Offshore outsourcing is a brilliant business strategy for many businesses. Gartner analysts predict that offshore outsourcing will rise by 8.9% in 2008, and the trend will continue on to 2009. However, it is not (yet) a perfect solution to various business issues and requirements. Before engaging the services of vendors, whether by offshore or onshore outsourcing, it is important to know that outsourcing has its own sets of issues.
The bright side of the debate is that if a business understands the issues surrounding outsourcing, these “cons” can easily be turned into “pros” that will add up to profitability and result in better quality of products and services. Below are some of the risks that you must understand about outsourcing:
- You are putting parts of your business in someone else’s hands. Realize that you are inviting a third party into your own operations. Business matters that used to be kept within your company’s walls are being laid open to the scrutiny of the vendor, or as some say, consultant. While trust must be established between the company and the vendor, it is absolutely necessary to form security measures from contracts to security audits. And be hard-headed in the implementation of these contracts. In most security breaches, the weakest points are not the systems put in place to prevent data leaks, but humans, the staff themselves, who fail to understand the enormity of keeping corporate information secure.
- Business experts and visionaries are still a weak spot among outsourcing destination. Offshore outsourcing vendors can provide highly skilled workers who can perform volume tasks. However, management is often a weak spot among vendors. This means the lack of familiarity or knowledge of established processes by your company, lack of enough knowledge about your business or industry. In cases like these, it is important to know the people who will lead your outsourcing team. In many situations, middle- and junior managers receive months-long trainings on-shore before getting their feet wet with actual project delivery.
- Unfavorable business conditions in offshore destinations include economic and political factors. If you think that you are giving away control of parts of your businesses to companies located outside your country, consider how much less control you will have if you factor in the political and economic upheavals in that country. Any upheavals at all poses risks of operational disruptions. You must make sure that there are business continuity measures put in place in case it is business unusual offshore.
- Businesses only consider outsourcing in terms of cost-savings instead of value to the company. This weakness happens on both ends of the outsourcing spectrum. Both business and vendor only see outsourcing as a way to cut costs instead of adding value to the company’s product, services, customer relationship, among other things. Instead of concentrating on the outsourcing relationship in terms of money savings alone, it is important to add long-term product or service innovation and process improvement in the mix. The money saved today can be reinvested into bigger endeavors tomorrow.
Read the First Part >The Pros and Cons of Outsourcing – 1: Why Outsourcing Will Work For Your Company