Outsourcing is reshaping global Business. Today, you can find a freelancer or a partner company for your project almost anywhere in the world. All it takes is a little bit of research and a stable Internet connection on the other side of the communication tube.
Reports predict that the market share of the sourcing companies will grow by over 60% in 2018. It seems like everyone is trying to cut costs by establishing collaboration with international partners, but not everyone is considering risks that come with the new business model.
Table of Content
- 1. Language Barriers
- 2. Different Time Zones
- 3. Cultural Differences
- 4. Geopolitical Risks
- 5. Poor Intellectual Property Protection
- 6. Choosing the Wrong Market
- 7. Poor Communication Infrastructure
- 8. Contrasting Internal Processes
- 9. Not Defining KPIs Clearly
- 10. Loss of Business Knowledge Internally
- 11. Calculate Costs Carefully
- 12. Failure to Deliver
According to term paper writers specialised in HR, outsourcing can go wrong for multiple reasons: “There are dozens of risk factors to consider, but the most common barriers are immaturity of legal systems, unstable currencies, heightening geopolitical issues, and underdeveloped networks and infrastructure.”
In such circumstances, it is crucial to consider all the pros and cons of international partnerships. This post will show you 12 risks you have to consider while outsourcing overseas.
1. Language BarriersEnglish is the lingua franca of contemporary business. It’s a necessary precondition of outsourcing, but too many organisations and freelancers worldwide are really struggling with English proficiency. For instance, language learning is still at a shallow level in China. The problem is so acute that even non-native speakers can quickly go there and teach people English as a second language.
2. Different Time ZonesTime zones may seem irrelevant in the era of Skype and instant messaging, but it actually burdens a lot of outsourcing projects globally. It’s just not practical to cooperate with people who live on the other side of the world. Take Australia and USA as an example: the capital of Canberra is 14 hours ahead of Washington, slowing down what would otherwise be considered routine business.
3. Cultural DifferencesSome industries are highly sensitive to cultural differences, which can jeopardise your outsourcing efforts. Let’s say that you are dealing with web design. In this case, you need to know that different cultures prefer different colours, symbols, and motives. Red is the colour of passion and energy in the western world, but it’s a symbol of death and grief in many African countries.
4. Geopolitical RisksSometimes you’ll find tons of relevant outsourcing partners in one country, but you might face big issues due to geopolitical or regional risks. Countries such as India, Bangladesh, or Sri Lanka are often on the verge of conflict. This is a considerable threat for international projects, particularly ones that require a lot of time to complete.
5. Poor Intellectual Property ProtectionWorking with a partner overseas, you have to analyse local laws and regulations to prevent problems concerning intellectual property. The worst thing that could happen is to successfully complete the project only to realise that your outsourcing partners are using products and services as their own.
6. Choosing the Wrong MarketIndia is the most popular outsourcing market when it comes to information technologies, the blockchain, and software development. But would you really want someone from this country to be your ghostwriter? The answer is straightforward – No, you wouldn’t. Each market has its peculiarities, so you need to stick to the options that guarantee good results.
7. Poor Communication InfrastructureOutsourcing is impossible to handle without a stable Internet connection. However, some markets are really struggling with communication infrastructure. Before you choose a business partner abroad, you should explore all communication options and ensure backup solutions. For instance, you might want to avoid countries such as Libya, Indonesia, or Nigeria.
8. Contrasting Internal ProcessesCultural and language barriers are not the only thing that separates international markets. On the contrary, many other features influence the quality of cooperation. Contrasting internal procedures are one of those features. Keep in mind that companies might have different administrative demands, so make sure to align processes to ensure smooth cooperation.
9. Not Defining KPIs ClearlyA vast majority of outsourcing problems are caused by crucial vague performance indicators (KPIs). As a company that sets the rules, you need to state what you want clearly:
- 10 Goals: What is the final objective?
- Milestones: Define your project step by step.
- Timing: How long does it all take?
- Payment: When and how much are you going to pay?
10. Loss of Business Knowledge InternallyOutsourcing is a great way to reduce costs, but does it really help your organisation in the long run? When you outsource projects, you also neglect certain aspects of the business and don’t develop the necessary skills internally. If you think this could jeopardise the company, you better switch back to the traditional business model.
11. Calculate Costs CarefullyAlthough it seems like outsourcing costs drastically less than hiring local experts, you should think twice about it. The price of international projects could grow up to 50% due to local fees and taxes. We strongly recommend you calculate costs carefully, while tools like the Outsourcing Calculator can help you figure out the value of each option much more comfortable than doing it single-handedly.
12. Failure to DeliverAfter everything we’ve stated here, there is only one more question to ask – what happens if your partner is unable to deliver? It’s a significant risk because you could waste time and money without ever seeing the concrete benefits of outsourcing. Therefore, you should never sign a contract if you are not 100% sure that your cooperation could be fruitful.
ConclusionOutsourcing can drastically reduce a company’s operational costs, but it can also cause a lot of trouble in case you don’t consider possible business barriers. In this post, we showed you 12 risks you have to find while outsourcing overseas. Make sure to remember our suggestions as they might help you to keep international projects more efficient and profitable.
About the author: Olivia is a passionate blogger who writes on topics of digital marketing, career, and self-development. She continually tries to learn something new and to share this experience on various websites. Connect with her on Facebook and Twitter.