IT outsourcing is becoming mainstream across all industries with about 70% of companies choosing to outsource because of its cost-effectiveness.
Businesses from Fintechs, Logistics, Healthcare, and Manufacturing to retail, handle their IT infrastructure through outsourcing services. Consequently, the IT outsourcing market accounted for $460 billion in revenue in 2023. And growing at a rate of 10.99%, the market is projected to reach a market volume of $777.70 billion by 2028.
These numbers clearly indicate how outsourcing has become an integral part of the modern business landscape. Talking about the benefits of outsourcing might be simple, but is it easy to leverage all of its perks without any challenges?
Well, many aspects of the business may cause potential IT outsourcing problems. For example, quality standards, communication, reliability, location, and more. On the other hand, not knowing how to solve these outsourcing problems can cause enterprises a big loss.
Therefore, we have crafted this guide, curating the most common challenges of outsourcing. So you won’t have to face these IT outsourcing problems. Without further ado, let’s dive in!
Level Up The Business: Navigate the Top 10 Outsourcing Problems and Their Smart Solutions
Outsourcing can be a major turning point for your business, delivering internal efficiencies, domain expertise, and possibly cost reductions. But the fact is that nobody likes to exchange one set of trouble for another. Hence, let us explore the top 10 outsourcing problems your businesses could face with their possible solutions for outsourcing.
1. Objectives Not Met – Clear Communication & Contract Terms
Problem: Internal IT and outsourcing app development agencies have different interpretations of your goals, leading to missed deadlines, unmet expectations, and wasted resources.
Solution: Clearly define objectives in simple, measurable terms.
Unspecified expectations can be a serious issue in outsourcing IT services. To ensure you and your outsourcing partner are on the same page, clearly state your project objectives involving outcomes, deadlines, and quality standards.
It can be beneficial for you to consider drafting a detailed contract that includes the confirmed scope of work, cost breakdowns, and methods for resolving potential differences. This can save your time, ensure everyone is on the same page, and promote a smooth and successful project outcome.
Having a constant informational flow and following up regular checks of updates ensures the project is going in the right direction. By explicitly defining all expectations and ensuring they are well-understood by all, you can alleviate the possibility of unmet expectations.
2. Lower Quality Services – Regular Quality Checks
Problem: The quality of service delivered needs to meet your expectations, impacting your brand reputation and customer satisfaction.
Solution: Set clear quality standards from the outset. In terms of outsourcing, there’s always a concern about the quality of the service being compromised. To overcome this, a rigorous practice of frequent quality audits is a necessity. These reviews ensure the outsourced providers deliver work that complies with the high standard your business expects.
It’s necessary to state your quality expectations from the start and clearly define and explain this requirement to the outsourcing provider. Such expectations should be added to the contract terms to emphasize their priority. With this, the provider shall be held accountable for quality management, and any loopholes in the timelines can be resolved.
3. Cultural and Language Differences – Understand Cultural Oppositions
Problem: Did you know? Around 30% of companies face communication problems in outsourcing because of cultural and language barriers.
Solution: You can invest in intercultural training for both your internal and outsourced teams.
Effective collaboration can be facilitated by cultivating mutual understanding and respect. You can also promote cultural compatibility by establishing mutual understanding across your internal and outsourced teams, ensuring reliable collaboration.
If the language is a major barrier, consider options such as having a translator or using language translation software. Adopting proactive management of cultural and language barriers and engaging in work through a productive, harmonious relationship with your outsourcing provider will succeed.
4. Confidentiality Breach Risk – Strong Security Measures
Problem: Sharing confidential data with a third party can be intimidating. Such cases can jeopardize the privacy and confidentiality of your sensitive business information.
Solution: You must validate that your outsourcing agency adheres to strict security rules and has robust data security protocols for its clients. Moreover, you can secure your data confidentiality with comprehensive non-disclosure agreements (NDAs) and regularly monitor security compliance.
5. Poor Control – Existing Governance
Problem: Outsourcing might seem like handing over control, but it doesn’t have to be.
Solution: You can overcome this outsourcing problems by establishing a firm governance model. A model that involves a robust communication system, regular progress reports, and monitoring of KPIs. Additionally, employing a project manager who oversees the process and execution can help manage the control over your project.
6. Hidden Costs – Complete Cost Analysis
Problem: The biggest trap in outsourcing is often the hidden outsourcing costs, those sneaky expenses that creep up beyond the initial price tag. Hidden costs often creep in later, like unexpected management fees, dispute resolution charges, or travel expenses. These can disrupt your budget and derail your project.
Solution: Therefore, you should conduct a thorough full cost analysis before diving headfirst into IT outsourcing. List out outsourcing agencies and explore their engagement models. What does each engagement model include? Will there be additional costs for iterations?
Analyzing different pricing models at different agencies will help you find the common ground for fulfilling your project requirements under budget. Development hourly rate play a crucial role in hiring that varies from country to country. It would be wise for you to choose an Indian outsourcing partner since it will be an economical and clever solution without compromising quality.
