Outsourcing is one of the proven ways to increase business efficiency by transferring non-core functions and tasks to an external contractor, as well as the ability to focus core resources on the core business of the company. The stable growth of the market for these services is ensured by the demand from companies and the effectiveness of the approach to the division of duties. This is especially noticeable during times of crisis.
Outsourcing companies often transfer such types of work as accounting, legal support, custom software development, and recruitment. At the same time, new directions appear that affect the more conservative functions of the company, such as training and development of employees. Training outsourcing is the creation, maintenance, and development of a system for improving competencies in a company to meet business needs. Management, organization, and implementation of training programs are transferred to a third-party company. 10 typical problems are usually encountered when outsourcing.
Сhallenges of Outsourcing Software Development
1. Outsourcing vs. Outstaffing
One of the first pitfalls is the confusion between the concepts of “outsourcing” and “outstaffing”. Misunderstanding the differences between these two terms makes it difficult to correctly predict the results of the tasks, the amount of resources, and the costs expended. In some areas most often involved in outsourcing (accounting, law, link-building), there is a greater understanding of this process and successful experience of interacting with customers, in others, for example, in corporate training, there is less clarity.
In simple terms, outstaffing is the provision of “rent” of employees, where the client is directly involved in managing, setting tasks, monitoring employee performance, and assessing quality. Outsourcing, in turn, implies the complex execution of a specific business function or process, where the responsibility for the result lies with the company providing the service. The outsourcing company is engaged in the selection, provision, maintenance, and management of employees and other resources that are necessary to achieve the goals.
2. Market Research
Lack of proper market research or choosing a vendor without any market research and reference checks is one of the most common mistakes.
Most startups base their outsourcing decision solely on initial profitability. The cost factor indeed plays an important role, but it is far from the only one. Other important things are how your vendor performs in the market, testimonials and reviews, portfolio, and experience. It goes without saying that if you need to increase your technical team from 40 to 70 people on staff you should take your time and do proper research.
3. Communication Barriers
Before you start any cooperation, you should also discuss the main stages of work and approve all this in the contract. Your provider should understand exactly what you want to find the most efficient ways to realize your idea. Business owners often take advantage of outsourcing their web application development projects without having a full understanding of what needs to be done. If you have only a vague idea about your project, it becomes quite difficult to establish the exact requirements of others and assess whether the process is going right or not.
The challenge is to make sure that you, as the customer, have a good understanding of your project needs, can answer all questions, and provide useful support throughout the workflow.
Experts say that the importance of communication between parties cannot be underestimated. Here are a few things that a basic app development outsourcing company should outline:
- An accurate profile of your target audience;
- the core functions of your app;
- the technologies you want to use in app development
- The business goals of the organization;
- design details and examples of existing apps;
4. Regular Testing
You should test and monitor your project during the design process. It is vital to realize that your final project will meet expectations and function properly. The tester should be involved in the development from the very beginning. Otherwise, you are likely to encounter a lot of bugs in the final product.
Therefore, make sure that your software is properly tested. Whatever you create, testing should be an integral part of software development from the very beginning. Quality assurance should ideally be done by the same company that collaborates with you on your projects.
5. Misunderstanding the Cost of the Project
One of the main motivations for outsourcing is to reduce the cost of software production. In most cases, inexperienced developers charge lower rates. Here’s the golden rule: Always put experience above cost.
It’s wise to avoid agencies and software vendors that are too cheap. As a result, you risk poor quality or complete failure of your project. Moreover, remember to work out the details such as taxes, applicable duties, or third-party transaction fees.
6. Specifics of Partnerships
Avoid short-term partnerships.
Signing a short-term agreement implies that your software project is done in a hurry.
The danger here is missing important development details or not accurately representing your business goals. As a result, you run the risk of getting substandard software. In addition, such projects end up in one-offs rather than long-term business relationships. Remember, it is wise to look for long-term partnerships to outsource any software development project.
You, as the customer, benefit by building a strong relationship with the software. Plus, friendly relationships are good for business and partnerships.
You also need to make sure that your outsourcing partner meets your expectations on all criteria beyond the technical ones, such as legal and compliance risks, work ethics, cultural differences, time zones, and many other external factors that can affect the outcome apart from the competencies of the professionals. The most important factors are:
- Time zone difference: What happens when the connection fails? The problem is that nothing happens. When you live in different time zones, there is a problem with communication as most of the time your working hours are not the same. That’s why consider the time zone difference when choosing an outsourcing partner, as you will need to talk every day to make sure your expectations are in line with the results.
- Language and cultural barriers: Along with time zone differences come language and cultural differences. You won’t believe it, but attention to detail, innovation, and focus on the result are culture-dependent. A survey conducted by the National Outsourcing Association in the UK shows that over 75% of respondents said they would pay more attention to culture next time, citing the importance of national differences. Before signing a contract, assess the difference in organizational culture between the parties and the English language level of the outsourcing team, taking into account pronunciation, accent, etc.
7. Awareness About the Project Within the Company
Another mistake of a company that involves external performers to perform part of the tasks is the low awareness of its employees about changes in business processes.
At the start of the project, an information strategy must take into account all levels of the organization, regional offices, and agencies. The information content for alerting personnel should be adapted to all levels of management. The key task is to ensure that everyone has an understanding of the expected results, their roles and responsibilities, and the level of responsibility of the outsourcing company. Usually, the practice shows that the more meetings, letters, and announcements to the team about the transfer of part of the functions to outsourcing, the better.
8. Duplication of Staff
The next outsourcing risk is duplication of staff. In most cases, the outsourcing company will take part or all of the business process from an existing team within the client’s organization. Therefore, in order to reduce the cost of double payment for the same work, it is important to clearly define the areas of responsibility, and the process of regular feedback between the outsourcing team and staff members.
When implementing a project on outsourcing training for an industrial organization, the following distribution was made: programs for line managers and middle managers are given for outsourcing. The forces of the internal training department closed the rest of the programs, including the introductory course, safety precautions, and so on.
9. Continuous Feedback in Outsourcing
The lack of feedback from the outsourcing company is another pitfall that the customer’s business can crash against. The head of a company delegating part of the projects to outsourcing should understand the processes for their implementation, the presence of challenges and ways to overcome them, and suggestions on how to solve the problem more efficiently next time.
On the part of the contractor, the initiative should come from participating in the operational and strategic plans for the development of the customer’s business understanding the current picture of the activities of the partner and departments. This will allow not only optimal use and distribution of existing resources but also optimize them.
10. NDA risks
And the last piece of advice – be sure to predict NDA risks before outsourcing business processes. NDA (non-disclosure agreement) is an agreement on non-disclosure of confidential information, which is concluded between the customer and an external contractor. This is necessary because, in the current economic situation, commercially interesting information can be disclosed by those who have access to it and want to profit from its distribution. For example, transfer to competitors.
Summing up, it is worth noting that outsourcing allows you to increase the efficiency of the company’s service functions and is interested in partnerships with the customer, developing his business. The advantages of this type of service are also savings due to more efficient use of the resources and time of the internal employees of the company.
Efficient use of resources is when the employees of an outsourcing company are experts and professionals in their field, can and should cope with more complex tasks than full-time employees, and should be able to quickly expand or curtail activities that are required by the business. All this increases the flexibility of the client’s company. At the same time, outsourcing is now gaining popularity: new outsourcing products are emerging and it is possible to choose a company that will increase the efficiency of the customer’s business.