Before you hire an outsourcing provider, you should know that outsourcing problems can make or break your company's success.
While the promise of reduced costs makes outsourcing seem attractive, it's not without its pitfalls. Mismanaged outsourcing can lead to a multitude of issues, from diminished product quality to ballooning operational costs and potential legal complications.
As you consider outsourcing for your company, you must be aware of these potential challenges. Understanding the problems that often accompany outsourcing arrangements can equip you with the knowledge needed to make informed decisions, navigate risks and find talent solutions that work for your company.
Whether you're a seasoned business veteran considering a new outsourcing strategy, or a tech startup founder looking to extend your team with global talent, this guide will address the most prominent outsourcing challenges and, more importantly, how to avoid them.
The 10 biggest challenges with outsourcing
Outsourcing – it's more than just a buzzword. It's a strategic move many companies, big and small, are making to juggle their increasing workload, keep costs in check and tap into a worldwide talent pool.
But let's pump the brakes a bit. While outsourcing does have its benefits, it's not without its fair share of hurdles. And these aren't small speed bumps but more like full-blown roadblocks that can seriously sidetrack your success.
Let's delve into these potential outsourcing problems before you make your next move.
1. Shortcomings in skills and expertise
A common issue with outsourcing is the discrepancy between expected and actual skill levels. You might find that the outsourced team lacks the necessary experience or expertise to deliver the desired results.
The consequences of this skills gap can be substantial. Your meticulously planned timelines get stretched as you grapple with delays. The expected cost-effectiveness of outsourcing begins to fade as revisions and reworks pile up. But what's even more concerning is the quality of work. The final outcome is lackluster.
In an era where customer expectations are sky-high, and the smallest flaw can lead to a barrage of criticism, subpar results can be a huge setback. Your reputation could be at stake, and the trust you've built with your clients could be jeopardized. This potential lack of experience or skills is a serious outsourcing problem that could turn your strategic move into a blunder.
2. Lack of control
Delegating tasks to an external team is an inherent part of outsourcing. However, with that delegation comes a trade-off: surrendering direct control. Your control over the daily nitty-gritty, your ability to make real-time adjustments, and your power to enforce your company's quality standards dwindles. Suddenly, you're relying on third-party professionals who may not have the same level of commitment to your business goals as you do.
The lack of control can manifest in various ways. Maybe the team isn't implementing feedback as you'd like, or they're deviating from your preferred processes. Perhaps they're not prioritizing tasks according to your company's needs or missing deadlines without valid reasons. These issues can create friction, leading to project delays and quality compromises.
In worst-case scenarios, the outsourced team might make a serious error or oversight due to a lack of direct supervision. This could have significant repercussions for your business, from dissatisfied clients to regulatory violations.
3. Lack of transparency
When you work with an outsourcing company, your main point of contact is typically an account manager or a representative. They are the ones who relay your instructions, feedback, and concerns to the team actually working on your project. But here's the catch - you never get to interact with this team directly.
You often don't know who's assigned to your project, their qualifications, or how they manage their tasks. You have no insight into how they interpret your directions or how much time they dedicate to your project. In short, you're blind to the day-to-day operations of your own outsourced function.
This lack of transparency can create a disconcerting sense of uncertainty and helplessness. You might also face unpleasant surprises, like unexplained delays, unexpected costs, or subpar work, all stemming from the operations you have no visibility into. The bottom line is a lack of transparency can make outsourcing an opaque nightmare and an extreme exercise in trust.
4. Legal and contractual hassles
Outsourcing often involves working with teams in different countries, each with its unique legal framework. This international collaboration is like navigating through a complex labyrinth of rules and regulations.
Perhaps you're dealing with intellectual property rights, where laws vary dramatically from one jurisdiction to another. Maybe it's labor laws - standards for working hours, benefits, or termination clauses could differ from what you're used to. It could even be tax laws, data protection regulations or industry-specific compliance requirements. In short, the potential legal hassles are numerous and diverse.
These challenges become even more acute when disputes arise. Dealing with a contractual dispute when both parties are under the same legal system is hard enough. Imagine doing so across different legal systems, where norms and enforcement mechanisms could be worlds apart.
In the worst-case scenario, unintentional violations of these laws could lead to hefty fines, legal proceedings or damaging reputational loss. Your strategic move towards outsourcing could suddenly turn into a nightmare of legal complications.
5. Cultural and language barriers
When you outsource, your work is handed over to a team in a different part of the world. They might speak a different language and follow cultural norms that are entirely foreign to you. These differences can introduce many challenges, often subtle but with significant impact.
Language barriers can lead to miscommunication, with instructions lost in translation or misunderstood technical jargon. Even if you all speak English, differences in accents, speech patterns and colloquialisms can create a communication gap.
Cultural barriers can pose even trickier problems. Different cultures have unique ways of approaching work. Attitudes toward hierarchy, decision-making, punctuality, negotiation, and feedback vary widely. Unfamiliarity with these cultural norms can lead to misunderstandings, disagreements and even hurt feelings.
These cultural and language barriers can cause confusion, slow progress and even impact the quality of work. Your outsourcing journey might feel like a constant uphill battle, filled with missteps and misinterpretations.
6. Communication issues
In the era of the Internet, instant messaging, and video conferencing, communication should be easier than ever. But reality often proves otherwise. Despite our hyper-connected world, communication challenges remain towering obstacles to successful outsourcing.
Time zone differences can be the first hurdle. Your workday might be winding down just as the outsourced team's day is beginning. So, when you need urgent clarifications or immediate feedback, you might find yourself stuck in a cycle of 'message tag,' waiting hours for responses.
Communication styles can further exacerbate these issues. Some cultures lean towards direct communication, while others prefer a more indirect approach. Misinterpretations can arise from these differences, causing confusion, delays and unnecessary friction.
