Why IT Outsourcing Fails and How to Avoid its Pitfalls

For many companies outsourcing is an easy way to achieve quick product development and sometimes that’s where they dig a pit for themselves. Cloud based service provider start-ups like Slack and StudyTube have risen by IT outsourcing services and in fact, managed to inspire folks globally. However, we should also consider that a lot of companies have also collapsed due to bad IT outsourcing experience giving the contemporaries a lot of learning to take away. Below are some cases which have a tale to tell:

IBM: The Mega Disaster of Outsourcing  

In December 2007, the state of Queensland, Australia partnered with IBM to make an application that manages payrolls for Queensland’s health department for $6 million by mid-2008. After a few months of working on the project, IBM discovered several alterations and technical issues which cost Queensland $27 million. The deadline was extended by many years and in the meanwhile, thousands of staff failed to receive a paycheck while others were falsely paid. The cost increased by 16,000% of the expected cost. Queensland was fiercely angry thus sued IBM for heavy losses and banned them to work on any other government projects henceforth.

What goes wrong with outsourcing Companies that causes fallout?

Surprisingly, the failure rate of outsourcing companies that provide IT services is also pretty high. There are many circumstances which result in the dooming of an outsourcing partnership. Undoubtedly, managed competency centres can bring huge success, but not to ignore the fact if not done right; outsourcing can dupe you not only of your money but trust as well.

Bad Outsourcing Causes Cyber Risk

According to Trustwave Global Security Report on 450 global data breach investigations 2013, the third-party component of IT system administration was 63% responsible. The report also revealed that cybersecurity deficiencies have allowed hackers to easily exploit their system IT support. However, this doesn’t mean at all that outsourcing is totally hazardous to companies. As said by John Yeo, Trustwave’s European director “We are not saying outsourcing is inherently bad, but organizations that do get breached have probably made some bad outsourcing decisions.”

Organisations are embracing disruptive outsourcing technologies such as cloud and robotic process automation (RPA) – 2018 Global Outsourcing Deloitte Survey

• 93% of organizations deliberatively consider or adopt cloud solutions.
• 72% of organizations prefer RPA solutions.
• 70% of respondents believe their service providers have a reasonable or advanced ability to implement disruptive solutions.

How to combat these problems and succeed?

Be it a start-up or an established firm, outsourcing has become a go-to solution for businesses of vast expertise.

• Clear Project Roadmap

Seems simple but many companies aren’t clear initially about their demands and expectations from their outsourcing partner which leads to project chaos and confusion. Mention your requirements in the writing upfront. Keep it simple, accurate and informative.

• Screen the Outsourcing Vendor Inside Out

Certainly, your outsourcing partner isn’t working at your space but it is like any other employee. When choosing, analyse different vendors, check portfolios, and ask for a quote, screen and interview to clear out any loopholes.

• Pick Effective Tools

Variation in geographical boundaries, culture and time zone creates hurdles in the entire outsourcing model. Don’t let this happen by choosing from the right and collaborative tools like Azendoo, GitHub, Asana, Redbooth, and Proofhub to keep a track of your project from miles away.

• Communication is the Key

35% of companies intentionally or secretly expect innovation from their outsourcing agreements and rests are unsure to define the concept, according to Deloitte reports. The biggest roadblock in the outsourcing process is the communication gap. Instead of assuming things and planning in your head, it is vital to express your expectations to the outsourcing partners.

• Protect Intellectual Property

You never know when someone is lurking around your intellectual property to harm your organizational credentials. This is one of the major reasons why companies fear partnering with outsourcing companies. Register your copyright, patents, and trademark. Adopt legal framework along with the certifications like Non-Disclosure Agreement (NDA), Non-Compete Agreement (NCA), API access, and server access.

Outsourcing is a convenient and affordable way to accomplish product development without comprising the quality but not in every case. Ironically, the success rate of outsourcing is lower than its failure; the reason being poor communication, conflicting interests, and unrealistic expectations. But, if done right and deployed shrewdly, it can bring miracles to the business. The amazing part is you can avail a vast talent pool, share crucial risks, reduce costs, work around the clock and focus on core expertise.