13 Common Problems of Outsourcing and How to Avoid Them

by | Nov 3, 2022

There is a wide range of motivations behind the decision that is being made by an increasing number of businesses to contract out some of their work. The cost-effectiveness of the solution is the most important factor, but other important factors include access to a wider talent pool and overall efficiency brought about by the capacity to concentrate on the most important tasks.

If outsourcing were risk-free and without flaws, we would not be discussing the issues associated with outsourcing deployments. When you outsource work to a vendor, what are the most typical difficulties you will run into, and how can you prevent them from happening?

What is Outsourcing?

In the context of business activity, “outsourcing” refers to the practice of delegating certain tasks or responsibilities to an external third party. An attempt to outsource information technology tasks to a technology provider might entail a wide variety of tasks, from the entire IT function to discrete, readily specified parts, such as communications networks, software development, or quality assurance (QA)  testing.

problems of outsourcing

Companies have the option of outsourcing their information technology functions either onshore (inside their own country), nearshore (to a country located nearby or to one that shares the same standard time), or offshore (anywhere around the globe). In order to achieve cost savings, offshore outsourcing has typically been sought.

IT functions have traditionally been outsourced as infrastructure or applications. Infrastructure outsourcing includes service desk, data center, network, security, and management. Outsourcing might encompass mobile app development, legacy software maintenance, Quality Assurance (QA), and testing.

Cloud services make for one-third of the outsourced business, a growing percentage. Traditional outsourcing providers, worldwide and specialty software vendors, and technology-enabled industrial enterprises all offer these services.

Additional reading: Offshore Software Development: Things You Need to Know

Benefits of Outsourcing

The business plan for outsourcing varies depending on the scenario, however, the advantages of outsourcing frequently include the following:

  • cost savings (due to lower labor rates)
  • improved efficiency
  • varying capacity
  • greater emphasis on strategies and fundamental skills
  • access to resources or skills
  • improved adaptability to shifting market circumstances
  • quicker time to market
  • Reduced ongoing infrastructure investments
  • Innovation and thought leadership
  • probable cash flow from asset transfer to a new provider

Problems of Outsourcing

We have compiled, on the basis of our extensive experience, a list of the top 13 challenges that you may encounter when outsourcing your projects, as well as the solutions that can help you avoid or overcome these challenges.

  1. Language and culture variations
  2. Selecting the incorrect outsourcing model
  3. Uncertain costs
  4. Concerns regarding the vendor
  5. Inadequate expertise in outsourcing tasks
  6. Lack of control
  7. Weak transfer of expertise
  8. Unfair and unbalanced negotiations
  9. Locating a trustworthy provider
  10. Legal and contractual procedures
  11. Different time zones
  12. Very little tech expertise
  13. Concerns about security
problems of outsourcing

1) Language and Culture Variations

Many outsourcing clients undervalue cultural differences. Distinct cultures have different views on how to complete a task. Detail, outcomes, and creativity all depend on culture. Language is similar.

problems of outsourcing

English proficiency is critical for creating functioning communication channels. Ensure you and the partner are on the same page before signing a contract.

2) Selecting the Incorrect Outsourcing Model

When outsourcing, you must know what model will work. Different outsourcing models might confuse a beginner. Knowing the proper model for your project can help you succeed.

Some consumers are uncertain about which model to pick, but some corporations choose the wrong one because they don’t know what they’re doing.

People make errors while choosing a project model. For short projects, a fixed model may work better, but for larger, continuing projects, an agile approach may be better because it allows for adjustments and iterations without defined terms. Or you can go with a dedicated team working on your project completely.

Also read: What Is Software Building Process? A Complete Guide in 2022

3) Uncertain Costs

Even if we have stated that outsourcing would help you save a significant amount of money, there is a chance that this strategy may fail if it is not meticulously prepared. In addition, you are unable to get an accurate estimate of the expenses without first determining the specific needs, timetables, resources, etc. This takes us to one of the most difficult challenges that outsourcing presents, which is determining an accurate cost estimate.

problems of outsourcing

If pricing is your major concern, you may select the cheapest firm. Interview software developers to discover their technical backgrounds. Choose the best software outsourcing provider for the job, which may not be the cheapest.

A professional provider may be more expensive, but they may help you prevent delays and problems. They’ll help you define specifications, navigate research, and find top candidates for projects.

4) Concerns Regarding the Vendor

Many firms enter contracts without knowing what to anticipate from outsourcing vendors. Lack of outsourcing experience causes this. One beautiful website won’t help you decide. Check out review platforms like Clutch.co, meet in person or online with an outsourced firm rep, and so on. This can help you avoid untrustworthy vendors, a major outsourcing concern.

5) Inadequate Expertise in Outsourcing Tasks

Incompetence is another outsourcing concern. If you don’t have enough skills in JavaScript or Big Data analytics, you can’t judge a third-party service’s work. Without knowing technology and solutions, you risk wrong hiring or misjudging.

6) Lack of Control

Outsourcing hinders complete project control. External companies aren’t in-house. You can’t fully manage how a third party performs duties when you delegate them. If you’re used to controlling every detail of a project, it doesn’t make sense to outsource. Loss of control increases dependency on a contractor.

7) Weak Transfer of Expertise

Poor knowledge transfer causes two outsourcing problems: yours and the vendor’s.

After terminating your vendor relationship, you may have trouble with project results. Without comprehensive documentation, you can encounter confusing features or scripts. If the vendor acquires an ongoing project without a transparent knowledge transfer method, they may not match your expectations.

