists to your project without having long-term commitments.

According to market research conducted by KPMG, app development outsourcing is the best option for customers who want to secure expenses without loss of quality. The statistic provided by Computer Economics shows that more than 45% of businesses that already used outsourced services are going to increase the amount of outsourcing workload in future.

No doubt, the benefits of outsourcing are numerous. In fact, about 26% of the companies opt for outsourcing because of costs savings. At the same time, 20% of clients strive to improve the quality of provided services by delegating the operation of some departments to specialized services. For example, a significant number of businesses choose customer support outsourcing as an effective way of providing qualified customer care. Experience has proven that cooperation with reliable outsourcing service can increase customer satisfaction a lot.

Although there are many perks, so are the pitfalls that can easily sidetrack your project. Therefore, what are the common risks of outsourcing and how can you successfully avoid them? It is important to mention that your decision to outsource should be well-considered after accurate analysis. In such case, all hidden obstacles can be prevented or even turned into additional advantages.

Here are the most common risks that a company can face when using outsourced services and some advice on how to avoid them.

Risk #1: Loss of control

No one wants to lose control over the project when trusting it to an outsourcing company. In fact, unclear communication and lack of visibility lead to unforeseen expenses that can transform your product into a costly one.

But how to keep control over it? First, manage the outsourced project equally between your company and service provider. Build strong business relationships with outsourcing team by improving communication. Also, don't forget to make sure that your in-house staff is aware of how to handle the outsourced project. Choosing the vendor, opt for the one that offers high transparency of communication with customers using reliable tracking systems.

Risk #2: Different time zones

The onrush of technology and Internet has changed the world tremendously and turned it into the global marketplace. This has opened many doors to business development and made the outsourcing possible. Still, there are challenges to overcome. The main problem of global outsourcing is related to time zone difference. Just imagine that you have an urgent issue, but all members of your remote team are offline. In such case, you should wait until the next day to solve your problem. Such unpredictable delay can be the cause of missed deadlines and even project failure.

The best way to avoid risks is to use Follow the Sun (FTS) strategy. Due to this model, the outsourcing team works on your task when it is a night on your side and sends the completed work when it is morning. This process helps to reduce response time and make the workflow much faster.

Risk #3: Problems with language

As you can see, clear communication is fundamental for effective outsourcing. But if the hired team can’t speak your language, communication will lead to poor results. So if you don’t want to get into hot water, select the outsourcing company carefully and pay special attention to its location. Choose a service provider with firm guarantees. The company should ensure that remote staff would be able to keep in contact with you in the preferred language while working on the given project.

Risk #4: Hidden charges

If you decide to outsource, you know that this method of business cooperation is cost-effective. Even though, it won’t fix all your issues with additional expenses on the project. The problems may appear when vendor charges fixed rates but hires unqualified specialists. The reason for this is obvious: the lower costs on employees are, the higher revenues the company receives. Such unprofessional approach can bring poor-quality results.

The best way to avoid extra spending is learning more about the potential hidden costs of outsourcing. Make an in-depth business analysis to plan the budget including all possible charges that can appear at any stage of the process. Doing this, you will find out an exact cost reduction that outsourcing can bring to your company. Besides, opt for “cost plus” model that gives you an opportunity to control the remote team. You’ll be able to choose specialists and determine their salaries. That is also an effective way of taking control of expenses.

Risk #5: Lack of technical documentation

Preparing thoughtful technical documentation is fundamental as it determines the course of the whole project. In other words, it is the roadmap for the team that helps avoid threats and challenges. Thus, the more informative and detailed your technical documentation is, the more accurately your expectations as a client will be met.

To avoid failure and miscommunication, make sure that technical documentation is written clearly, and all your requirements are mentioned. Also, don’t be afraid to ask clarifying questions. There is no general standard, so the structure of technical documentation can vary considerably depending on the service provider and type of the project.

Risk #6: Protection of data

Hiring experienced and reliable company is crucial for the protection of provided information. The security issue is especially significant when the outsourced project involves highly sensitive data. In such case, it’s better for you to conduct a background check of the potential vendors and find out how they have dealt with security problems in the past. Don’t hesitate to ask about some case studies that clarify security measures and show how service provider has handled sensitive data in the previous projects.

Risk #7: Outsourcing the key project

Outsourcing the key project is quite dangerous. Starting cooperation with a remote team, you run a risk of becoming dependent on a service provider and losing project expertise. To avoid these risks, don't outsource the whole project. What is more, keep management in your in-house staff.

Are there any risks you can add to this list? Feel free to leave your comment below.