6 Myths and Misconceptions about Outsourcing

By: Tanya Kobzar

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27.11.2020

IT outsourcing is a major business optimization driver. It has an annual growth rate of 4.5% that should see the industry hit the $397 billion mark by 2025. Even though 78% of businesses are happy with their outsourcing experience, many companies are still reluctant to cooperate with external specialists. They fear losing control and efficiency or getting low-quality products. 

 

The discourse is ripe with myths and misconceptions that we’ll try to dispel today, relying on our experience in Diversido – we have been helping different companies reach their business goals through outsourcing for 7 years.

Only Big Companies Outsource

According to Deloitte Global Outsourcing Survey 2020, the top reasons for companies seeking outsourcing solutions are cost (70%), flexibility (40%), speed to market (20%), access to tools and processes (15%), and agility (15%). These objectives are common for all businesses no matter their size. The COVID-19 pandemic and lockdown have impacted the processes of many companies, but small and medium-sized enterprises (SME) suffered the most. In this context, cooperation with outsourcing partners seems even more viable for SMEs.

 

As more business owners realize the benefits of outsourcing, the number of adopters grows. For now, every third small business (37%) relies on outsourcing to improve operational efficiency. Employers and employees get used to remote operations, so outsourcing provides an endless talent pool for many functions, from HR to accounting to marketing to software development. The number of SME owners looking for outside contractors is likely to exceed 50% by the end of 2020. Moreover, the outsourcing budgets may see an uptick as well, especially when it comes to IT outsourcing.

 

Outsourcing is an unbeatable solution for SMEs with no personnel budget to search, screen, and interview new team members. The same steps can be completed much faster and cheaper when hiring an outsourcing employee. Besides, the talent pool available for outsourcing is broader. It enables business owners to guarantee the perfect fit between the in-house team and the external workforce. After all, in 2018, getting access to skills unavailable in-house was listed as the top reason for outsourcing.

Outsourcing Means Poor Communication

Miscommunication occurs across all industries and business sizes, but it would be inaccurate to suggest that cultural and language barriers are impossible to overcome when dealing with outsourcing. In fact, it’s quite the opposite. 

 

Outsourcing companies have had decades to develop an efficient communication toolset and ensure that all project stakeholders are on the same page from the first contact to launch. These include video calls and interviews with individual team members to ensure a perfect fit. Moreover, at the project’s onset, both parties sign a contract outlining the rules of engagement and breach-of-contract penalties.

 

The communication framework documentation should also be among the initial paperwork signed by business owners and outsourcing vendors. This document should specify contact people on both sides, project management and time tracking tools, preferred communication tools, and reporting schedule. By setting up the rules of engagement from the get-go, business owners can prevent major communication mishaps and increase successful completion chances.

Core Functions Should Not Be Outsourced

Small businesses have been outsourcing accounting for decades, along with customer support and other auxiliary processes. Delegating core operations, like software development, is gaining ground, too. But many companies are still reluctant to outsource, fearing loss of control, security breaches, or plain incompetence.

 

Still, Deloitte and other industry experts claim that outsourcing remains a primary driver behind the business transformation, regardless of the industry. For instance, software development provides instant access to talented engineers capable of helping SMEs brave the digital transformation. An experienced team can perform advanced tasks, including:

  • Business analysis
  • Software architecture design
  • UI/UX design
  • Frontend and backend development
  • Website or app overhaul
  • Project launch
  • Ongoing updates and technical support

Outsourcing allows for the freedom to pick and choose among experts to perform specific tasks in cooperation with an in-house team. It also lets the external team take over the project from inception to launch and beyond.

Outsourcing Is Always Inefficient

Some business owners claim that they run into various efficiency-related issues when dealing with outsourcing vendors. However, all too often, these challenges are easy to overcome if SMEs do their homework and choose the right outsourcing partner. Combining this with the right approach to management will result in even better performance and cooperation across teams, both in-house and external. Here are project management best practices:

  • Task tracking platforms. Plenty of online solutions, like Asana, Jira, and Trello, provide teams with the necessary tools to break large projects into manageable chunks, assign the tasks, and follow their progress in real-time. Business owners can assess the current project status at a glance and quickly identify bottlenecks that hamper further progress.
  • Reporting schedule. Regardless of the chosen project management approach, SMEs should receive status updates and reports at least once a week. Regular video calls or emails should specify the work done, occurring problems, or changes.
  • Ongoing analysis. Every stage of the project should end with an in-depth look at the tasks completed, and difficulties met. Analyzing the issues throughout the cooperation will help prevent their repeated occurrence and increase efficiency.

Outsourcing Means Lower Quality

When relying not only on in-house efforts, businesses do not get constrained in terms of talent, expertise, materials, and capacity. Outsourcing provides access to unlimited human resources, knowledge, and skills. As a result, companies achieve the desired high quality of not only products but also the entire processes of creating these products. Business owners can now pick the best professionals to complete their tasks thanks to independent feedback aggregators, such as Clutch.co, and extensive service portfolios.

 

Additionally, a quality assurance (QA) framework should be in place before the project begins. Business owners should identify measurable quality parameters or deliverables and set up the ways to assess interim and final results. Every stage of cooperation should be rounded with quality assurance procedures, like manual or automated testing. The project should not go forward without achieving interim deliverables. This approach guarantees high quality.

Outsourcing Takes Away Control Over Business

The lack of control over the project and business is among the top outsourcing concerns for European companies. Incompatibility with the client’s requirements isn’t far behind. However, hiring an external team to supplement in-house efforts doesn’t necessarily mean zero control over the outcome. With proper expectation management and detailed documentation, business owners can retain maximum control and ensure understanding with an outsourcing vendor.

 

Mutual expectations should be discussed and listed at the onset of the project. Ensure they are realistic on both sides and do not contradict the vision and operational approaches of either party. Document any changes to the expectations and ensure they are followed.

 

Business owners and outsourcing employees should agree on a set of guidelines, rules, and problem-solving tactics from the start. If all else fails, termination of the partnership in the early stages can be much easier and cheaper than sticking with it despite the red flags.

 

Summing up all said above, we believe that communication is the key to successful collaboration, and processes of any complexity can be effectively outsourced with high-quality results for any size of the organization.

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