8) Unfair and Unbalanced Negotiations

Sometimes lack of trust or expertise in the field can cause unbalanced negotiations of the project. A big company may intimidate a smaller outsourcing vendor with information left out for an unfair negotiation or vice versa.

9) Locating a Trustworthy Provider

When outsourcing doesn’t go as planned, one of the prevalent causes is that the company partnered with an inappropriate agency. The significance of selecting a reliable provider is something that has been emphasized more than once by us. However, what does this actually signify? How can you identify the difference between the two?

10) Legal and Contractual Procedures

Unlike in-house recruiting, outsourcing legal depends heavily on the vendor’s location. From nation to country, you may need to sign extra legal documents. Small mistakes in the contract might lead to major consequences that taint the relationship you have with your vendor.

11) Different Time Zones

Let’s imagine you’re located in New York, but the company that handles your outsourcing is based in Lahore. There is a nine-hour time difference between both sites, and you only have two to four hours of overlap in your schedule. The problem of different time zones needs to be considered in order to determine the time of day that will allow for the most effective communication.

12) Very Little Tech Expertise

This applies to 80% of outsourcers. The inability to analyze development teams, create explicit needs, and have fruitful communication at all phases of development is the most prominent problem. You need a good understanding of the technology to assess the quality of work.

13) Concerns About Security

Issues with a third-party provider might damage an organization’s image. Especially a data loss risk. Prioritize company and IP security. You provide your new partner access to business-critical data. Ensure your outsourcing partner’s security policies, processes, and technical measures are GDPR-compliant.

Solutions for the Outsourcing Problems

Following are some of the good solutions to the problems people face when outsourcing their projects:

  1. You may conduct diversity awareness training for your workforce and communicate your values and conventions to freelancers. Build clear communication routes and hold regular conversations to keep everyone informed.
  2. Always consult a CTO or your outsourcing partner in advance about the scope and outsourcing model in advance in writing to avoid any difficulties ahead.
  3. Ask as many inquiries as you can to prevent surprise expenses. Tell the seller your budget to avoid misunderstandings.
  4. Learn more about your vendor in advance like checking their Clutch reviews so that you can go with a good party for your project.
  5. Set defined project performance criteria to prevent this problem. You may wish to engage someone to create job criteria and oversee vendor progress. If you can’t afford another employee, choose a vendor who can explain the procedure and outcomes.
  6. Discuss in advance what parts you will control and provide your vendor with an adequate free hand in their area of expertise.
  7. Create a plan to transfer features, technology, and code logic. Your vendor should understand the project from your docs. Organize meetings with the outsourcing business, your DevOps and QA experts, and developers to address potential risks and answer queries.
  8. Always be clear about the expectations and learn in advance about the technology and its market for a more balanced negotiation.
  9. One website may have only good reviews and another just negative ones. Visit vendors’ site links to learn about their projects and experience.
  10. Draft a contract with deliverables and deadlines. Specify the payment plan, code guarantee, and maintenance support period. Write down confidentiality and IP problems.
  11. Use different tools for managing time to communicate. It won’t be a problem because remote teams like ours at ENOU Labs usually work in the client’s time zone.
  12. Get enough knowledge of the technology or consult an expert for defining better expectations on the quality of work.
  13. A DPA is advised. So, you can summarise how to store, process, and transfer data. Ensure GDPR-compliant security policies.

Golden Rules for Avoiding Outsourcing Issues

problems of outsourcing

Let’s go back over all of the advice from above:

  • Maintain a record of the documentation
  • Create open communication channels
  • Be conscious of the cultural disparities that exist.
  • Before settling on a provider, it is important to always carry out extensive research.
  • Clearly identify the parameters of the project, including its needs, timeframe, and expenditures.
  • Make sure you are aware of the potential risks and look for a reputable business to work with.

Additional reading: How To Plan Software Project – Complete Guidelines in 2022

Conclusion

If you’re new to outsourcing, you’ll have difficulties, so find a reputable agency. A competent outsourcing provider has enough instances to establish their skill, excellent customer feedback, and dedicated staff to take you through each stage.

ENOU Labs creates digital products with intuitive product designs with an effortless user experience. We’ll provide you with a team of professionals and offer the best product.

FAQs

What are the 3 disadvantages of outsourcing?

3 main disadvantages of outsourcing are:
1. Data risks 
2. Lack of control
3. Cultural and language differences

What are the benefits and problems of outsourcing?

The major benefits of outsourcing are lower costs, access to better talent, expert teams, and lower time to launch.
Whereas disadvantages include the lack of project control and data security risks.

How can I ensure the quality of the final product?

Here are several techniques to ensure the quality of remote work:
Outsource with care. Remote vendors are more likely to prosper in this climate.
Interview vendors carefully. Before hiring, do many interviews and verify references. Ensure they have expertise with your sort of project so they can start right away.
Complete onboarding. Set expectations about how often and how you’ll communicate with them (email, chat apps, etc.). Remind them to follow corporate policies on an email responses, timeliness, and other things to avoid misunderstanding.
Set expectations. Ensure that everyone understands their time commitment and job quality expectations right away.

How do I know that the project will be delivered on time, within scope, and within budget?

Project management ensures on-time, on-scope, and on-budget delivery.
Project management involves planning and supervising a whole project. It comprises establishing the job scope, identifying resources, setting deadlines and budgets, communicating with stakeholders, monitoring progress, and making modifications.
Good communication skills and the ability to collaborate with individuals from varied backgrounds are needed to manage a project efficiently. You must know project management tools.
Project management tips:
1. Stick to the project scope.
2. Identify deliverables
3. Subdivide deliverables
4. Check team devotion

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