7. Choosing the Wrong Outsourcing Model – Assess Your Project Needs, Choose Wisely
Problem: Choosing the wrong engagement model can result in a scattered development process. In the worst-case scenario, you might not be able to accomplish the project on time or go over budget.
Solution: That’s why it’s necessary to understand your project requirements; whether you need a long-term IT outsourcing service provider or just to complement your existing team. Fixed price, time & material, and a dedicated team are the most common engagement models. You can choose one based on your project requirements.
8. The Outsourcing Partner Flexibility: Detailed Outsourcing Company Assessment
Problem: The outsourcing partner’s unwillingness to implement the changes as per your project needs can be the greatest obstacle to the smooth functioning of projects.
Solution: While collaborating with the outsourcing partner don’t just focus on technical skills! Before signing, conduct a thorough assessment that includes their adaptability. Ask about their experience handling changes in scope, budget, or goals. You can discuss your company’s dynamic nature and ask about their flexibility in adjusting their approach. Look for partners who use flexible methodologies and are open to discussing your specific needs.
This assessment helps you identify a company that aligns with your vision and can adapt to your ever-changing business landscape.
9. Differences in Time Zones – Efficient Scheduling
Problem: The time difference between you and your outsourcing provider may lead to difficulty in communication and coordination. This barrier, however, can be met through intelligent scheduling and the application of suitable technologies.
Solution: It’s important to have an overlapping work schedule that is comfortable for both. Such an overlap creates an opportunity for live interaction and teamwork, significantly increasing the project’s productivity and efficiency.
Additionally, aligning project management tools that provide real-time updates can be fruitful. These tools provide a common ground for monitoring progress, setting deadlines, and keeping in touch despite time differences. By employing this intelligent scheduling with tech use, you will deal with time zone differences and other potential outsourcing issues efficiently and, thus, make your outsourcing relationship efficient.
10. Employee Morale — Transparency of Communication
Problem: The outsourcing process is a crucial reason for anxiety among in-house employees, which may result from concerns about the security of their jobs or higher workloads.
Solution: To avoid such anxiety, you should adhere to the policy of open discussions with your employees. Explain reasons for outsourcing to your employees and highlight the advantages it brings to the company, including cost reduction and increased efficiency.
It’s important to explain how outsourcing can create opportunities to prioritize tasks with greater importance and meaning within a business. With this transparency, you can tackle their concerns, meet the expectations of your employees, and make a cohesive and harmonious workspace during your outsourcing project.
Now that we’ve explored the top 10 challenges of outsourcing and their solutions, the big question is: Should you build your app in-house or outsource it? We’ll break down the pros and cons of each approach so that you can choose the best fit for your business goals and growth plans.
Difference Between Inbound Vs Outsourcing Development:
Every business faces a critical decision: to start in-house inbound development or outsource the development process. This choice avoids navigating the complex roads of software development.
The decision is also based on the differences between each option, the advantages and disadvantages of the project outcomes, team dynamics, and the budget.
Let us compare both approaches side-by-side to get a clear idea.
| Aspect | Inbound (In-House) Development | Outsourcing Development |
| Control | High control over project processes, team dynamics, and decision-making. | Less direct control over the development process to the outsourcing partner, depending on the agreement. |
| Communication | Direct and immediate communication within the internal team. | Communication can be challenged by time zones, cultural differences, and remote collaboration. |
| Cost | Potentially higher upfront costs due to salaries, benefits, and infrastructure. | Cost-effective in the short term, reducing overheads related to hiring and infrastructure. |
| Talent and Expertise | Access to talent is limited to geographical location unless remote positions are offered. | Access to a global talent pool, often with specialized skills suited for specific projects. |
| Flexibility and Scalability | Changes and pivots can be managed quickly within the team. | Flexibility depends on the contract terms and responsiveness of the outsourcing partner. |
| Quality | Quality standards are internally set and managed, allowing for consistent outputs aligned with company values. | Quality can vary and requires thorough vetting and continuous monitoring of the outsourcing partner. |
| Time to Market | Can be slower due to the ramp-up and development within the internal team. | Potentially faster, leveraging the outsourcing partner’s ready-to-go teams and expertise. |
For business owners, the choice between in-house development and outsourcing comes down to balancing control, cost, flexibility, and talent acquisition. Make a strategic decision aligned with your organization’s long-term vision, internal operations, and specific project goals.
Conclusion
Now you understand the top 10 challenges of outsourcing and how to overcome them! Successful outsourcing starts with careful planning, proactive risk management, and choosing the right outsourcing partner. To fuel your growth and efficiency, leverage outsourcing solutions. However, this requires understanding your needs, thoroughly assessing potential partners, and fostering open communication.
If you still have queries about how to find the right IT outsourcing company, feel free to connect with our expert. Schedule a consultation at your convenience and benefit from our outsourcing experience services to streamline your business operations.
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