8 Outsourcing Mistakes That Sabotage Success

Outsourcing Mistakes

Outsourcing can be an excellent way of quickly growing an enterprise.

It provides efficient and scalable access to expertise in a variety of business functions, in as many fields, without the need to commit vast resources to hiring and training permanent staff.

Outsourcing needs to be approached with care, however; done badly, it can create far more problems than it solves.

Here are eight errors that any business should anticipate and avoid before embarking on an outsourcing arrangement.

1. ​Poor Choice of Functions to Outsource

​Not every part of a business is a good fit for outsourcing.

In general terms, it's best to keep mission-critical functions in-house, and this includes almost any operation which involves customer contact.

The responsibility of customer relations is simply too important to relinquish to a third party, no matter how trustworthy and professional they are.

Prime outsourcing tasks are those involving administrative or routine functions, such as accountancy and bookkeeping, or those requiring a particular commercial expertise which would be expensive to bring in-house, such as marketing and public relations.

When outsourcing software, like mobile games, it helps to prototype the game first so your concept will be clearly communicated to your outsourcing partner. Moreover, for complex software outsourcing, having a clear process between your team and the outsourcing company is key to success.

​2. Outsourcing Partner Selected by Price

​Outsourcing can deliver services at relatively little expense, especially if you partner with overseas workers or agencies.

However, focusing too heavily on price doesn't always translate into receiving good value.

The quality and professionalism of the work should always be the number one consideration, even if this comes at a slightly higher cost.

And, never forget how much it would cost to support everything you are getting from the outsourcing provider in-house, when comparing cost don't forget to factor in all the extras you would have to pay to fill the task internally.

3. ​Failure to Monitor Value Continually

​Also keep in mind that market conditions change, and what was once a good-value relationship may not always age well.

Continue to monitor both the price you're paying and the value you're receiving, and ensure that the equation stays in balance over the long term.

Loyalty is an admirable quality, but that shouldn't stop you being on the lookout for a better deal with a different partner. 

With that said, it is not unusual for many hidden switching costs when moving from one provider to the next, you're best investment in outsourcing is maintaining strong relationships with the outsourcing partner and keeping the focus on the bottom line activities.

4. Undervaluing Stability

​On the other hand, just as with any business relationship, an outsourcing arrangement will take time to come together and work smoothly.

There needs to be an element of patience in the early days; if things aren't going precisely to plan, it makes sense to try and fix the issues rather than jump ship at every sign of trouble.

Without stability, you'll end up squandering resources dealing with the same problems again and again.

​5. Inadequate Oversight

​Overseeing your outsourced operations to the correct level can be a tricky balancing act.

Pay too little attention, and you risk doing damage to your business because mistakes go unnoticed. On the other hand, attempts at micro-management will tend to stymie the effectiveness of the agency, while also doing little to lessen your workload. 

It's essential to trust your outsourcing partner to work in their own way, while at the same time keeping a close eye on their results.

​6. Confusion Over Parameters

​For a good working relationship which doesn't rely on excessive supervision, both parties must know exactly what to expect from one other.

The parameters of the delivered services need to be spelled out, along with clear criteria on how you will judge the results.

If there's any confusion on either side, outsourcing can quickly become a source of conflict and a drain on resources.

​Outsourcing is successful when specificaitions and expectations are set clearly up front.

For example:

  • ​How will reporting on progress take place?
  • What are the payment terms?
  • Are there milestones attached to progress and payments?
  • What are the preferred communication channels?
  • How frequently will communication take place?
  • Are there any guarantees?
  • What happens if things don't go as planned

These are just a few of the questions to guide you to a successful outsourcing relationship from the start.

​7. Blurred Accountability and Poor Communication Routes

​Who has ultimate responsibility on both sides of the relationship?

Your company probably has a strict hierarchical structure which may not be apparent to outsiders.

There needs to be a fixed point of contact within each party, who can make sure the two entities work together smoothly. Confused communication can quickly lead to chaos.

​8. No Protection or Escape Route

​Lastly, even with the strongest will and best intentions, the outsourcing relationship may not work as desired.

How do you get out of the situation if you need to, with the minimum of cost and disruption? Conversely, what protection do you have against an agency suddenly withdrawing their services and leaving you high and dry?

Outsourcing involves a more deeply entwined relationship than hiring a freelancer, and so needs a proper contract in place to make any parting of the ways go more smoothly.

​Wrapping Up

​When it works well, outsourcing can save significant amounts of time and money while providing solid benefits to a company.

Like any other aspect of a business, however, it takes proper management and supervision to operate successfully.

Avoiding these mistakes will give your efforts the best chance of fulfilling the potential that outsourcing offers.

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Ilona Kazimirko

I'm a former Venture Capitalist and the founder of GreyLoud - a software design and development company. I'm an expert in management of offshore development teams and software development process design and implementation. Always looking for great software engineering talent in Minsk and exciting & challenging software projects in Europe and Asia!