Then there are the technological barriers. Although we're surrounded by numerous communication tools, not all of them might be available or preferred in the country where the outsourced team is based. There might also be connectivity or tech proficiency issues, further hindering smooth communication.
These issues can create a significant lag in your project's progress. Critical updates get delayed, feedback becomes a game of broken telephone and alignment starts to slip through the cracks.
7. High and hidden costs
While outsourcing is often seen as a cost-saving measure, it can sometimes end up being more expensive than expected. Hidden costs can add up quickly.
One major contributor to these unexpected costs is managing the outsourced team. It takes a lot of time and resources to oversee the team's work, ensure they meet deadlines and provide the necessary guidance. And if the team lacks the required skills or experience, you could find yourself investing in training and development, further driving up costs.
Then there are the costs associated with poor-quality work. Subpar results might necessitate reworks, leading to project delays. The cost of these delays can quickly pile up in terms of wasted time and missed opportunities.
Moreover, other hidden costs could creep up, such as legal fees, translation services, travel expenses for meetings, or the cost of communication technology. Additionally, outsourcing companies are known to tack on hidden fees throughout the process. Though seemingly minor, these expenses can add up, turning your cost-saving strategy into a financial pitfall.
8. Poor employee treatment
When discussing the challenges of outsourcing, one aspect that often slips under the radar is the treatment of outsourced employees. You may never meet these individuals, but their well-being is directly linked to the success of your outsourcing venture.
Poor employee treatment can manifest in various ways. The outsourced staff could be underpaid, overworked or working in substandard conditions. They may not receive benefits or have job security. This not only affects their motivation and productivity but can also significantly impact their quality of work.
Moreover, how a company treats its employees - even outsourced ones - tends to get around. If the outsourced workers are mistreated, it can negatively affect your company's reputation. In an era where social responsibility and ethical conduct are increasingly important to consumers, businesses can't afford to overlook the welfare of their outsourced workers.
It's crucial to remember that while outsourcing involves contractual agreements and financial transactions, it also involves real people.
9. IP protection and data security issues
In this digital age, data is the lifeblood of businesses. Intellectual property (IP) and proprietary information are valuable assets that give you a competitive edge. But when you outsource, you share this sensitive information with the outsourced team, potentially exposing your company to the risk of IP theft or data breaches.
Consider a scenario where your outsourced team is working on your next-gen product. They have access to your blueprints, designs and proprietary algorithms. If this data falls into the wrong hands, it could result in substantial financial loss and damage your market position.
Furthermore, data security breaches can lead to a compromise of sensitive customer information. This affects your customers and can lead to regulatory penalties and irreparable reputational damage.
Remember, protecting your company's sensitive data is not just about legal compliance; it's about safeguarding your business's future. With outsourcing, vigilance and caution are your most effective shields.
10. Quality issues
The above outsourcing problems, individually or collectively, often culminate in one major issue: a drop in the quality of work. When your outsourcing journey is marred by skill gaps, lack of control, opaque processes or poor communication, the ultimate casualty is often the quality of the product or service you deliver to your customers.
When the outsourced team isn't up to the mark, you can't oversee the project effectively, or communication gaps lead to misunderstandings, the results will likely be below par.
Quality issues aren't just about the immediate project at hand. They can have a ripple effect on your entire business and can impact your bottom line. Reworks, delays and dissatisfied customers can all lead to financial losses. And let's not forget the time and effort you'll need to put into damage control and reputation management.
How to avoid outsourcing problems: There's a better way
While outsourcing can provide many benefits, the potential issues that can arise are too significant to ignore. But what if there was a way to experience the benefits of outsourcing without the pitfalls? A solution that enables you to:
- Get skilled talent
- Maintain control
- Have transparent operations
- Bypass legal hurdles
- Transfer knowledge effortlessly
- Overcome cultural barriers with ease
- Establish clear communication
- Have predictable costs
- Ensure fair employee treatment
- Protect your data and IP
- Maintain quality
Enter an Employer of Record (EOR). EORs are companies with legal entities in countries around the world that hire employees on your behalf. They handle the backend HR hassles, like payroll, taxes and compliance, but unlike outsourcing, you maintain control of the day-to-day.
Transparency and control, often sacrificed in traditional outsourcing, are restored in this model. With an EOR, you can supervise your team, manage projects and oversee processes, ensuring alignment with your business goals.
Navigating the legal labyrinth of global employment can be a significant challenge in outsourcing. However, an EOR handles all the legal and compliance aspects of global employment, insulating you from potential legal and contractual issues.
Cultural barriers, communication gaps and ineffective knowledge transfer are also mitigated. EORs, with their global reach and expertise, not only understand cultural nuances but also establish clear communication channels, ensuring smooth interactions and effective knowledge sharing.
Predictable costs, fair employee treatment, data security and quality assurance are other advantages of using an EOR. They manage the financial aspects, ensure your team is treated fairly and safeguard your sensitive data.
(Learn more about the differences between outsourcing and EORs here.)
Avoid the issues of outsourcing with Outstaffer
EORs are the answer to many outsourcing problems. By choosing an EOR like Outstaffer, you get all the advantages of a global team without the headaches of traditional outsourcing. It's a strategic solution to a strategic challenge, ensuring your journey into global employment is smooth, effective and profitable.
Are you ready to take the leap and conquer the global talent market without the pitfalls of traditional outsourcing? At Outstaffer, we make it easy to find, hire, equip and manage top talent from around the world in just a couple clicks. Plus, with our #WorkFromAnywhere technology, like Managed Laptops, Employee Monitoring, and VR Workplaces, we keep your data safe and your team productive and connected.
Want to learn more? Reach out today for your free demo.