Anush Bichakhchyan

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November 9, 2022

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7 min read

5 common fears of outsourcing preventing business development

5 common fears of outsourcing preventing business development

Outsourcing digital services is already a common practice, but it is still subject to fears and misconceptions every time it faces a new challenge. The rapidly changing business environment changes the "game rules" at lightning speed. We had 2019—the year of expansion and success—followed by a collapsed global economy in 2020. The tech industry was the least affected by the global crisis, but again, the fluctuations affected partnerships overseas. 

In 2022, we have a new challenge with tech layoffs, recessions, and hiring freezes. How will digital service outsourcing respond to those changes? How can businesses overcome their fears and start collaborating with international vendors in favor of their business objectives?

Outsourcing industry; tech layoffs and downsizing

outsourcing services

Is it worth outsourcing?

Massive tech layoffs in the US market have already resulted in over 50.000 mass job cuts in just one month (the number of tech layoffs for October). Try to update data and you will get new numbers every day. A downturned market, global inflation, and weak performance numbers, which started at the beginning of 2022, have hit harder at the end of the third quarter. Large enterprises that had practiced overhiring during times of rapid growth are now slashing jobs. How will this all affect the outsourcing industry?

Outsourcing was actually born out of the crisis as a solution to cut costs or find new talents. Retaining employees on staff costs an additional 35% of the employee payroll. In times of tech layoffs, the businesses will still need to push their processes, especially non-core or functions requiring special expertise, but now they will start looking for new markets with lower rates. 
 

Check out the digital service outsourcing rates in Armenia and other Eastern European countries.


 

In spite of unfavorable forecasts for the tech industry, the outsourcing market will continue to grow. Thus, the Global Business Process Outsourcing Market report 2022–2030 showcases the current situation with forecasts for 2030. The market, valued at $261.9 billion in 2022, is predicted to register a CAGR of 9.1% during the forecast period and reach $525.2 billion by 2030. 

The data is based on the analysis of global players in different segments, showing the tremendous popularity of outsourcing worldwide. So why do we still face the problem of distrust and fear of outsourcing? Let's dig deeper.

Facts, Fears, and Mitigation

Fears, facts, and mitigation

The top common fears of outsourcing

Delegating the task to an individual or an agency you don’t know is a real challenge, especially when dealing with sensitive data. Sometimes companies choose expensive in-house teams so as not to deal with the issues of outsourcing. Still, the cost-efficiency needs and talent pool shortage at one point forced organizations to consider outsourcing as the best solution to cut costs and increase productivity. 

Let’s be clear: outsourcing is an excellent opportunity to cover business processes, but cancellation or rejection of service outsourcing is never a layoff but a business decision. Permanent hiring should be a serious and carefully-weighted decision. As long as there is no clear picture of the long-term functional need for outsourcing, companies may stick to safer collaboration: outsourcing of immediate and experimental needs.
 

There are still some fears and facts that make companies avoid outsourcing, and we are here to show you the top common ones with mitigation hints.

Lower data security standards  

Fear: Sharing sensitive data with a third party that is not under your total control is always risky. There is a chance of data leakage and the spread of confidential data outside of the company.

Fact: 76% of business owners say that data privacy regulations and security concerns still impact their disruptive outsourcing decisions. 

Source: Deloitte

Mitigation: The vendor needs to have a strict privacy policy and protocols, a good reputation, and references to ensure security. For collaboration, the vendor should verify the guarantees of security and data protection. Don’t neglect the necessity of choosing an agency that will work with dedicated personnel under a “time, and materials” contract engagement model while paying attention to the vendor’s working style. 

Unexpected costs

Fear: It is impossible to predict all the hidden costs. Underestimating the cost of outsourcing services may make BPOs more expensive than in-house service providers.

Fact: 59% of companies, collaborating with outsourcing companies, use it as a cost-cutting tool. At the same time, outsourcing has hidden risks and unexpected costs.

Source: Deloitte

Mitigation: To cut the risks of hidden costs, the company should clearly outline the agreement details, reviewing all the expenses and fees. The safest collaboration model is hiring a predefined team and implementing a rate card system. It is also important to pay attention to the operational costs of the outsourced team, what tools they are going to use, and whether they will need accounts and permissions for your tools, respectively, taking the costs into account. 

Overdependence on a service provider

Fear: When outsourcing services, some of the control over the process falls into the vendor's hands. On the other hand, an issue or an outage becomes a company's problem too. 

Fact: 48% of companies still fear outsourcing services being concerned about performance and overdependence on vendors.

Source: Deloitte

Mitigation: A professional team will not make them feel like a third party but will quickly blend with the organization. To solve the overdependence and security concerns, trustworthy vendors offer SLAs that meet the standards of the company. This means service providers will take responsibility for any issues. Before signing a contract, discuss the following components:

  • Communication framework - where and how
  • Task management framework - who is approving what
  • File management system - where and what

As a critical part of the collaboration, companies should always integrate the collaboration framework to maintain the pace of the working and reporting processes. It is significant to initially determine dedicated relationship owners in both parties that will maintain transparency and communication on a daily basis.


If you are looking for a reporting template, contact us and we will help.


Language and cultural barriers

Fear: One of the common issues with offshore outsourcing is the language barrier. Cultural differences and different time zones are issues that disrupt the establishment of effective communication.

Fact: 72% of c-suite claim communication in a native language increases satisfaction and loyalty.

Source: ICMI

Mitigation: Multilingual agents and team members will be able to support effective communication. Don’t focus on the communication skills of all team members, but rather on the excellent communication skills of the point of contact or representative. Practice written communication, as the best means of eliminating any communication misunderstanding. 

Employee onboarding

Fear: Service outsourcing is about planning. The transition may be time-consuming and difficult to adjust to for employees on both sides. 

Fact: 57% of organizations say outsourcing helps them focus on other important business objectives. 

Source: Deloitte

Mitigation: A high-level service outsourcing agency will provide partners with a transition plan where employees know their roles. From a company perspective, successful service outsourcing requires a competent product or initiative owner interested in maintaining that kind of relationship.


Want to stay away from outsourcing mistakes? Check out the 10 biggest mistakes companies make when outsourcing" article.

Final thoughts

Just like organizations doubt outsourcing and are unsure about dealing with challenges, outsourcing agencies also have challenges finding reliable and responsible partners. The initial stages of collaboration and discussions are crucial for stakeholders to set their requirements and expectations. If the agency isn't proactive and doesn't have any questions about business processes and objectives, except the budget, it's probably best to stay away.

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FAQ

What are the challenges of outsourcing?

Vector
  • Sharing sensitive data with a third party
  • Underestimating the cost of outsourcing services
  • Facing a language barrier
  • Missing planning and monitoring 

What will the company gain from outsourcing?

Vector
  • Save resources
  • Increase efficiency
  • Bridge the skills gap
  • Focus on other vital business processes

The collaboration with an agency that proved to have the expertise and a reputation would be a game-changer for the company.