Over the last couple of years, several organizations have turned to outsourcing to diversify their portfolios, access a wider talent pool, and reduce staffing costs. Currently, businesses globally spend over $700 billion on outsourcing each year, with IT outsourcing accounting for more than $519 billion. With the increase in economic globalization and surge in international recruiting, there’s no doubt that outsourcing is here to stay.
While the increased adoption of outsourcing shows that more executives are finally discovering its potential benefits, this doesn’t mean it has no flaws. In fact, the model is far from perfect. In this article, we’ll go through some of the common challenges that come with outsourcing business processes and offer actionable tips for avoiding them.
Top 6 Outsourcing Challenges and How To Deal With Them
For the record, the challenges outlined below apply to both domestic outsourcing and international recruiting, whether through nearshoring or offshore staff augmentation.
# Challenge 1: Lack of project control
This is probably one of the major reasons some businesses are still skeptical about outsourcing. Unlike an in-house team that you can monitor and manage with ease, outsourcing means you have to relinquish the control of the project to a third-party vendor. While you can occasionally guide the outsourced team on the project specifications and specifications, you’ll not have as much say on the project’s progress and direction as you would with internal employees.
Worse still, if you’re relying on offshore managed service providers thousands of miles away from your offices, you might not have control over the staff they assign to your projects. And because of the geographical difference, it’ll be challenging to conduct physical audits for quality control. The best you can hope for is that the MSP is as good as they claim and has your interest at heart.
Solution
The solution to this challenge is discussing your preferred level of control with the service provider upfront. Let them know the project details you want to retain full control over, when they should consult you before making a decision, and the aspects they can alter without prior consultation. You should also clearly communicate how to collaborate on quality control and how often you expect updates on the project’s progress. While at it, beware of being too micromanaging. If you want to have full control over the project, we recommend staff augmentation over complete outsourcing. With augmentation, you can have one of your in-house employees managing the project as you leverage the external team’s expertise.
# Challenge 2: Time zones differences
Time-zone disparities also pose a significant challenge to the effectiveness of outsourcing operations, especially in today’s fast-paced business landscape. While 2 – 3-hour differences may be manageable, over five-hour delays — as is in most offshore destinations — often result in less effective communication and collaboration. Here’s how:
- Communication delays: Suppose your New York-based organization with an Indian offshore data engineering team experiences a data breach. How long will it take you to reach the Indian specialists and resolve the infiltration? Two hours? Three? Four? No — it could take you up to 10 hours or more. By then, the hackers will have gained complete access to your network and gotten away with whatever they wanted. The substantial time-zone difference with offshoring destinations often causes communication delays, impeding the resolution of urgent issues and prolonging project timelines.
- Limited overlap in working hours: Another challenge associated with time-zone differences is the limited overlap in working hours between outsourcing teams and their clients or parent companies. This constraint reduces the window of opportunity for real-time collaboration, meetings, and problem-solving sessions. As a result, decision-making processes may be delayed, hindering progress and potentially impacting project outcomes.
- Impaired responsiveness and customer service: Time-zone disparities can also compromise responsiveness and customer service levels, especially in industries or projects where prompt assistance and real-time collaboration are essential. This can lead to client dissatisfaction and potential reputational damage.
Solution
When recruiting internationally for time-sensitive projects that require frequent, real-time collaboration, prioritize outsourcing destinations with limited time zone differences. For example, team augmentation in Latin America means you only have to deal with an average of 2 – 3 hours of time difference, allowing you to schedule real-time meetings and collaborate with the outsourced team more frequently.
# Challenge 3: Cultural differences
Outsourcing, especially when offshoring to traditional destinations like Asia and Eastern Europe, means you’ll be working with people with divergent norms, values, communication styles, attitudes towards authority, work ethics, and business etiquette. If overlooked or mismanaged, these differences can result in communication breakdowns, employee conflicts, and diminished productivity, ultimately undermining the intended objectives of the outsourcing partnership. For example, in some regions, such as East Asia, deference to authority and adherence to strict hierarchical structures are deeply ingrained. As a result, employees from this area may be less inclined to open communication with their superiors, potentially inhibiting the exchange of ideas and feedback in a collaborative setting.
