4 Costly Outsourcing Mistakes to Avoid

Outsourcing has no rulebook. For most small business owners, it’s a game of trial and error with the errors amounting to costly outsourcing mistakes.

Entrepreneurs are a busy breed of people. If they don’t have their sleeves up tackling the delivery of their products or services, they are likely supporting clients, supporting staff, managing orders, managing the books, dealing with suppliers or any number of tasks required to run a business.

One of the biggest challenges for modern small businesses that entrepreneurs face today is orchestrating and managing outsourced contractors to produce work that is important to the inner workings of the business.

Importance of efficient processes

As skills have moved more and more into the digital space, and requirements for onsite practitioners tapers off, outsourcing has become an integral cog for many small businesses. Here are some outsourcing trends to look out for. Whether the requirements are in the form of brand designers, web designers, developers, digital marketing strategists, social media managers or copywriters the need of an efficient process when managing this work is imperative

Outsource Opportunities for Start-ups

The outsource market has opened up opportunities for start-ups that were not available before the age of digital freelancers but with this opportunity comes major challenges.

Hiring the wrong outsourcers may have a knock on effect that can impact many elements of your business (and your life) whether it’s time, money, clients, business relationships or stress that you bring home.

The flip side of that is that many successful businesses (and more and more of them) are built on having a highly skilled, highly efficient outsource team. Companies like Skype, Basecamp and Opera have been built on the back of tapping into outsourcing teams.

Here are 25 examples of successful start-ups that were built with outsource development. 

Outsource Pitfalls for Start-ups

There are no shortage of painful stories involving problematic outsource relationships. Many small businesses are reluctant to tap into it because of some of these stories and the perception of the minefields that await them.

Speaking from first-hand experience, I can affirm the challenges that outsourcing can create, or more specifically, the wrong outsourcing can create. Some of these challenges include; lost revenue, lost time, damaged reputation and highly stressful days to name a few.

This 2008 article highlights how far back modern outsourcing problems go.

The outsourcing market has certainly grown since then which, although it means there are more skilled practitioners on the scene, there are a lot more under-skilled practitioners lurking.

If you are considering tapping into the world of outsourcing, arm yourself with this knowledge and be sure to avoid the following potentially costly mistakes.

1. Going Cheap

It is very tempting to go for cheap overseas solutions given the potential for decreased overheads and increased margin. More often than not, these cheap solutions are coming from individuals or companies based in countries with vastly different economies than the one you’re operating in (hence the large discount).

Along with the difference in the economy and subsequent cost of living, there is often a vast difference in culture, which can include standards of business and quality of work.

These companies can (and quite often do) cost more money in the long run as often their work doesn’t live up to their promise, leaving you searching for someone to pick up the pieces.

In many cases, the person tasked with picking up the pieces might recommend scrapping or even refusing to work with the initial production. This is a hard pill to swallow when it does happen, as it is essentially money down the drain.

Although the outsourcing market may save you money, that shouldn’t be the number one reason for engaging in it.

A reasonable budget should be allocated and stuck to. The temptation to hire someone less than the allocated budget in the hope of saving dollars will grab your attention, but compromising quality for a few dollars will speak volumes in the end.

2. Location (Understanding its importance)

Ok, so one of the perks of outsourcing is that they can work from anywhere right? Well, the benefit here is mutual but there should certainly be more consideration on the part of the hiring business when it comes to the location of the outsourcer.

Using overseas outsourcers means there is little or no accountability for the work produced, other than the review system, which should be taken with a pinch of salt. Using an outsourcer from within your own country means that they are subject to the same quality and business laws as you are and you do have a comeback.

Time zone differences can impact the momentum of a project dramatically. Depending on the location of the outsourcer, communication may primarily be through email, often with questions, adjustments, and updates requiring a 24-hour turnaround time. If the two-way communication is not succinct and efficient, these items can often take a few replies (days) just to be interpreted correctly.

3. Total Cost (Misunderstanding it)

Outsourced jobs are usually quoted in one of two ways.

On a per-project basis:
Although it may seem that this is surely the way to go, this can have an impact on the quality of work and the level of dedication to the job.

It’s not uncommon for per project jobs to be rushed with little attention to detail. This is a sign that the outsourcer has mentally banked the full amount and quickly wants to move on. These scenarios can begin to become problematic when the finer details are pushed from your end.

On an hourly basis:
The hourly basis projects come with their own sets of problems as the outsourcer may push out the timelines from initial from the initial projections and can drag their feet with putting the final touches on the job.

Time Cost:
Along with the cost of the outsourcer, there is time cost on your end, which is often overlooked. The more time that is required for you (or your in-house team) to manage the back and forth communication of the project, the more it is impacting your bottom line.

4. Communication (Underestimating its importance)

If your hired outsourcer is from a country where English is the first language, then the communication challenges, for the most part, are isolated to the time zone issues.

If however, you have opted to use an outsourcer from a country where English is not the first language, the finer points in the communication often represent a struggle. Even if they have excellent conversational English and can chat to you at length, it is in the interpretation of your message and requirements that the communication can become strained.

If they are experiencing confusion on their end in comprehending your requirements, often they will opt to keep quiet and indicate that they do fully understand for fear of being drawn into a challenging conversation.

This is where most entrepreneurs who are dipping their toe into the outsourcing market get caught. After a plethora of confirmations that their requests and requirements have been fully understood, they feel a sense of relief that their problem is about to be solved.

Only when it is time for the outsourcer to produce their work does it start to become clear that there was a misunderstanding. This is the point of realisation that they now have a challenge on their hands.

Working hand in hand with an in-house team when everyone is sat around a table face-to-face can be challenging in its own right. Trying to manage a project with a contractor from a different continent, a different time zone, with a different first language, and from a different culture can bring the term ‘challenging’ to another level.

[Bonus] 5. Not Interviewing

If your hired outsourcer is from a country where English is the first language, then the communication challenges, for the most part, are isolated to the time zone issues.

If however, you have opted to use an outsourcer from a country where English is not the first language, the finer points in the communication often represent a struggle. Even if they have excellent conversational English and can chat to you at length, it is in the interpretation of your message and requirements that the communication can become strained.

If they are experiencing confusion on their end in comprehending your requirements, often they will opt to keep quiet and indicate that they do fully understand for fear of being drawn into a challenging conversation.

This is where most entrepreneurs who are dipping their toe into the outsourcing market get caught. After a plethora of confirmations that their requests and requirements have been fully understood, they feel a sense of relief that their problem is about to be solved.

Only when it is time for the outsourcer to produce their work does it start to become clear that there was a misunderstanding. This is the point of realisation that they now have a challenge on their hands.

Working hand in hand with an in-house team when everyone is sat around a table face-to-face can be challenging in its own right. Trying to manage a project with a contractor from a different continent, a different time zone, with a different first language, and from a different culture can bring the term ‘challenging’ to another level.

Conclusion

This article is not for the purpose of bashing or discrediting the outsourcing market. Outsourcing is here to stay and will become more and more common in the coming years. There are many excellent practitioners in the outsourcing space but finding them can often be a time-consuming challenge.

This article is for entrepreneurs dipping their toe into the market for the first time as a caveat of the pitfalls of the landscape. If you can negotiate these pitfalls you can potentially leverage the market to scale your business. Keeping a close eye on the points mentioned above will go a long way to helping you do that.