Outsourcing is the purchase of goods or services that were
previously provided internally. Generally, it is used for a
broad range of information technology functions that are
selectively contracted to an external service provider.

For most companies, outsourcing is an interesting option,
but they are reluctant to explore this option. Many
companies are not even aware of outsourcing possibilities.

The decision to outsource is a difficult one that many
executives now face. Outsourcing is a difficult issue. The
perceived advantages of outsourcing include better control
of costs, accountability and the ability to focus internal
resources on more business critical tasks.

There are so many risks involved. If you neglect these
risks, your business would terribly suffer. Here are some
problems often encountered in outsourcing:

Communication is one of the most crucial issues in
outsourcing. It can kill projects and the whole outsourcing
relationship. There are various sources of communication
problems, such as language barriers, inability to
communicate bad news or problems, cultural differences,
etc.

Misunderstandings and language barriers are also
contributing factors to communication problems. When work
is outsourced the time spent on communication will increase
considerably.

Global team management. When a software development team is
dispersed globally, through many time zones, it is often
difficult to manage and synchronize teams and pay attention
to team and individual needs. Resources and time spent on
these activities usually increases.

Cultural fit. Here we have to think of, among others, work
ethics, work style and corporate culture as well as more
general cultural issues. In some parts of the world 9:00 AM
means around 9:00 AM which might not be sufficient enough
for our purposes. We also have to consider the fact that
weekly, public and religious holidays are at different
times in different countries.

This can cause quite serious timing problems and even
communication breakdown. Cultural differences influence
management and work style as well as the way people deal
with problems, deadlines and stress.

Security. These days security concerns are paramount which
influences off-shore outsourcing. Questions like “Is this a
safe country or city?” are asked more often and people
expect an elaborate and reassuring answer.

These questions also relate to the general business climate
and political stability in the country in question. But
security could also mean other measures a company is taking
or required to take in order to meet certain requirements.
On-site access security: security cards are used to access
the premises and also for instant personal identification,
or the building has 24 hour guard for example.

Network and IS security - measures could include hardware
and software firewalls, virus protection, power supply,
backup and fall back operation, fire control, redundant
hardware and software, etc.

Training costs. At our outsourcing partner people often
must be trained or re-trained to meet our requirements. It
can be cross-cultural, general management, communication
training for the top management, technology, process,
project management, language training for the technical
staff. In case training must be provided it will definitely
increase our direct costs and can cause delays and timing
problems.

Service level. There is a very real risk that while we are
busy relocating our IT operation off-shore our service
level at the home ground will drop. Clients are lost, new
clients are not acquired because of dropping service level.
And news travel fast to the competition. The fear from
dropping service level is one of the main reasons why
companies have decided not to go off-shore with their IT
operation.

Employment. In these days, when unemployment in the IT
sector returned to Europe and the US, employment became a
very serious domestic and political issue. Social tension
is growing against relocating jobs off-shore. The issue is
often linked to globalization.

Staff turnover. Influence on staff turnover and other HR
issues is very limited. It carries the risk, for instance,
that one day a key project manager just leaves the company
without any notice, leaving a gap behind which might cause
delays and cost increase.

This would place you in a better leverage situation when
choosing and transacting with outside service providers.
The following problems will quell your fears and help you
bravely take advantage of the benefits of outsourcing in
the new global economy.

Find where to hire freelancers, how to deal with them,
protect your business and get professionnally written contract
templates in the Outsourcing Survival Kit.

Gilles Rais

Categories: Articles