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Outsourcing Pitfalls and How to Avoid Them

Aug 3, 2008
As with any business venture, outsourcing has its own unique set of risks and rewards; keep in mind that with a little research and careful planning, most hazards can be easily avoided. Don't let the possible pitfalls deter you from an outsourcing situation that could greatly benefit your company in the long run! Instead, learn how to identify the most commonly made outsourcing mistakes and gather the tools necessary to sidestep them. But what are the mistakes most frequently made by U.S. companies when outsourcing their business processes (Business Process Outsourcing)? And what steps can you take to lessen these risks and ensure that outsourcing works for you?

One of the most obvious risks in any outsourcing situation is an inability to meet cost reduction expectations. Many companies have entered blindly into outsourcing without considering the real costs of such an enterprise, expecting it to provide a quick fix for their financial problems. While outsourcing is an excellent way to trim your budget, you must consider the fact that, in the initial stages, savings will neither be instantaneous nor incredibly dramatic.

According to SearchCIO, most organizations save 15-25% in the first year that follows implementation of outsourcing, and up to 35-40% by the third year. Savings will be considerable, yes, but not outrageous --if you look to outsourcing to single-handedly rescue a failing operation, you're likely to be disappointed!

A lack of sufficient data protection on the part of both companies involved is another common pitfall of outsourcing. From the personal information of patients or customers to your business's invaluable intellectual property, make sure that you have strong privacy standards and security requirements in place before any problems with loss or theft of sensitive data have a chance to arise. When investigating outsourcing providers, ask about their level of commitment to data protection; choose one that is up to your company's security standards, and make certain that the issue is addressed and agreed upon in your contract.

Poor planning, that persistent boogeyman who haunts any number of failed business ventures, can lead to a huge array of problems that may be easily avoidable with just a little forethought. For instance, don't make the mistake of ignoring the process of risk analysis prior to outsourcing. If you do, you'll run the risk of making any number of mistakes, from outsourcing too early to selecting a less-than-optimal provider to work with to attempting to adhere to an inefficient business model.

Another aspect of poor planning that can derail your outsourcing venture is a contract that fails to account for all of the different aspects of the outsourcing situation. One common mistake is assuming that an outsourcing provider's price for any given project is fixed; in fact, projects usually increase up to 15% in price during the development process. Failure to recognize this possibility is exactly the kind of setback that can needlessly throw off an entire outsourcing operation. Instead, ask questions, inform yourself and make sure the contract has your interests covered.
About the Author
Adir Le writes on the topics of customer service outsourcing, call center outsourcing, and many other topics related to business process outsourcing.
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