Outsourcing Pitfalls and How to Avoid Them

As with any business venture, outsourcing has its own unique set of risks and rewards; keep in mind that with a little research and careful planning, most hazards can be easily avoided. Don’t let the possible pitfalls deter you from an outsourcing situation that could greatly benefit your company in the long run! Instead, learn how to identify the most commonly made outsourcing mistakes and gather the tools necessary to sidestep them. But what are the mistakes most frequently made by U.S. companies when outsourcing their business processes (Business Process Outsourcing)? And what steps can you take to lessen these risks and ensure that outsourcing works for you?

One of the most obvious risks in any outsourcing situation is an inability to meet cost reduction expectations. Many companies have entered blindly into outsourcing without considering the real costs of such an enterprise, expecting it to provide a quick fix for their financial problems. While outsourcing is an excellent way to trim your budget, you must consider the fact that, in the initial stages, savings will neither be instantaneous nor incredibly dramatic. According to SearchCIO.com, most organizations save 15-25% in the first year that follows implementation of outsourcing, and up to 35-40% by the third year. Savings will be considerable, yes, but not outrageous – if you look to outsourcing to single-handedly rescue a failing operation, you’re likely to be disappointed!

A lack of sufficient data protection on the part of both companies involved is another common pitfall of outsourcing. From the personal information of patients or customers to your business’s invaluable intellectual property, make sure that you have strong privacy standards and security requirements in place before any problems with loss or theft of sensitive data have a chance to arise. When investigating outsourcing providers, ask about their level of commitment to data protection; choose one that is up to your company’s security standards, and make certain that the issue is addressed and agreed upon in your contract.

Poor planning, that persistent boogeyman who haunts any number of failed business ventures, can lead to a huge array of problems that may be easily avoidable with just a little forethought. For instance, don’t make the mistake of ignoring the process of risk analysis prior to outsourcing. If you do, you’ll run the risk of making any number of mistakes, from outsourcing too early to selecting a less-than-optimal provider to work with to attempting to adhere to an inefficient business model. Another aspect of poor planning that can derail your outsourcing venture is a contract that fails to account for all of the different aspects of the outsourcing situation. One common mistake is assuming that an outsourcing provider’s price for any given project is fixed; in fact, projects usually increase up to 15% in price during the development process. Failure to recognize this possibility is exactly the kind of setback that can needlessly throw off an entire outsourcing operation. Instead, ask questions, inform yourself and make sure the contract has your interests covered.

One risk that’s somewhat unique to the outsourcing situation is the possibility of a foreign government’s interference with your outsourcing provider. In order to avoid any problems with the government of the nation where your provider is located, make sure that the company you’re choosing to work with is aware of any industry-specific government requirements, that they’re able to comply with said requirements, and (perhaps most importantly) that they’re able to offer evidence and documentation of that compliance during a possibly audit.

Another issue of special concern to American businesses seeking to establish an offshore call center is that of culture clash. In addition to the possibility of alienating customers with a call center employee’s difficult-to-understand accent, you must also consider that your offshore employees may be equally confused by your customers American accents, with their attendant regional inflections or colloquialisms. Communication, of course, is the key to any well-run call center, so this issue must be addressed head on in order to make the outsourcing a success. Many outsourcing service providers offer their employees excellent cultural education and accent neutralization programs as part of their basic training, but it’s a good idea to make sure such programs are in place and running effectively beforehand.

Setting aside the problems that may arise abroad, outsourcing also has the potential to create friction at your company’s home offices as well. One example is the time-consuming nature of the knowledge transfer process; no matter how well-educated, astute and experienced your offshore workers may be, there’s still the necessity to train them in the specifics of what you do and how you do it. Much of this training will probably fall to your stateside employees. This process can lead to a decline in productivity that may approach up to 20% in the first year of an outsourcing situation. Ways to lessen this decline include training offshore workers in a classroom setting, a situation which allows a greater instructor-to-student ratio and thereby ensures a higher level of training efficiency, and videoconferencing, which eliminates travel time. There may also be morale issues among your home office employees, particularly when the outsourcing is first announced, due to the many misconceptions and fallacies that have been perpetrated regarding outsourcing in the media. Employees may fear that their jobs will become obsolete, or that they are no longer a valuable part of the company. Avoid these issues by waiting until all of the details have been finalized before discussing the situation with your employees; this will enable you to answer their questions more thoroughly, and to communicate their new or continued role in the company with greater accuracy and sincerity.

Finally, any outsourcing situation must have as its main focus the continued success of the primary company, the company that’s seeking to outsource. To that end, take the time to establish a contingency plan that allows for the possibility of a disruption from your outsourcing service provider. Is there a possibility of political upheaval in your outsourcing partner’s country? What if there are problems with their power supply? While you should be able to rely on your offshore offices with the same confidence that you put in your internal operations, remember that there is always an increased possibility of miscommunication or confusion when dealing with employees who are thousands of miles away. A contingency plan allows you to relax, knowing that your company and your customers are protected in the event of an emergency.

Following these tips will ensure a positive and profitable outsourcing experience for your company. Why fall into the traps of unrealistic expectations, poor communication and insufficient planning when they can be so easily avoided? With just a bit of analysis and precautionary planning, you can make business process outsourcing work for you!