Solution
Like with time zone differences, the best solution to cultural incongruence is hiring from destinations with shared cultures. For Canadian and North American businesses, this means onshoring or outsourcing to South America. However, if this is not possible, you should thoroughly assess the offshore team to ensure they’re a perfect cultural fit, or at least willing to adjust accordingly. Also, you should have an elaborate onboarding process and training program to familiarize the outsourced staff with your processes, expectations, and protocols.
# Challenge 4: The risk of data leaks
Another challenge of outsourcing is the inability to have full control over how the external service provider uses your data. Entrusting sensitive information to outsourced vendors can expose your organization to potential breaches, jeopardizing confidentiality, integrity, and regulatory compliance. With the distributed teams operating miles away, you might also not be in a position to monitor who they share your intellectual property like business plans, key processes, and trade secrets with.
According to a 2022 Business Wire study, over 90% of the surveyed MSPs had experienced cyber attacks within the previous 18 months. As you can imagine, the attacks on these service providers meant their clients’ sensitive data was potentially at risk. While it’s not common, we’ve also heard of disgruntled distributed staff who mine business secrets to use as bargaining chips or sell to competitors.
Solution
Of course, the most obvious solution to preventing data leaks is signing non-disclosure agreements with the outsourced personnel or firms. Doing so ensures that if they divulge any company secrets without your knowledge or authorization, you can sue them for damages. Regarding data breaches, you should have a well-structured data security and privacy policy tailored specifically for the external team. Unlike with an in-house team that you can monitor to ensure compliance with security protocols, distributed teams are more exposed and challenging to oversee. As a result, they often require more stringent data access and security protocols.
# Challenge 5: Incorrect cost estimation
While outsourcing generally helps businesses cut costs, things can still go south without proper planning, forcing you to pay more than you had initially budgeted. One of the primary factors that often contributes to this issue is the lack of a comprehensive understanding or clarity on project requirements and scope due to the lack of experience in outsourcing. Whether it’s underestimation or overestimation, incorrect cost estimation can cause significant financial losses and derail your projects’ progress.
Solution
To avoid incorrect cost estimation, it’s crucial to conduct thorough research and analysis during the planning phase. Begin by breaking down the outsourcing project into smaller tasks and estimating the time and resources required for each. Involve all relevant stakeholders, including the outsourced team your in-house staff, and project managers. If you’ve had past outsourcing engagements, you can also review them for reference, analyzing their costs and identifying any factors that may have led to discrepancies between the estimated and actual expenses. Most importantly, you should also research potential risks or uncertainties that might impact the project’s budget, such as changes in market conditions or unforeseen delays.
#Challenge 6: Choosing the right experts
When recruiting internationally, most of the initial processes — job posting, recruitment, and interviews — often occur remotely. Without face-to-face interaction, it can be challenging to verify candidates’ educational qualifications, certifications, technical expertise, and soft skills, making it difficult to find the right experts. Even if you do land the ideal candidates, you’ll still have to grapple with foreign contractual and legal processes that might take centuries to understand.
Solution
Unless you’re an HR expert with a considerable understanding of your target hiring destination, you should consider outsourcing via an experienced staffing company. The hiring firm’s hindsight from helping other organizations manage outsourcing projects will help you eliminate the guesswork and land the most competent talent hassle-free. Thanks to their experience, they can also help you identify and avoid other potential outsourcing challenges.
Let DevEngine Help You Outsource to Latin America Stress-Free
When working with us, you don’t have to worry about the above challenges. Once you’ve enlisted the services, we’ll do all the worrying and fixing until you have the best data and software engineers.
Below are some factors that distinguish us from most LATAM hiring companies:
- Upfront pricing to enable you to budget with confidence
- We have very rigorous vetting and technical testing to ensure our customers get nothing short of the best tech talent
- We offer customized hiring, ensuring our staff not only meets your educational and skill specifications but also fits your organization’s culture
- Available migration support for Canadian companies
- We can handle the entire HR process from hiring to onboarding and staff management
- We deliberately limit the number of clients we work with at a time to ensure active customers get our full attention
Outsourcing can be challenging, but it doesn’t have to be. Let us help you augment your staff with competent LATAM talent as we take care of potential challenges. Get In Touch With Us now to kickstart your stress-free outsourcing journey!