When Outsourcing Becomes a Failure
Several Reasons Your Business May See an "Epic Fail" Through Outsourcing
Outsourcing can provide many benefits to businesses of all sizes. However, like any other aspect of a business, there are risks involved. No matter how big the business is, sometimes outsourcing does not go according to plan.
One example of outsourcing going wrong involved Virgin Airlines in 2010. Due to a failure with software that was provided to Virgin via outsourcing over 50,000 people were left stranded. Although the situation did get rectified, it took 24 hours to do so. This failure cost Virgin up $20 million dollars plus there will be lasting damage to the brand's reputation.
Getting outsourcing wrong can cost your company money, time, and irreparably damage your brand's reputation. Whether you need to outsource on a permanent basis or just for a one-off project, this guide will help you understand 7 of the main reasons for outsourcing failures.
Cost Is The Main Consideration
When deciding to outsource work, ask yourself why? The answer in many cases is to save money. However, focusing just on saving money can lead to other problems.
For business, money is a priority as it is important to be profitable. This means you may focus on finding the cheapest company available to use for outsourcing. What problems could this cause?
If the company is based offshore, it could mean difficulties arise with communication, time zones, lower standards for staff, and cultural differences—specifically if that company is totally unfamiliar with working with international clients. Otherwise, a well-seasoned offshore company can be a tremendous cost-saving benefit.
All these areas could contribute to bringing a project to a halt. In the end, a breakdown with the outsourcing company can mean your business could pay more than if they hadn't used them in the first place.
When choosing a provider, don't focus on the cheapest or the one offering the biggest discounts. Instead, consider the following:
Who will provide the best service?
Can you see their history with others?
Are references available from current clients?
Can they provide an overview of the current staff's abilities including experience and certificates (when applicable)?
If you are unsure how to check all of this, can you hire a consulting firm to help with the decision?
Always keep in mind the saying, 'you get what you pay for', cheapest isn't necessarily bad but it isn't always best. Do your due diligence to make sure you get the best provider to work with your company.
Rushing To Meet A Deadline
If a 200-person firm introduced a new management system, this would normally take roughly twelve months to implement from beginning to end. It would include:
Analyzing existing people, processes, and systems
Vendor review and selection
Planning the migration
Integrating legacy systems
Deployment and change management
Rushing to meet a deadline can mean that shortcuts are taken in some or all these areas. The result of this can be poorer work and problems in the future. Occasionally, having to rush to meet a deadline may be unavoidable. However, most of the time a project should be built with plenty of time to meet all deadlines. It is better to allow the project to have extra time and not need it, than rush through and potentially make mistakes.
Not Valuing The Relationship As A Partnership
Long-term outsourcing contracts mean your provider should become a partner in helping your business achieve success. If you view the outsourcing provider as a separate entity or as a burden, this could mean the relationship doesn't reach its potential. Your business could miss out on potential growth if the provider doesn't feel valued.
Outsourcing The Wrong Jobs
When deciding to outsource work it is important to do a thorough assessment of what needs to be outsourced. You could outsource entire departments, although, in some cases, this may be unnecessary or even unhelpful to your business.
If you keep jobs in-house rather than blanketly outsourcing everything this means essential staff is kept in the place you need them.
Failing To Be Flexible
Technology advances faster and faster every year. Making sure to be flexible and changing with the times is important so your business can remain agile and make the most of the latest advancements. Failing to be flexible can mean competitors gain an advantage.
As mentioned above, outsourcing can create issues due to things such as language barriers, time-zones, and cultural differences. Projects could be delayed, and your own staff may have to work overtime to catch up. Problems like this can sometimes arise even if both companies are in the same country.
Poor communication can severely hinder progress. Therefore, it is vital to communicate well, make sure all parties know what is expected, what the goals are, and when the deadlines are.
If you communicate well and value the partnership with the outsourcing company, then you will avoid micromanagement. Trying to micromanage can ruin a working relationship and leave the outsourcing company feeling unappreciated.
When you chose the outsourcing company, the decision would have included the fact that they have the necessary skills required. Keep this in mind and let them do their work uninterrupted.
Outsourcing failures can happen to businesses of all sizes. There is no reason to let the possibility of failure put you off. Keep these 7 points in mind, trust the company you choose and build a solid working relationship with them. If you do this, then the risk of failure will be greatly reduced.