How to Handle Main Risks of Outsourcing

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During the last few years, outsourcing has become a vital part of the business sector. Turning to services of outsourcing companies to handle most various types of technological tasks more efficiently and painlessly is a trend in the modern IT world. But is it safe? In this article, we take a look at how to avoid outsourcing risks and get the desired results.

What do I need to know to handle main risks of outsourcing

So, what is outsourcing, actually? In a nutshell, outsourcing is a company transfering a part of its business processes and functions to a third-party organization located elsewhere, all of which is consummated by a contract. Companies in the IT field usually outsource the development, implementation, and maintenance of data systems that may provide a life support for the company’s whole infrastructure or for its specific part.

Outsourcing main risks

What are the advantages of outsourcing?

  1. The chance for the in-house team to focus on the main business tasks;
  2. Increase of effectiveness, speed, and quality of task completion;
  3. Proper risk management;
  4. Minimization of operational costs;
  5. Using skilled human resources without huge investments.

Indeed, outsourcing has many benefits, but it also harbors some risks which can hardly be avoided. Which drawbacks outsourcing has and how to handle them – we’ll deal with these question in the following article.

Risk No 1. Chance of not getting proper end product

The contractor’s inability to fulfill the contractual obligations is one of the major concerns here. One of the disadvantages of outsourcingis that every company will advertise itself and promise to provide the high-end result, however, not each vendor can live up to their words. In order to secure the deal, you can take the following steps:

  • Check the company’s portfolio – has it already completed projects that would be similar in scale and required resources to your concept?
  • Get in touch with the company’s clients – both present and the past ones, ask their opinion about the contractor.
  • Take a close look at the company’s website – does it actually impress you? If the contractor can’t create something valuable for itself, how is it going to come up with an outstanding solution for you?
  • Case studies are also a great source of information about the company. How does it approach challenges? What kind of problems has it solved in the past?

The most proper solution for this issue would be hiring a dedicated team with a proven record of successful work on and completion of complex projects. In this case, you can be 100% sure that the specialists will deliver the proper result.

Risk No 2. Loss of control over process

This is one of the most dangerous risks of IT outsourcing because it can cause serious issues in the future. The difference between what you want in the end and what outsourcing company builds might be significant because of limited communication and remote management.

Outsourcing loss of control

The solution for this issue is to be involved in the development process as the product owner. The modern methodologies such as Scrum allow to integrate managers of the client into the workflow. Here are a few other points for you to mitigate the risks:

  • Develop the processes inside your company that allow for efficient communication with the outsourcing partners, pick the tools and have the personnel trained accordingly.
  • Ask your contractor for access to the project management tools including report tracking and task distribution. Transparency is the key factor that allows effective control over the process.
  • Set a communication schedule so that you can keep in touch with your contractors on a regular basis.

Outstaffing (gathering a dedicated development team for your project) has proven to be a cost-efficient solution that allows you to retain full control over the development process and receive the anticipated result on schedule.

Risk No 3. Possible issues with geolocation

If the outsourcing partner works in a different time zone, you may face certain difficulties because the working hours of your in-house managers and the contractors will differ. This will definitely result in miscommunication and lack of coherence. Another concern about the IT outsourcing risks could be that the work ethics vary between cultures to a certain extent. In order to avoid problems of this sort, communicate with the contractor in advance to see if the initial contact goes smoothly and there are no obstacles to mutual understanding.

Outsourcing issues

Risk No 4. Security

Your outsourcing partner gets access to the confidential information that belongs to the client and it’s extremely important that this data is never disclosed to third parties. Signing an NDA (non-disclosure agreement) may protect you to a certain extent, but you should also make sure that it is actually enforceable in the jurisdiction.

Outsourcing security

Another indicator that this company is trustworthy could be projects in the medical field or those related to governmental agencies. If the contractor has a positive record in the area that involves sensitive information, they can be entrusted with your personal information as well.

Risk No 5. Hidden costs

Outsourcing companies will never perform any action outside the scope of the contract for free which means that you may be in for an unpleasant surprise. They may charge you extra when you don’t expect to spend a penny outside the planned budget.

Here is what you can do to overcome outsourcing problems:

    • Double check the scope of the contract and what it covers. Pay attention to how the company provides the estimates;
    • Discuss the way the costs are calculated and try to find a solution that is acceptable to the contractual parties;
    • Check if the project has any additional fees and ask for clarification.

 

Summary Considering all the risks that we overviewed and, sometimes, small chances of avoiding them completely, we can say the following: if you need access to developers’ expertise, outsourcing is sometimes not the best solution you could possibly find. In such case, finding an outstaffing or outsourcing partner may prove to be a more beneficial solution for you.
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