There is no doubt that IT outsourcing has become a normal practice for firms all over the world, providing a cost-effective alternative for software development projects. Outsourcing allows you to save time and money while focusing on your core capabilities and getting high-quality outcomes. What other option do you have for success?
However, IT outsourcing, like any other business approach, has its own set of failures and possible hazards. The good news is that these risks are manageable with careful planning and preparation, as well as a thorough grasp of the main hazards and their causes.
If you want to outsource this year, we welcome you to read our essay on the causes of outsourcing failures and how to avoid them, complete with real-world examples. Let's get started and make sure your IT outsourcing plan is a success.
1. Why Do Companies Outsource?
The reasons why businesses outsource are varied and many. We shall simply mention a few because it is not the focus of our discussion. Companies outsource development when:
The expertise or technical knowledge being outsourced cannot be gained or achieved in-house owing to a variety of issues such as cost, inadequate skill set, or time restrictions.
Quality procedures, methods, and techniques are required for your software development activity, which you cannot attain internally.
Developing software in-house produces little value and necessitates more management monitoring than is necessary, and so on.
IT outsourcing may efficiently handle the issues described above, as well as many more. However, not all outsourcing ventures are a success. What are the fundamental reasons? Let's take a deeper look.
2. When Does IT Outsourcing Fail?
Statistics show that 25-50% of outsourced projects fail or underperform, while 76% of businesses experience supplier management challenges and hidden expenses. Communication problems affect 30% of providers, and 51% are dissatisfied with performance. Finally, corporations save just 26% on average, which may be higher.
Are the high failure rates discouraging you? Don't be too ready to call it quits. Surprisingly, many causes for outsourcing failure do not originate with the outsourced company. Rather, they are frequently the result of the client's lack of experience with software development, IT outsourcing, and the associated procedures. You may ensure the success of your outsourcing journey by avoiding the typical causes of failure outlined below.
There is a lack of strategic objectives. Outsourcing should not be used only to save money. Choosing the lowest provider may result in a failed outcome if cost reductions are the only consideration.
People factors. Retaining talent can be difficult for providers, resulting in teams that lack commitment and purpose. Disengaged teams may lose focus and contribute to project failure.
Inadequate risk comprehension. In outsourcing projects, a lack of information about potential risks can lead to issues and additional problems during the delivery phase.
Inadequate technology. You continue to use obsolete or inefficient technology, or you are enticed by new technologies that may not meet the needs of your project. These blunders can result in budget overruns and project delays, endangering the viability of the outsourcing collaboration.
Inadequate knowledge transmission. A successful transition of requirements and processes to a remote workforce requires effective communication. Failure to do so can have devastating consequences.
Communication breakdown. You don't provide a shared working place where people can share ideas and cooperate on tasks, which slows down the project's development.
3. Tips to keep away from traps during renting the outsourcing group
3.1. Identify outsourcing targets and scope
If you do not understand where you want, you will not arrive here. After you have cleared your brain to begin the IT outsourcing campaign, you need to determine what precisely you need to outsource services. Next, analyze the project to track what you might do in-house, and what skills you do not get.
For a better outsourcing plan, it is quite critical to determine all short-term and long-term needs and ensure you get the software development campaign’s vision that you want to outsource and make written duties and expectations for your abroad group.
Be available to answer various queries about the future software product from the leading outsourcing plant. The appropriate contractor might shower you with more queries about the business and campaign targets and might attempt to determine as many requests as possible before the project is implemented.
3.2. Select the proper vendor
The service provider which not only knows the field but is also entirely aligned with more business targets and culture is a good deal. Therefore, taking a lot of time while selecting an abroad partner can take you some issues in the future. In this case, you have to do research.
First of all, you need to list five better IT outsourcing development plants to select from. Next, evaluate the advantages, and perks they provide or learn your suppliers’ information. Have a look at their values, and approaches to obtain the best vision of the plants. Finally, you have to analyze and shortlist some vendors.
