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In 2021,  the global outsourcing market reached 100 billion dollars which is 1.7 billion more compared to 2019 and it’s not going to slow down. With a CAGR of 5.1 % between 2021 and 2027, the worldwide engineering outsourcing industry is expected to earn roughly 431.12 billion US dollars by 2027. Companies feel positive about finding an outsourcing vendor as it saves money and resources, enables focus on core business, enhances service quality, and much more. Deloitte’s survey shows that 88% of companies that outsource admit that their choice is beneficial for their business and they achieved the goals they had. 

So, how to get into this 88% of happy outsource clients? Forewarned is forearmed. In today’s article, we are going to dwell upon possible outsourcing problems that may arise in the process of outsourcing and tips on how to avoid them.

#1 Data Security Risk

Outsourcing has been a common corporate practice in which companies hand off lower-value activities like payroll or even sections of the value chain that are critical to their operations. Whether a company's purpose is to save expenses, streamline processes, or improve customer service, outsourcing may help. This does, however, come with a level of danger as an organization's image can be severely harmed by problems with a third-party service. This is especially the case of a loss of data risk.  The security of your business and intellectual property should be prioritized. You give your newly coined partner access to the valuable data that your business depends on. Make sure that the security policies, procedures, and technical safeguards used by your outsourcing partner are on a high level and are fully compliant with the GDPR.

It is also quite a reasonable idea to set up a contractual arrangement that allows for less data sharing is a smart place to start. For doing their job, a third party does not need to have access to an organization's entire data set.

#2 Not Planning Your Budget Ahead

Statistics show that the major reason for outsourcing services is a cost-cutting factor. Though outsourcing helps your business to save on, it doesn’t mean it’s cheap as chips. Without a deep analysis of all the pricing for the services provided, you can end up spending much more than you actually planned before. Therefore, count ahead, ask the vendor about any possible extra charges and read the clients’ reviews.

Additionally, to prevent surprise costs, take as long as you can to figure out how the pricing strategy works. Communicate your financial constraints to the vendor to avoid future misconceptions., 

#3 Time Zone Difference

What happens when communication fails? The problem is that nothing happens. When you live in different time zones, the communication issue arises, as most of the time, your work hours don’t coincide. Time zones can cause communication delays and, as a result, the inability to complete a project on time. That’s why while choosing an outsource partner, take into account time zone differences, as you’ll need to talk on a daily basis to make sure your expectations match deliverables. 

To establish a productive and dependable IT staff, firms must specify specific criteria, visualize overlapping hours, implement effective feedback mechanisms, and schedule suitable meetings.

#4 Language and Cultural Barriers

Alongside time difference comes language and cultural ones. Believe or not, attention to detail, innovation and focus on end results depend on culture. The survey held by the National Outsourcing Association in the UK shows that over 75% of respondents mentioned that they “would take more account of culture next time”, indicating the importance of national differences. Before signing a contract assess the difference in organizational culture between both parties and the English level of the outsourced team, taking into account peculiarities of pronunciation, accent, etc.

To solve this problem of cultural diversity you can conduct cultural awareness training sessions for your employees as well as communicate your principles and conventions to individuals. Also, make certain you establish clear communication lines and schedule ongoing interactions to ensure that everyone is on the same page. And remember that when you overcome all the difficulties it may drive you to innovation.

#5 Inability to See the Whole Scope of the Project

One of the most important outsourcing issues is an explicit understanding of how an outsourced project fits into a company’s overall strategic goals. Each of the outsourced aspects of operation has a direct influence on every other project in the company's portfolio. Win the process of communication with the company to which you are considering outsourcing a project, explain not just a project itself, but the whole scope of your goals as a company, the interference of the current project with other projects that already exist in your company.

Undertake a comprehensive knowledge transfer strategy, including capabilities, technology, and coding reasoning. The software development company you choose must be capable of understanding the project only by looking at your written rules. If that isn't enough, set up conversations or meetings with the firm, your QA automation engineers, DevOps experts, and engineers to address hidden hazards and answer all of your vendor's queries.

#6 Unclear Delivery Expectations

Once you have found a vendor that is easy to reach for you and have clearly formulated your company goals and the project objectives, the next stage is to inform your partner to omit possible delays, change orders that can drive up costs, and extend the project timelines. Try to be transparent about your expectations for quality and checkpoints along the course of the project.

#7 Quantity, not Quality

If the price is your main driver, you will often be under the temptation to choose the cheapest company. When choosing a software development company, make sure to interview the engineers to learn their technical background. Choose a software outsourcing company that is best suited to deliver the project, which may or may not be the one with the lowest cost.

Remember, an expert vendor may be more expensive, but they can explain the process, assisting you in avoiding delays and mitigating any hazards. They'll guide you with defining specifications, navigating the research process, and identifying the top candidates for the tasks you assign.

#8 Buying a Pig in a Poke

You’ve seen a beautiful website and are ready to sign a contract? No way. A website matters, of course, especially, if it gives consistent information about services the company provides and the clients’ feedback. But go further. Arrange an interview with a manager and development team, check some popular review platforms (e.g. Clutch, AppFutura, etc.), look if the company possesses any well-known industry rewards.

#9 You Don’t “Get it in Writing”

A loosely framed contract or oral agreement can play a trick with you, and most probably will, resulting in sizable monetary losses. Draft a tight contract with all the deliverables and timeframes outlined. Define the payment schedule, instill the code guarantee, state the duration for which the team will provide maintenance support. Confirm confidentiality and intellectual property issues in writing as well.

#10 You Don’t Have any Expertise in Technology

This can be applied probably to 80% of companies that outsource. The biggest pitfall is an inability to assess the quality of development teamwork, make clear requirements, and conduct a productive dialogue on all the stages of development. Therefore, make sure a software development company, you outsource to, has the domain expertise and top software engineers in the area you are interested in. A big advantage would be having someone tech-savvy to consult on your side.

Final Words

The modern market is tough: if you don’t outsource, you’re out of the game. But if you outsource unwisely, you’re out of money, a desirable project, and emotional stability. Successful IT outsourcing becomes possible only when you actively work to avoid the causes of outsourcing risks.

The article was updated on February 16, 2022.
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