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November 29, 2021

7 risks of outsourcing that you should be aware of

7 risks of outsourcing that must be aware of

There is no doubt that the reason why business owners outsource is because of the advantages that it brings to help them grow their business. These benefits include low labor cost, increased efficiency, saving them time to focus on core areas, and etc. According to Smallbizgenius, it is estimated that 300.000 positions are outsourced every year, which means that the number of businesses that consider outsourcing is growing. Not to mention how the COVID-19 pandemic affects businesses, more and more entrepreneurs consider outsourcing as one way to strengthen and grow their business during a difficult time. 

However, this business strategy also comes with risks that you should be aware of. In this article, we will be sharing with you the top 7 possible risks of outsourcing.

7 risks of outsourcing that you might encounter 

In everything that we do, there is always a possibility that something unpleasant will happen and the world of business is not an exception.  Below we have listed down the thoughts of entrepreneurs about the risks of outsourcing and their ways on how to avoid them.

Compromised quality

In outsourcing services, we rely heavily on their expertise and knowledge to do certain jobs or tasks for us. However, we can’t avoid having some expectations and our own standard as to how these tasks are supposedly done. Thus, we can end up being unsatisfied by how it came up. To avoid this, communication will be the key. Make sure that you have delivered your instruction to them clearly and that they have fully understood it.

Keenan Beavis, Founder of Marketing Agency, Longhouse Media 

Communication difficulties

Communication is one of the significant risks of outsourcing. It includes topics like language barrier, time zone, lack of face-to-face meetings, and cultural differences. A lousy communication system can lead to unrealistic expectations and frequent project disputes due to miscommunication.

To avoid this, examine the team’s English to ensure they can fully understand each other. Try to have more face-to-face meetings, even if they are virtual. Find out if the company has worked in your time zone. When a team sends you a message at the start of their working day, it could be a long night for you. Set a schedule that works for everyone, and consider (or offer) shifting teamwork to a time that works for you. Please find out about the future partner’s culture, such as holidays and their duration, working on weekends, etc.

Daniela Sawyer, Founder of  FindPeopleFast

Loss of control

Your business process that was executed by the in-house team when outsourced to external agencies can be at risk of mismanagement. You’ll have little control over it, which could affect both your quality and success rate for executing these tasks on time or within budget. This lack of geographic distance affects how much oversight you receive from higher-ups about their work. To help fix this loss of control, you can include a few project management measures like; Set timelines for meetings, tracking KPIs and metrics, and identifying the person of contact. By following this, you’ll also be well aware at every stage of what’s going on in your process because we want our team members to make informed decisions about how they work with us as an organization.

Kamyar K.S, CEO of World Consulting Group

Information leakage

Though the chances of this happening are slim if you choose a reputable vendor, there is always a potential that the third-party organization will steal/leak vital information or trade secrets. Information leakage as a risk of outsourcing, increases exponentially when you hire someone from another country who does not adhere to your country’s laws. To address this security risk, work with an international lawyer to draft an impenetrable outsourcing contract or SLAs (service level agreements) that protect your firm. And, to avoid any possibility of a data breach, you can even require concerned parties to sign an NDA (non-disclosure agreement).

Hutch Ashoo, Founder & CEO of Pillar Wealth Management, LLC.

Constant delays

You can’t rule out delays as a common risk of outsourcing. In our remote business, We’ve got our outsourced freelancers spread across 4 continents and practically it’s impossible to coordinate and work in the same time frame. Therefore, they’re waiting for instructions from our side and limited communication hurts our operation’s speed! You can probably avoid them by requesting at least 2 hours of overlap in a single time zone. Eventually, as a business owner, you should also give a detailed description of tasks, with no room for any kind of confusion that delays work!

Sally Stevens, co-founder of FastPeopleSearch.io

Landing with the wrong vendor

Possibly one of the biggest risks of outsourcing is that you might not end up finding the right company to help you with whatever it is your specific business needs help with. This can result in a number of different problems from quality issues to a lack of trust from consumers. The thing is, when outsourcing, you need to be able to find a company that has knowledge of your industry and truly understands your consumer base, employees, etc. Having a good understanding of these aspects of your business is what ensures the job gets done correctly and that you maintain a high level of work quality.

Teri Shern Cofounder of Conex Boxes

Hidden charges

Outsourcing is primarily motivated by the desire to obtain a competitive edge through cost savings and profitability. However, if it results in any additional costs, it becomes a danger. Later in the development project’s life cycle, unexpected charges such as hardware or software upgrades, after-hours assistance, or troubleshooting may occur. These factors add up to the project’s final cost, causing it to exceed its initial budget. To avoid this outsourcing risk, the first step is to explicitly outline the outsourced project’s requirements. This will ensure that the business process runs well and that errors are avoided. Additionally, you’ll need to pay great attention to every detail and cost estimate your outsourcing partner provides.

Haris Bacic, co-founder and CEO of PriceListo

How to avoid these common risks of outsourcing

One way to avoid the risks of outsourcing is by choosing the right partner who can provide what you and your business needs. 

Here at Stealth Agents, we provide you with dedicated virtual assistants that will help you grow your business and run your day with ease. From customer service down to web development, you can outsource your tasks to us. 

If you are interested in our virtual assistant services, please don’t hesitate to book a free consultation with us. We would love to work with you!

Takeaways

Outsourcing is a business strategy that has a lot of benefits that help you grow your business. Nevertheless, just like any other thing, it has its own risks. The possible risks of outsourcing can be easily averted when it is thoroughly planned. It may be tedious at times, but the outcome should come close to meeting your expectations.

With the right practices for outsourcing and tips given by the entrepreneurs mentioned above, you will be able to avoid such unwanted situations in the long run. Most importantly, do not let the risks stop you from helping you grow your business.

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