As companies look to save cost in this weak economy environment that casts its shadows all over the world, it may be more tempting than ever to consider outsourcing your IT services– whether to cloud based providers, or to providers in some far off land. Certainly, we do not speak in against the plus sides of outsourcing and there might be many companies that have profited a lot by outsourcing their IT jobs overseas but it cannot be hidden that outsourcing can also lead to business- damaging nightmares.
Larry Harding, founder and president of High Street Partners, a global consultancy firm that advises companies on how to expand overseas, said that many outsourcing horror stories from corrupt general managers with conflicts of interests to projects torn apart by huge turnover losses exist. These disasters are mainly credited to desires to save money or literally saying “half priced” workers in places like India, China or the Philippines and good execution of work flies out the window.
Having an understanding on what could possibly go wrong before you think into outsourcing the jobs of your company, you better be prepared to mitigate those risks and approach outsourcing with eyes wide open. Most common problems with companies that have survived the horror of outsourcing: lack of preparedness for going into a new relationship and lack of communication once the project gets started.
Biggest Failures In The History Of Outsourcing
#1. $4 Billion Deal between U.S. Navy and Global Services Provider — EDS
It all started back in 2003 when the Plano, Texas, Vendor beat the giants like IBM and Accenture for the contract. The deal was to outsource the job of managing voice, video, networking, desktops and training for 350,000 Navy and Marine Corps users. But it all ended up with a debacle because EDS had won the contract just to realize that it had no idea that Navy and Marine corps had thousands of legacy and custom applications for which it was expected to either integrate or replace them. The EDS spokesperson who threw the blame over the Navy had said that EDS was expected to bring down the legacy apps down to mere 10,000 or 12000. While the Navy also took some of the share of the blame to themselves saying that there was not even a single person or entity that could help EDS determine what legacy applications were needed and what were to be excised. Just one year later, EDS was writing off an approx.$350 Million cheque due to its inability to come even close to what was expected of it to do.
#2. A Medical Firm outsourcing its in-house IT development and quality assurance
When this particular medical firm took the decision to outsource the existing IT development and quality assurance to overseas developers in India, it had not known what it was getting into.
The first major problem started to occur when there was the language barrier between the teams in-house and the offshore Indian team. The Indian IT developers spoke the language that was hard to understand and hence that developed the communication barriers. The second problem was a bit more complicated due to the time lapse in India. It took the remote team in India an average of 13 hours to get an update on the source code of the configuration management tool, Microsoft Visual SourceSafe, which was working fine locally but was a total bust with the two groups that were 8000 miles apart. As can be seen due to those 13 hours to get an update on the source code and with a time difference of 11 hours in the local times of the two teams, co-ordination of work was tossed in the air as the team from India was 24 hours behind schedule for a day to day job.
#3. HP outsourcing manufacturing and marketing job to Taiwanese Manufacturer
Due to the ability of Taiwanese manufacturers ability to bring down the cost of manufacturing by manifolds, the managers at HP started pushing for that the entire project be outsourced to Taiwan — everything from manufacturing to writing instruction manuals to marketing materials.
But, this was an assumption made by the managers that manufacturing excellence brings in marketing excellence too. These managers were being subdued under the pressures of rising cost and not on the quality of the brand.
As it was expected, Taiwanese manufacturers being non-native english speakers wasted almost six months and failed to bring upon any cost-effective marketing strategy. The problem was not as much attributed to the language barriers between the U.S. firms and the Taiwanese firms but it was mostly the failure of the internal hierarchy within HP. No one knows whether those managers learned their lessons or not but it surely costed HP in wasting a good amount of money.
Outsourcing has both the plus sides and the negative sides that it entails but before taking a decision of outsourcing a job a company must analyze the implications that it would have and better be prepared to handle them. Because at some point it all ends up as a dooms day for the company with no back up points to recover from the loss of time and money.
Hope this article gives you a useful insight.