The popularity of global outsourcing has grown over the past couple years, and it seems that it will grow even further thanks in part to the darkening economic horizon. Nevertheless, many companies still have trouble getting the hang of it, especially when it comes to keeping a successful partnership.
Outsourcing services globally is convenient, but choosing the right business partner and maintaining a successful relationship with said partner isn’t easy. Around 25% of outsourcing partnerships fail during the first couple years; the number jumps to 50% during the first five years.
There are several pitfalls companies can fall into when dealing with outsourced partners, whether offshore or nearshore. Some of them are obvious; others, not so much. Here are some pointers on how to be aware of the less obvious mistakes that can be made.
1. Take Your Time
Things are moving faster in the outsourcing world. As demand for outsourcing of business and technology services keeps climbing, companies feel the pressure to find adequate partners as soon as possible. In a recent report, Deloitte said it expects faster contracting mechanisms to emerge precisely because of the uptick in demand.
While speed is necessary in a fast-changing landscape with fast-moving competitors, companies should strive to strike a balance between rapid movement and thoughtful consideration when choosing an outsourcing partner.
It must be stressed that the right partner isn’t necessarily the most well known, or even the top firm in the market, pointed out Ed Hansen, Partner and Co-Chair of Digital Transformation and Managed Services Group at Nelson Mullins. In their search, companies should evaluate who could best serve their needs, while also finding a partner with whom they can “click” in order to work together towards a common goal instead of just assigning a job.
2. Agreement Isn’t Alignment
Outsourcers should strive to strike deals that go beyond mere agreements and assignments, focusing instead on aligning their partners’ goals with their own.
“The tricky part is partnering with somebody that, when the stuff that you don’t know comes up, you’re going to be able to work through it together,” explained Hansen in an interview with NSAM. “If all that you’re doing is agreeing with me, then you’re just complying with my wishes. If you and I are aligned, if you and I want to do the same thing, I don’t have to watch you as closely.”
This is one of the wider pitfalls in the road to successful outsourcing partnerships, Hansen pointed out. Companies tend to focus on the details in a contract, leaving the less definable aspects of the relationship unresolved. Those can be ironed out as the relationship develops, but that requires an alignment of purpose.
3. Trust Your Partner
By definition, outsourcing business requires a level of trust in your partner. Nevertheless, companies might feel tempted to micromanage, especially if they’re not entirely sold on their own partnership.
“Micromanaging their [your partner’s] actions, second-guessing their approach and constantly suggesting changes, of course, could impact your design and create a weak product,” pointed out Nacho de Marco, Co-Founder and CEO of Nearshore tech firm BairesDev, in an article penned for Forbes. “The ideal thing to do is choose the best-fitting partner you can find, and then trust them.”
Trust might solidify as the relationship develops and your partner gives credits to your choice. Yet, the best thing you can do beforehand is setting up things for a partnership that makes you feel at ease.
“The ideal thing to do is choose the best-fitting partner you can find, and then trust them”— Nacho de Marco
That’s why it’s important to take your time when choosing a partner, keep a steady flow of communication and make sure that you are aligned instead of just agreeing.
4. Challenge Your Partner
This might come off as contradictory to the previous point, and even counterproductive, but businesses should be comfortable challenging their partners when they don’t feel sure about a specific choice.
Even when your partners hold the expertise, that doesn’t mean they are infallible. They should be able to take honest questions and even criticism. Being able to comfortably deal with challenges is a sign of a stable partnership.
“If they’re typically defensive and uncooperative when this happens, rethink the trust factor in your relationship,” Hansen pointed out in a recent LinkedIn post. “There’s no reason to tolerate incompetence or dishonesty in the name of partnership. Partners don’t take advantage of their partners!”
“Partners don’t take advantage of their partners!”— Ed Hansen
5. Try Short-Term, Flexible Contracts
Even though you might be aiminig for long-term partnerships, you might want to give short-term contracts a try.
In Deloitte’s most recent survey on outsourcing, almost half of the legal experts consulted underscored the importance of shorter and more flexible contracts for the future of the industry. According to the firm, that approach received “wide support across both client and service provider interviewees.”
“As organizations embrace agility and disruption, outsourcing contracts must facilitate these philosophies and be structured to recognize the increased commoditization of the services provided,” stated Deloitte on its report on the survey.
6. Culture Matters, But It’s Not a Deal Breaker
Cultural differences are an unavoidable factor when trying to strike outsourcing partnerships offshore. Nevertheless, businesses should not fear such differences. In some cases, they might even try to embrace them.
“People from different cultures often have different approaches to problem-solving,” pointed out Camilo Gómez, VP of Engineering at Appgate in a post on the topic. “As such, when a team of developers is comprised of individuals from different backgrounds, there’s a diversity of ideas for how to go about solving a problem.”
Also, the fact that there’s a cultural gap between you and your partner could be an incentive to keep you on your toes, according to Hansen. You’ll make the extra effort to make sure that you’re both on the same page.
This doesn’t mean that you should take cultural differences lightly, though. Being unaware of them can spell trouble for your project and even doom your partnership, taking you back to square one.
This is one reason why nearshore projects are growing increasingly popular in North America. There are definitely cultural differences between US/Canadian firms and potential partners in Latin America and the Caribbean. Nevertheless, the gap isn’t as wide when compared to Asian, African or even Eastern European countries.
7. Mind the Technical Jargon
When dealing with partnerships for digital transformation, the throwing around of technical terminology is a given. For that reason, companies should make sure that the terms used are understood by both parties.
“With technical jargon, it’s actually in some ways worse [than language differences] because if they ask each other what they meant, they look as if they were inexperienced,” explained Hansen.
If technical terminology is being used to define a relevant aspect of the project, stop and ask what you both mean when you use it. If you don’t out of fear, you’ll both remain ignorant and run the risk of hurting the project.