Reason of Outsourcing Failure
In a recent report of the rating agency, Dun and Bradstreet, it was concluded that 25% of outsourcing fails completely and more than 50% outsourcing deals do not provide any substantive benefits. It is because of companies rushing into transactions with an unsubstantiated expectation of saving cost and improving performance that is impossible to achieve because clients do not tell their exact requirements to the vendors. Apart from IT, outsourcing in other businesses also has the same results. Some main causes of failure of this process are:
Goals and requirements of buyers are not properly defined. Plus there is a lack of outsourcing contract management efficiency, which results in IT outsourcing failures.
Although, the interest of the party is given priority but it can be misaligned because the buyer’s business environment keeps on changing with time.
Poor performances of the service providers in comparison to what is mentioned in the agreement.
It is often seen that both the parties do not bother about each other’s interest to get into a mutually beneficial relationship.
There are asymmetric sizes between both client and the vendor.
The parties do not share necessary information with each other and this leads to poor communication gap between both.
There have been several incidents where buyers and outsourcers are in conflict and not at all worried about the outsourcing failures. Poor cross cultural communication; high staff turnover and hidden costs are some of the major causes of offshore outsourcing failures.
Another reason of failure of outsourcing is that outsourcers speak of selling high and pitch their services to the CEO rather than going to the IT staff, who know how to run the business. This process of high level selling has little practical value.
If you are planning to take the opportunity of global outsourcing in your business, realize that you have to adopt a careful and planned approach towards this. Failing in this process can have major consequences.