Christopher Vera’s Mystic Nebula

Five Dangers of Outsourcing
By Christopher vera
www.autumnfactory.com

Using the experience of having worked for companies that provided outsourcing and ones that have requires such services, this writer attempts to provide the reader with the elements that seemed to be missing from those relationships.

Note: This essay applies equally to onshore as well as offshore outsourcing.

There are five common dangers to outsourcing. Proponents of outsourcing will try to convince you that having a solid contract in place with the outsourcing vendor will mitigate these five dangers, but reality says that regardless of the words chosen in the contract, these dangerous events will occur. Most CXO’s rarely have time to take their eye off the perceived bottom line. All they see is that the vendor saves them money in the eyes of the stockholders. This essay is wriiten from the grunt’s perspective of working day-to-day, toe-to-toe with outsourcing vendors. They see the real costs associated with the vendor.

1. The Outsourcing Contractor Multiplier
Some people say that when a couple makes love, they are not just making love together, but also with all the previous lovers of each partner. So it is with outsourcing. When a company trusts a portion of its business with an outsourcing vendor, the relationship does not stop there. The company is also trusting the vendor’s outsourcing relationships and contractors. You may trust vendor x with your confidential data. Do you also trust that vendor’s vendors? How about the vendor’s vendor’s vendors?

2. No Process Improvement
Outsourcing vendors make money by helping your company solve problems. Sometimes over and over again. There is little or no profit in improving a broken process. Outsourcing vendors,sometimes with full knowledge that something is not working, or worse, is not secure, will continue to hammer the square peg into the round hole until the customer instructs them to stop and do something different.

3. Lack of Ownership
We’re all guilty of it: If its not our problem why should we care? Do the outsourcing vendor’s regular employees really care if the customer’s stock price is dropping like a stone? Will their onsite employees take steps to cut costs and become more efficient? When mistakes are made will they own up to it and make it right? Will they contribute to the morale of the customer or put themselves at arm’s length? Some will. Some will find ways to make it “not my problem”.

4. Policy Violations
Perhaps because of danger #3 above, some of the biggest policy offenders seems to be from the outsourcing vendor. Examine the laptop of your average onsite outsourcing vendor and just watch the violations rack up: instant messaging, peer to peer music file sharing, hacking tools, porn. Its all there. And its on your network. When the RIAA comes knocking, it will be on your door, not your outsourcing vendor’s.

5. No Knowledge Transfer
Try as hard as you like but you will never get satisfactory documentation out of your outsourcing vendor. It is not profitable. Documentation takes time away from meeting service level agreements and makes the vendor more expendable. Knowledge kept in the onsite outsourced employee’s heads will make the vendor shine more when the customer finally kicks the vendor out and begins to flounder when no one can remember the password to a mission-critical system. Time and materials costs mysteriously double when the customer comes crawling back for help in what should have been a provided service.

If you are considering outsourcing a mission-critical part of your business to an outsourcing vendor, pay attention to these dangers. Consider this fact in your risk assessment: No matter how clever your lawyers are at addressing these issues contractually, unless you are prepared to go head to head for years in court at the cost of perhaps many hundreds of thousands of dollars, these dangers will become your problems when you outsource.

Trackback URI |