Many outsourcing companies have created beneficial outsourcing relationships with vendors. Unfortunately, there are the occasional projects that fail to meet deadlines or criteria set forth by the outsourcers. When a project does fail, there are usually numerous reasons and not just one underlying cause.



Lack of outsourcing strategy

The outsourcing company must take the time to formulate a strategy for handling outsourced projects. Working with vendors in other countries can create even more complications, which just shows the importance of having a plan. Managers must consider how the process will be managed and must set expectations for the projects. Sometimes outsourcing companies do not adequately prepare for the administration of projects. Management should clarify how global sourcing will be implemented and effectively communicate the strategy to the internal IT department and the vendor.

Miscalculated time involved

Outsourcing companies often do not realize the amount of time it will take to get a project in operation with a vendor. Some outsourcers take a "hands off" approach, meaning they do not feel that they have to be involved once the project is sent to the vendor. That thought process can be damaging to the project. It takes time and effort to transfer technical and business knowledge to the vendor. Once the transfer is made, hours will be spent maintaining the business relationship. The outsourcing company and the vendor will also have to coordinate between the team members to ensure that everyone understands project specifications and deadlines.

Cost-reduction expectation was not realistic

One of the most common reasons that companies look to outsourcing is to reduce costs. Although outsourcing does provide cost reduction, outsourcing companies frequently have unrealistic expectations regarding the initial savings. Even though labor costs may be lower, there are other hidden costs that can cause a project to go over budget. The longer the outsourcing relationship continues, the higher the savings. However, most outsourcers do not realize this fact. Consequently, a project can be unsuccessful if an accurate budget was not put in place.

Communication barriers

Communication is more than just language. Global sourcing can be complex as outsourcers and vendors face issues of time zones and locations. These challenges can make it very difficult to communicate crucial information in a timely manner. Communication barriers are frequently to blame when it comes to a project's failure. If team members can not effectively communicate the project status, concerns or ask questions, it can negatively impact an IT project. A communication plan can overcome this obstacle.

The vendor was incompetent

Various criteria should be considered when choosing a vendor. If price is the main motivating factor, there is a risk of choosing the wrong one. A low-cost vendor most likely will not provide the same quality of work as another vendor who may charge more. That is why cost should not be the only consideration when choosing a service provider. A vendor should be evaluated on multiple areas, such as trained personnel, technology and processes. A thorough analysis of the vendor will allow the outsourcer to have a good sense of what to expect.

Differences in culture

Cultural differences can impact a project. If the outsourcer is unfamiliar with the culture of the vendor, potential problems and miscommunication can occur. Cultural differences include religion, mode of dress, social activities and work ethic. Even the way a question is answered can differ depending on the culture. Cultural obstacles can be overcome by taking measures to clearly outline project specifications and encourage feedback from the vendor.

A project can fail for a combination of reasons. However, by understanding why projects fail, outsourcers can plan ahead to avoid potential problems.