Knowing in advance what these pitfalls are can help you to avoid them, so we have provided a brief overview of each.
1. Underestimating the cost and complexity of managing relationships with outsourced partners.
Most companies greatly miscalculate the amount of time, money and talent it takes to effectively manage outsourced functions. Forbes states that “companies must invest in overseeing the partnership for the long term. This includes establishing a dedicated team of people, on both ends, to ensure compliance and adherence to agreed-upon service levels.”
2. Overestimating your cost savings from outsourcing.
Although labor costs may be lower in many countries, wages will continue to rise, as much as 10 percent each year, as is the case in India. A region can maintain highly educated leadership at a low cost for only about 20 years.
3. Choosing a country without having a clear understanding of your objectives.
Before selecting a country or service provider, first establish the cost of operating your business processes and set forth your objectives. Forbes recommends that you “study the expertise of each potential partner, considering proximity, costs, cultural and language barriers, telecom infrastructure and tax laws among other factors, before making a decision.”
4. Neglecting to communicate with your employees regarding the changes you’re planning.
Let your current employees know how much you have valued their service, and help them train for a new role within the company or elsewhere, to the extent possible. Be sensitive; don’t expect your employees to train the person who is to replace them.
5. Choosing a single source provider.
Whenever possible, distribute your risk by using a variety of service providers in different countries. You can also increase your company’s efficiency, by having providers in different time zones working around the clock on your projects.
6. Failure to provide retention programs for your best talent.
Competition for outsourced talent is intensifying, as more American and European companies send some of their work to offshore providers. The article’s advice? “Work with your service provider or offshore subsidiary–many American companies have established international development centers–to maintain your best assets.”