Why outsourcing fails: mistakes to avoid in business partnerships

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Are you asking yourself why outsourcing fails in companies? Here are three common mistakes you must avoid when choosing a software development outsourcing company.

Why outsourcing fails: mistakes to avoid in outsourcing partnershipsThe outsourcing model has become a very well-known instrument that provides companies a competitive advantage in the market. It is estimated that, in 2018, the global market for outsourcing was worth $85.6 billion. Its benefits are as wide as you can imagine; therefore, many companies around the world, from large factories to small businesses looking for a boost, are getting the most out of it.

However, any process that includes the introduction of a third party can also bring drawbacks if the model is not applied properly, leading to an economic vacuum or loss of profits.

Infographic related: 7 tips you should consider when outsourcing software

After years of offering outsourcing software services — and dealing closely with the ups and downs that are likely to appear in any contractual relationship — I consider it important to highlight some of the most common mistakes that are made when establishing such an arrangement. Whether you are currently outsourcing your IT and software needs, or you are assessing the idea of implementing it, take into account the following mistakes and make sure you avoid them.

1. Searching for the cheapest service

In the software industry, one of the most important elements in the cost of a company lies in the salary that professionals receive. This particular industry has a wage that varies according to the country and the region while, at the same time, is a very competitive labor market in terms of human resources, so it is not surprising that the best professionals go in pursuit of the best salaries in the market.

Why outsourcing fails: mistakes to avoid in outsourcing partnerships

However, if you are looking for quality service, it is essential that your first thought is not to hire the cheapest service. The reason is very clear: If you pay little, what you receive in return will be (generally) directly proportional to it. Although this is not an established rule, it is important to be careful and not fall into the trap of “low price, good quality”.

It is necessary to find a balance between both variables in order not to fall into poor quality services that, at the end, will imply extra costs, setbacks, and failures. From every point of view, redoing the work will always be more expensive than choosing a service from the beginning with prices according to the complexity of the project.

In a previous post, I went deeper into the problem of hiring cheaper services. Without a doubt, this is an important reason why outsourcing fails.

2. Staying in the comfort zone

When the outsourcing model is chosen, it is because a technological partner has been found that offers one or several solutions to certain needs; however, there may also be a need to advance, modernize, and innovate. But, how do you do it?

Many companies prefer to continue a contractual relationship with a third party that meets (basic) expectations without going any further instead of seeking to boost their business to another level with more advanced technologies that promote new business opportunities. In short, many prefer not to take any risk since it is “better the devil you know than the devil you don’t.”

Understanding how the industry works is a reality where its pace of evolution forces companies to ensure that they hire a partner who is at the forefront and that their professionals master the latest technological trends. Therefore, the call of the new times is for companies to get out of the comfort zone and look for allies who are chasing their same goals.

3. Ignoring incompatibilities between the parties

  • Thinking that it is not necessary to evaluate the supplier. It is important to evaluate the strengths of the service provider, as they may be in one or more fields. Find out about the background and experience in similar projects the company has, as well as its trajectory in the market and the expertise and profile of their professionals. This is useful information to get an idea of the quality and seriousness of the potential partner.

Why outsourcing fails: mistakes to avoid in outsourcing partnerships

  • Not paying attention to the project scope. Many times, things work well when it comes to small projects, but it is likely everything changes when you work on big projects. Ensure that the outsourcing company has experience in handling projects of diverse sizes and that it is able to offer a service that accompanies your business’s growth and keeps up with your needs and objectives.
  • Different corporate cultures. The cultures of the companies that establish the contractual relationship to work on a development, undoubtedly, must be compatible and always be aligned towards the same purpose. A company’s culture is made up of norms, policies, and values, so opposing cultures could generate conflicts and misunderstandings. It is key to consider the above and seek points of mutual understanding to avoid headaches that can eventually lead to relationship breakdown. It is indispensable that parameters and rules are established beforehand and that those involved are communicated in a clear way.

Why outsourcing fails in a few words

In short, in order to have a healthy bond between a provider and an organization, the following three aspects must be taken into account:

  • Cheap may not be the best, and it may cause you to fall into unnecessary cost overruns. At the end, this mistake can lead your company to spend more than if it had hired a provider with better service and quality.
  • Make sure your partner helps you innovate and keeps you up to date technologically. Leaving the comfort zone and not taking the leap towards innovation is a decision that will cost you in the future.
  • Find a partner that matches your company’s interests.

Hope I have helped with these points to generate a healthy, effective, happy, and lasting bond. Have you found another common mistake nobody should make?

Do not miss this: Do’s and don’ts in outsourcing software development

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