Businesses frequently outsource as an effective strategy to decrease cost, access improved software products, and bring in innovation. However, outsourcing comes with its set of challenges that could be difficult or intimidating to manage.
If you don’t prepare properly, you could lose control over the direction of your project, experience decreased quality in your products, and face hidden costs.
That’s why you shouldn’t just outsource and forget. Here’s a list of risks your business is likely to face if you’re not careful.
Nobody knows your business better than you and your workers. Every day, your team exemplifies the policies and practices that make your business what it is today. You recognize what to do and how to do it. This doesn’t merely show in your business’s success but in the team collaboration as well.
When outsourcing, you lose some of the managerial oversight to the outsourced company. Initially, this can be unnerving because it implies losing control and insight into your project. After all, outsourcing implies that important decisions can take place without your direct oversight.
Remember, issues arise when providers and businesses aren’t working to attain similar goals. This could jeopardize or doom your project even before it gets the chance to get off the ground.
When tasks formerly conducted by company personnel are allotted to outsiders, over whom the company has minimal or no control, quality might suffer, disruption of production schedules might occur, or contractual agreements might arise.
If outsourcing contracts incorrectly or inappropriately detail work arrangements, outsourcers might be tempted to behave opportunistically. For instance, they might charge unwarranted or unforeseen price increases to exploit the business’s dependency.
Geographic distance could also worsen control issues, especially when the vendor is offshore. Monitoring productivity and performance can be challenging and communication and coordination might be difficult with offshore vendors.
Moreover, the incapacity to engage in face-to-face dialogues, explore or brainstorm nuances of obstacles could cripple your project’s flow. The key to handling this risk is by understanding that your company and the vendor should equally manage the outsourcing project.
Begin by enhancing the communication with the outsourcing team and ensure that the in-house team understands the manner in which to manage the outsourced project. Before giving up control to an outsourced company, consider what you are and aren’t ready to give up to the vendor.
It’s also important you develop a management plan detailing how you want the vendor to manage your project and collaborate with you regarding the updates. The plan should comprise:
- Timelines for the meetings
- When and how the vendor reports progress issues and updates
- Protocols for changes to operational and business goals, particularly if either party can’t meet those objectives
After hiring an outsourcing company, consider placing an employee in their organization temporarily. This will give you a direct link to the provider, enabling you to understand how they work.
The insinuations of a quality failure from a global source are more severe compared to a quality failure from a domestic one. To help reduce this risk, consider preparing comprehensive product specifications for suppliers and insist on autonomous quality control inspections.
Businesses pursuing innovation tactics identify the need to recruit highly competent individuals, give them a long-term focus, minimal control, and evaluate their performance for positive impact. When you outsource certain services, for instance, IT, innovation impairment might occur.
Additionally, when you hire external providers for the purposes of decreasing costs or adjusting to market oscillations, the interruption of long-standing work patterns occurs. This might affect your business’s corporate culture adversely. Therefore, you should watch for this risk when you outsource.
While outsourcing offers numerous benefits to any business, this strategy comes with its share of risks. Consequently, it’s imperative you understand the challenges you’re likely to face in order to develop a plan.
Dailey Bookkeeping Services is a Xero Certified BRONZE Partner and a QuickBooks Online Certified Advisor, so if we can help you with your outsourcing needs, just give us a call, we would love to help you! The owner, Jacqueline Dailey is a Certified Public Bookkeeper, an Advanced Certified QuickBooks and QuickBooks Online ProAdvisor, a Sleeter Group Certified QuickBooks Consultant and a Xero Certified Bronze Partner. We work remotely so we can work with any company located in the U.S. If we can help you with this process or provide you with custom reporting, please give us a call. If we cannot help you, we will refer you to someone who can! Feel free to visit our website at http://www.