Problems of Outsourcing & How to Avoid them
Nowadays, outsourcing is part of the business of many companies. The outsourcing market has been growing dynamically for many years, and there are no signs of slowing down. In 2021, the global outsourcing market was worth USD 100 billion, which is USD 1.7 billion more than in 2019. Experts estimate that by 2027 this value will increase to USD 431.12 billion. The most popular outsourcing services are dominated by IT, Accounting, and Digital Marketing, with a total share of 64%.
There are many reasons why companies outsource IT projects. Unquestionably outsourcing saves money and resources, allows you to focus on your core business, and high-quality products enable you to gain a competitive advantage. There are many types of outsourcing, and research conducted by Deloitte shows that 88% of companies using outsourcing consider this solution beneficial for their business. Poland stands out on the outsourcing map because there are many valued outsourcing providers, and the final effect of the work is a product of high quality and reasonable price. Since Polish developers are among the best in the world, it is not surprising that Poland specializes in software development outsourcing.
The Problems of Outsourcing
Outsourcing has many advantages, which is why it is so popular. But of course, outsourcing can come with various difficulties. It is good to be aware of them because this will allow you to prepare yourself properly for cooperation with any outsourcing vendor. This article will discuss the most common outsourcing problems and tell you what to do or avoid them.
-
No Outsourcing Experience
You may feel lost if you start your adventure with outsourcing for the first time. Not knowing the best outsourcing practices and the whole process will certainly not make your task easier. Communicating your project vision to an outside team can also be a problem for some people. Lack of experience in outsourcing is a problem for many people and should not be underestimated.
SOLUTION
In this situation, the best solution is to find a trusted business partner who will guide you through the entire process, help you define the requirements, reduce the risk of project failure and propose appropriate project management tools. It's crucial that you find a company that specializes in the type of project you are looking for (mobile app development, web development, UI/UX services, etc.). The right partner is not only high-quality work but also proper communication, teamwork, and trust. Before hiring an outside firm, review their portfolio or ask for references from other clients.
Our article "Choosing the right software partner - guide" discussed the issues you need to pay attention to when choosing an external partner.
-
Choosing the Wrong Outsourcing Model
Outsourcing models should be selected according to the outsourced project's requirements, budget, scope, and deadlines. The wrong outsourcing model can negatively affect the quality of your product or service.
SOLUTION
You first need to know the existing outsourcing models to make the right choice. The most popular models include:
Fixed price model: Due to the pre-listed price, this model is ideal for short-term projects with strictly defined requirements. But if you want to extend the project's scope, something other than this model will work.
Time and material model: In this model, you only pay for the time and material costs, which helps to avoid hidden costs. This model is suitable for long-term projects.
Dedicated development team: This model involves hiring specialists or a skilled development team to fill the knowledge gap in the parent company. It is more profitable than having your team. Here you will have more control over your external team. Our article "Dedicated Software Development Team" describes what is worth paying attention to make the right choice.
Time zones can cause delays in communication and, thus, the inability to complete the project on time. When your outsourcing partner works in a different time zone, communication may be problematic because working hours only sometimes coincide most of the day.
SOLUTION
When choosing an outsourcing company, consider the difference in time zones. Ask a possible third-party vendor how such problems are solved in their company. Many professional outsourcing companies from Poland solve this problem through a shift work system of their employees so that contact with the service provider is maintained, communication continuity and constant contact around the clock are maintained.
-
Cultural Differences and Language Barriers
Despite seeing the world as a global village, language and cultural differences can make an outsourced project difficult. Openness to looking for new solutions, attention to detail, and focus on the result very often depend on culture. In addition, there are linguistic issues: in each country, there is a local vocabulary that cannot be found in official dictionaries. For some, a different accent can also cause communication difficulties. A survey conducted by the National Outsourcing Association in the UK clearly shows that as many as 75% of respondents stated that they would consider cultural differences more the next time they choose an external company to cooperate with.
SOLUTION
Before you sign a contract for outsourced services, assess the difference in the organizational culture of both parties and the team's level of command of a foreign language, taking into account the specificity of pronunciation or accent. Then organize training for your in-house team to make them aware of cultural differences that may affect the course of the project. An outsourced service provider can provide similar training for its team. When choosing an outsourcing partner, please pay attention to whether he has already successfully cooperated with companies from your country. Such experience is significant because it shows that the specificity of your country is not a problem for an external partner.
One of the main reasons for outsourcing services is the cost-cutting factor. And you can only accurately estimate costs by specifying the project's exact requirements, deadlines, resources, etc. It is necessary to clearly define the budget and scope of the project, as well as the conditions for incurring additional costs.
SOLUTION
If you need help defining the exact project requirements, find a company offering Discovery Workshop and outsourcing services. The purpose of such workshops is to verify your project in technical and business terms, as well as to select a technology stack and estimate the costs and duration of the project. In addition, remember to sign an outsourcing contract. Such a contract protects both parties rights and clearly defines the obligations and terms of payment. In our article "Contract for software development," we discussed in detail what such a document should contain.
-
Less Control Over the Project
Suppose cooperation with an external outsourcing company needs to be at the right level. In that case, you will have less control over the entire project. Such situations only happen in the case of cooperation with proven outsourcing companies. Still, it is worth being aware that such a problem may occur. Sometimes, some people believe that an external team can be left without supervision and control. Still, this approach cooperates with an external, proven company with a high work culture.
SOLUTION
You must be in constant contact with the external team. When discussing the principles of cooperation, the terms of reporting and communication must be agreed upon. Meetings summarizing the current level of work should be held on an ongoing basis. Their frequency should be adjusted to your preferences and the external company's proposal. Depending on the type of project and the stage it is at, such meetings should be held at least once a week, but our experience shows that many companies prefer daily review meetings.
In addition, remember that many project management tools make it easier to oversee the project. A proven supplier should offer you such solutions himself because they facilitate the work of both parties.
Ensuring data security is an issue that should always be kept in mind, regardless of whether an internal team or a third-party vendor carries out the project. Of course, outsourcing involves the need to disclose critical data such as databases and business strategies, the leakage of which can cause enormous losses for the company. Therefore, everything should be done to prevent such a situation.
SOLUTION
To be sure that the data is protected correctly, you should sign a non-disclosure agreement (NDA). You can also include Data Processing Agreements (DPAs) that outline how your data should be stored, processed, and transferred. Thanks to this, you can outsource the project implementation without worrying about leaking important information.
Summary
Outsourcing has many benefits, and it is worth taking advantage of them to gain a competitive advantage. If outsourcing is new to you, it's worth learning about it as much as possible. We have prepared a series of articles about outsourcing that will be helpful for both beginners and those who want to supplement their knowledge. As an offshore outsourcing company, we know that choosing the right partner is key to success because it guarantees high-quality projects and comfortable cooperation. If I would like to talk about it with our specialists, make an appointment for a free consultation at a time convenient for you.