Easy Outsourcing Tips to Ensure Success and Avoid Pitfalls

Offshoring and outsourcing provoke different thoughts in different people. For some it's a natural aspect of globalization and growth, whereas others may find them threatening due to increased complexity and potential reduction in quality. However, the potential benefits — reduced operational costs, access to domain experts, and agility to scale — far outweigh the risks when the right approach is taken. A clear and robust strategy becomes vital to reap the benefits of outsourcing.

A successful offshoring strategy begins with clearly defined objectives and measurable goals. Find out why you want to outsource, reflect its business value, and develop a working framework for decision making — which vendor to work with, which process to outsource, which outsourcing models to use. Clear objectives help evaluate the success of your strategy, while measurable goals provide functional metrics to monitor progress, take corrective actions, and predict future performance.

While cost reduction is a prime reason to outsource, hidden costs tend to range from 16 to 50 percent of the outsourcing contract itself, and sometimes even more. These include costs related to selecting the right vendor, transitioning work and refining processes, and training offshore staff. Business leaders must account for the true total cost of offshoring rather than focusing solely on labor cost savings.

An agile and scalable risk mitigation plan is thorough, well thought-out, and worth the investment. It's not enough to just have a list of potential risks. Business leaders need to prioritize and aggressively manage risks, keep mitigation plans up to date, actively monitor risk development, take proactive actions to avoid risks from materializing, and if they do occur, act quickly to mitigate the impact.

Decision makers often rush to put entire business-critical processes on the offshore team, compelled to achieve enormous returns on their first project. However, how quickly to move forward should be determined by the success rate of each following project. Start small with a single, well-defined pilot project. It reduces initial risks and allows offshore and onshore teams to get accustomed to the changes.

Communication gap between a company and the vendor is often the reason behind outsourcing failure. When outsourcing, ask the vendor to keep you notified at every stage. Ensure you have direct access to the overseas team as well as the management. Even small matters can grow and become critical business issues that lead to delay in deliverables and increased costs.

Selecting an outsourcing partner requires thorough due diligence. Don't rely solely on price; evaluate their technical expertise, cultural compatibility, time zone differences, and past client testimonials. A vendor with a proven track record in your industry will integrate more smoothly and understand your business nuances much faster than a generic service provider.

Offshoring and outsourcing have been parts of business globalization for decades. While there are pitfalls and difficulties, the potential benefits far outweigh the risks. Success is within reach for companies that follow clear objectives, count total costs, create aggressive risk mitigation plans, start slowly, and maintain high communication transparency with their offshore partners.