Next, you hold the meeting with the organizations’ representatives to seek out their commitment to the following projects and capability to handle the pain points or staffing solutions.
3.3. Concentrate on value over cost
Do not approach outsourcing as an affordable or simple way to offload the work. Next, IT outsourcing might boost the business to free up time for strategic concentration. The ratios of your organization are regularly a work quality and skills reflection.
3.4. Do not move for fixed cost if needed
The fixed budget is great. It can offer a control’s sense and security, as your IT outsourcing provider can bear the financial dangers, and there is no need to worry about overpays. Initially, your fixed-cost campaigns usually take more. All the campaign dangers might consist in the fixed bid since your supplier will find ways to cover the uncertainties which particularly happen in each project. Some might increase up to 60% on the cost of potential risk campaigns.
Next, the transformations to the scope can be inevitable as it is nearly not impossible to identify every single piece of information about the project. Each alteration to the scope might move via time-consuming negotiations on whether that transformation is contained in the fixed cost or not. If it is not, then you can move to the “transform request” process again controlling the project cost overrun.
Lastly, you have to completely compromise on creativity and enhancements since the work’s value is less crucial than the cost. The work’s quality can suffer as your supplier might have to concentrate on hitting the suitable cost by all means, rather than making more efforts into creating great software.
3.5. Draw up a detailed written contract
Create a contract that covers every individual project detail to avoid technical, communication, and management concerns while outsourcing. This contract should have clearly defined service standards based on the shared risk rule, as well as a thorough Statement of Work (SoW) in which everyone agrees to accept responsibility for completing the assigned duties. In this manner, you can verify that all parts of your project are addressed and avoid any future problems.
A contract that lacks a clear Scope of Work might result in unsatisfactory results. Comments such as "we were thinking of having that done in-house" or "we thought you were responsible for that part" suggest that roles and responsibilities have not been established. This can lead to IT outsourcing issues for you, your vendor, and, worst of all, your consumers, resulting in additional costs.
Furthermore, developing an exit strategy is critical if your overseas partner encounters internal issues or fails to produce a product of the desired quality. A comprehensive return policy will help you protect yourself in such situations.
Finally, as the Agile Manifesto says, prioritize customer cooperation above contract negotiation.
3.6. Prepare your in-house team
When you begin an IT outsourcing agreement, your company's management and organizational structure will change. Your team must cooperate with an offshore workforce that may be working in various time zones.
As a result, you must train your in-house staff to collaborate effectively with their new distant colleagues. Begin this planning as soon as possible, and make certain that everyone in your company embraces this change.
You may reduce opposition to the process and enhance efficiency by conveying the reasons for implementing an outsourcing strategy and its possible advantages to your employees.
Organize an all-hands meeting and explain to your employees how to properly operate the remote unit. Discuss various communication formats, educate your staff on collaborative software and project management tools that you use, and urge your team to work productively and cooperatively with the new team.
3.7. Build relationships, not only software
Personal ties are frequently disregarded in the goal of project completion. A good connection based on trust and respect, on the other hand, can be more successful than a properly designed contract in assuring the success of an IT outsourcing deal.
It is critical to create a good and motivating environment that encourages your remote workforce to give their all. An open-door policy that allows everyone to contact you and share their concerns can help reduce confrontations, misunderstandings, and distrust.
Learn about your outsourced team members' motives, show real interest in their life, and share a little about yourself. Balance a relaxed lifestyle with a serious approach toward work while establishing empathy with each person you communicate with.
When there usually will be software outsourcing issues, and challenges on the path to a better project, just like in any various business, the advantages of it exceed the potential dangers for a lot of organizations.
Lastly, by implementing those hints, you can stay away from IT outsourcing failures and handle the staffing services so far.
Get top-notch Staffing and Payroll solutions from TSC in Asia. Our services, including Staffing and Payroll Outsourcing, BPO/RPO, and BOT model, enable businesses of all sizes to hire and operate cost-effectively. Since 2018, our recruitment team has provided candidates in diverse fields catering to specific client needs, from junior to management positions.