6 MAIN OUTSOURCING RISKS AND HOW TO MITIGATE THEM

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Outsourcing the enterprise information system is a responsible process and requires a comprehensive and thorough analysis when making the final decision. 68% of American big corporations make a decision to outsource at least some portion of their IT work.

Every year, more and more companies attract external contractors to solve problems. Whitelane Research confirms that 89% of customers are satisfied with the results. Why do business owners decide to work with outsourcing companies?

  • 26% of customers — to reduce expenses and safe internal resources;
  • 21% — to improve quality;
  • 19% — to get some rare skills and solve specific tasks;
  • 11% — to get better financial flexibility.

An essential part of making the right decision to outsource the IT services is analyzing the possible risks, ways to reduce them and whether they are acceptable for the business processes of the specific organization.

Frankly speaking, it is almost impossible to avoid all the risks for your company. But what exactly can go wrong? How to avoid possible issues? I’m going to tell you more.

Risk 1. Geolocation and time difference

Despite video calls, messengers and telephony are highly developed today, you may face communication problems.
Imagine the situation: there is an urgent question, the team is not available, the problem is solved only the next day. Such delays affect project timelines.

Solution:

Involve the business analyst in the project from the very beginning. Its task is to define risks, threats and possible conflicts between functionality and project resources. It saves time at the further stages. At the first stage of the project, the analyst helps to interpret the client’s business requirements in clear tasks for the developers.

Risk 3. Unprotected idea or source code

It’s a good idea to protect the idea of your product, even if it is not innovative or unique. Especially if you outsource the products to countries with weak legal frameworks. The protection of the intellectual property is not an easy thing.

Solution:

  • I recommend that you determine in the contract what information is confidential.
  • Detail the obligations of the parties not to disclose the confidential part of the project. There are different solutions for signing an NDA: split the source code into independent partitions or limit access to the database.

Risk 4. Out of trend

The brightest indicator that the guys are “behind the scenes” is the outdated design in their portfolio. It’s not just about aesthetics: UI/UX trends affect every aspect of the software product.

Solution:

  • Look for a team that follows trends, learns and adapts quickly.
  • Another important detail: often companies offer their customers the technology based on knowledge and load, but it is not the fact that they offer the best solution for the project. If you have an opportunity to consult an independent expert, do it.

Risk 5. Lack of outsourcing experience

Not every company has a great source in experience even if it provides the highest level of expertise. As a result, the cooperation maybe not so smooth as expected.

Solution:

  • The easiest way to reduce the risk is to provide some test tasks or trial period.
  • Another option is to request recommendations and feedback from the current clients of the outsourcing services provider.

Risk 6. Unexpected contract termination

For the customer, a significant potential risk may be an unexpected outsourcing contract termination. There may be several possible reasons: outsourcing company termination, some IT tasks are returned to the internal department, etc.

Solution:

In the outsourcing contract, it is necessary to determine the procedure of contract termination and the rules to settle the financial and other issues.

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