How To Achieve Project Success With Your Outsourcing Service Provider

The recent statistics show the global market size of outsourced services from 2000 to 2019. In 2019, the global outsourcing market amounted to 9.25 billion U.S dollars. As we can see, the outsourcing industry has grown significantly over the past two decades and is expected to continue in the coming years.

It is also estimated that the global outsourcing market will be around 425.19 billion U.S dollars. This is good news for businesses looking to reduce costs and increase efficiency by outsourcing certain functions. 

We can also observe that 59% of companies outsource to cut costs, which is the most common motivation for organizations. According to 2019 research by Clutch, 37% of small businesses outsource at least part of their business processes. This means that over a third of small businesses rely on outsourcing to get things done. 

Many businesses don’t have the resources to do everything in-house, so they have to outsource some of their work. But with so many firms offering outsourcing services, it can be hard to know if you are choosing the right team. This article will assist you in choosing the right partner and guide you to achieve project success with the outsourcing team. 

Why Do Outsourced Projects Fail?

Case Study 

The U. S corporation Hertz operates the car rental brands Hertz, Dollar and Thrifty. It has approximately 10,200 corporate and franchise locations throughout the world. 

Hertz has been facing some challenges lately. For five years, the growth of rideshare apps such as Uber and Lift has increased the competition, and used car prices have fallen. As a result, Hertz’s stock price has dropped 85% in the last five years. 

Hertz originally hired Accenture in August 2016 to give its online presence a much-needed facelift. The new and improved website was supposed to go live in December 2017, but due to unforeseen circumstances, the date had to be pushed back to January 2018. However, even the date came and went without the new site is available to the public. Eventually, the new go-live date was set for April 2018, but unfortunately, that wasn’t met either.  

Hertz realized it was in a difficult position as the delays continued- the product and design weren’t meeting half of the specialized requirements, and what had been done wasn’t even finished. Hertz didn’t believe Accenture could complete the project, so it terminated the relationship. 

Hertz stated that they are suing Accenture for $32 million in fees, and it wants additional compensation to cover the cost of fixing the mess. 

While some enterprises will recruit new employees to handle the increase in workload, other companies will outsource the extra workload to external service providers. Outsourcing is an effective way to meet the increased labor needs while maintaining low costs; however, it can sometimes fail due to several risks. Let’s study the reasons why outsourcing projects tend to forget. 

👉Communication gap 

One of the key aspects of communication in outsourcing services that can become problematic is a difference in ideas and expectations. As a result, the client and the development team can have different ideas about what they want, and they can’t come to a compromise. 

Conflicting requirements and unclear communication channels are inevitable in any outsourcing project and, if left unchecked, can result in frustration among team members and delays in the development process.

To prevent frustration and delays, it is important to establish clear communication channels from the project’s outset. Furthermore, regular check-ins with all team members will ensure everyone is on the same page and working towards the same goal.

👉No direct involvement with the development team

Good communication has always been key to successful projects. However, with iterative development and deployment methods, numerous time zones and a fast pace can make it difficult to sync. Therefore, it’s important to have procedures and collaborative technologies in place that allow for a seamless and low-risk exchange of information between team members. 

Regular, effective team meetings are essential. In addition, consider using tools that augment collaboration-tools that allow all team members to see the status of all tasks much more simpler. 

Related Read: 10 Tips To Deal With Different Time Zones And Communication

👉Low quality work 

Business managers can typically oversee the work of their in-house employees to ensure that they are meeting expectations and producing high-quality work. However, your managers won’t have the same direct oversight over the service provider when a project is outsourced.

As a result, there’s always a risk that the service provider will cut corners during production or provide you with subpar work. Verifying the quality assurance processes of the service provider earlier can give you a better idea of the level of quality to expect. 

Related Read: How To Successfully Create A New Product

👉Conflicting interest

One of the main reasons why outsourcing initiatives fail is the difference in interests and cultures between the outsourcing company and the hiring company. To avoid this, make sure you choose a service provider from a location that shares your interests and understands your way of working.

This way, you can be sure that they will be able to provide you with the services that you need in the most efficient way possible. 

Developing Outsourcing Strategy

Your outsourcing strategy is a long-term plan that determines the project’s success. The strategy-setting process will have big repercussions for both management and employees. Therefore, it’s vital to include all stakeholders in developing the strategies. 

What strategies can you adopt for a successful outsourcing IT project? Let’s list them down; 

👉Layout the objectives 

Organizations that know what they want to achieve before they sign an outsourcing agreement are more likely to find a vendor that can help them reach their goals. 

They will be able to explain their objectives to the service providers and agree on these as the basis of the contract. This will help manage the relationship so that both parties know what is expected of them and can ensure the agreement achieves its objectives. 

👉Assessing the risks 

When setting the strategy, it’s important to assess the risks to all parties involved. Every organization has its set of objectives and risks, but we have found that the following are common problem areas; 

• Failure to get the service provider to commit to the customer’s vision or culture. 
• The distraction of having to manage the relationship with the service provider, who has different goals and a different culture.
• A feeling of over-dependence on the service provider can be especially acute if there is only one large provider and a few retained staff. 
• Unanticipated service expenditure is assumed to be included in the provider’s package but appears as extras in their invoices. 

👉Define scope/ skills 

When outsourcing a project, it is critical to clearly understand the business goals you hope to achieve. Your outsourcing team should be able to see the vision and purpose of the project to invest properly. Furthermore, ensuring the team has the required skill to fulfill the project’s scope and lead to success. 

Be specific about what you want to outsource and how you expect it to be handled. This will help manage expectations and ensure that team you hire can meet your needs. 

👉Define financial terms 

A budget is essential to a project’s success as it determines how quickly you can complete the project, the skills you will hire, and the types of technologies and equipment you can see. More advanced technologies and tools are required for hiring costs. Keep in mind that financial terms are also a possible problem that could arise. 

Setting some financial terms to ensure you are prepared for all possible situations helps prevent overspending. Ensuring the budget and other financial aspects, like payment methods and schedules, are discussed, and all the stakeholders stick to it. This will make sure that you are profitable and successful. 

👉Appoint a SPOC 

You need to have a single point of contact to make the collaboration between you and your outsourcing partner effective. The SPOC will communicate all the relevant specifications on requirements for development.

They make communication smoother, leading to constant updates about the project, eliminating any confusion between the stakeholders, and efficiently transferring information. Your in-house and outsourced developers will know whom to report to and who needs to be kept updated about the development of the projects.