Reason for the failure of Offshore Outsourcing

Reason for the failure of Offshore Outsourcing by Mani Murthy

Earlier several offshore projects failed due to many reasons; but now the early adapters have learned from their mistakes, sharpen their skills in offshore vendor selection, project management, project execution and now succeeding in their offshore projects. Following are some the reasons you should know for offshore projects failure and plan before you start it.

Scope of Project was unclear
Outsourcing company must explain in detail about the goals, vision and scope of the project to the offshore vendor and put those in the contract. If is not done then offshore vendor can never t satisfy the outsourcing company’s expectations.

Timeline and Delivery
If proper timeline and delivery of the project is not given there will be communication gap with the offshore service provider.

Service Provider sometimes fail
The expected performance of the offshore vendor’s team may significantly impact the quality of the delivered project. If they can’t give quality work in time then offshore project may fail. But this occurs very rarely.

Cultural Differences
Since different people from different cultures work in the offshore vendor’s team so perception to a problem varies from person to person which leads to confusion in understanding the project.have. In fact majority of businesses that offshore IT and BPO projects quote cultural differences to be the primary problem they face in offshore projects.

Cost as the only criteria
Most of the company outsources their project to reduce their price. But that should not be done. With cost being the prime factor for outsourcing, it is not clear whether the service provider can give quality service to the company. Often outsourcing to the lowest bidder may not be the right choice

Hidden Costs
Though the companies think of cost saving at the start of the project but cost rise because of hidden cost. Change in technology may lead to increased costs of the business.

Cost of Overseeing the Project
The quality and performance of the offshore service provider must be checked by outsourcing business They must also check the attention and time employee spending for the project.




Retention of Key Personnel
If there are frequent turnover of key personnel in the outsourced team then it may lead to increase in time and effort. This is true in India where the employee retention rate is less than 90%.

Noncompliance with Government Regulations
In any outsourcing legal bonding of both countries need to be kept in mind. Transparency in such issues is especially important .

Communication Problems
Offshore service providers are located in a different time zone from the client may cause problems in communicating in real time. Also there is often a chance of misunderstanding e-mails or understanding messages and slow responses from offshore providers. This may derail the project. Communication issues are the chief reason for the failure of many offshore projects. In fact research studies show that over 10% of projects are delayed because of communication problems.


Early issues
Whenever two companies’ work in a project, early problems and issues will occur, and offshore projects are of no difference. Both of them may find it difficult and discourage to work through them and this may finally lead to the failure of the offshore project.

Mani Malarvannan is cofounder of Cybelink, a company specializes in small business financial and accounting outsourcing like Bookkeeping, Tax, Accounts Payable, Accounts Receivable, etc. For more info visit www.cybelink.com

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