The Top 4 Failures in Outsourcing Implementations

There is a growing trend among companies to outsource a completer project or a part of that project to a second or even third party. The outsourcing, no doubt, offers a lot of benefits, such as it is cost effective and provides two different entities to share their expertise and experience with each other in order to produce high quality goods or deliver quality services. However unfortunately, most of the outsourced projects fail or go well beyond budget effectively killing the purpose of outsourcing them. The biggest reason of these failures is that both the parties involved fail to realize the importance of change management in outsourcing.

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Purpose of Outsourcing:
As discussed above, the purpose of outsourcing projects is to decrease costs while exploiting the expertise and experience of the second or third part in order to get a high quality final project. In modern world, the IT industry is the biggest outsourcer in the world and one software project might be completed by different independent individuals or organizations that work on different parts and aspects of that project to finally complete that project. Outsourcing is also common in other industries most important of which are auto manufacturing where companies like Toyota have garnered special importance in this regard.

Three Cs of Outsourcing:
Three Cs of outsourcing stand for cost, capacity and capability. The biggest advantage of internationally outsourced projects is that it combines the capabilities and capacities of internationally recognized agencies or firms when they partner each other in a hope to launch a project that is not only of the superior quality but can penetrate the public as well in order to generate profits for them. Similarly, the outsourcing party attempts to considerably reduce its cost by reaching a contract with the any other firm to complete the project on their behalf.

Traditions in Outsourcing:
However, most of the internationally outsourced project suffers from a miserable final fate. In this regard, the ‘traditions’ play the most important rule to call upon the downfall of the projects that are started with great zeal and zest. For instance, the company outsourcing the project is usually very enthusiastic about the progress and final outcome but the other party fails to respond with equal enthusiasm resulting in continuing mistrust and disharmony between both the agencies.

Similarly, the outsourcing company develops a false sense of security assuming that the company to which the project has been outsourced will take after all the matter itself. As a result, the outsourcing company does not keep an eye on the project progress. This behavior can result in the shock of lifetime for them when they suddenly realize that the project is not being run as it should be. The Following figure illustrates the situation more clearly.

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How Outsourcing Can Become a Dilemma?
Although, some of the internationally outsourced projects have achieved unprecedented success yet most of them cab become a dilemma especially for the outsourcers. First of all, the outsourcers have no control over the agency to which the project has been outsourced and therefore, they can only request them to work as per the contract if they are not satisfied with the project progress. Similarly, cultural and language barriers, time zone differences, different style of working and understanding things can really create some serious problems for both the parties. Moreover, the constant rechecks and redesign can cause both outsourcers and outsourced agency to suffer from significant loss in terms of money and time.

Challenges of Outsourcing or Top Failures in Its Implementation:
Above paragraph outlines some of the reasons why outsourced projects fail. In this paragraph, we shall discuss about some common challenges an outsourced program has to face.

  • Most of the companies tend to follow the set processes and use traditional tools instead of being interactive, proactive and creative while completing an outsourced project.
  • Similarly, these companies spend more time on comprehensive documentation of the project rather than concentrating on visible progress and as a result, the project deviates from its right path.
  • Two different companies joined by an outsourced project tend to satisfy the contract clauses in order to avoid any legal issues instead of promoting any collaborative development between them.
  • Last but not the least, both companies involved in the outsourced partnership prefer to follow the plan developed at the initial stages of the project instead of actively and effectively responding to any change that come their way. The consequences of this ignorance can be quite drastic as unchecked and poorly managed changes can play havoc with the project and as a result, the project can fail completely or can go beyond budget, schedule or scope.

Who Should take the Liability:
Another major problem in outsourced project is to determine whose liability it will be if project fails? Similarly, if there happens to be defects in the project, then the cost of removing them will definitely increase other expenditures and the project will go out of schedule as well. Therefore, both the parties try not to take liability of the failed projects as it can result in huge financial losses for them. Take a look at the following figure for clarification.

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Outsourced partnerships can really yield fruitful results for all the parties involved. They should dispense with traditional methods of working and ways of thinking and have to incorporate the new Agile approach in their offices and workplace to achieve the results they desire. They have to promote values like transparency, adaptability, unity and simplicity in their workplace and be more iterative, collaborative and incremental while eliminating various factors such as long feedback lifecycles that can adversely affect the project progress in the long run.