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In 2022, the global IT outsourcing market was estimated at $525 billion and is forecast to reach $1,149.24 billion by 2032. To dive deeper into IT outsourcing tendencies dominating the market, consider reading our recent article:
IT Outsourcing Trends That Can Help Your Business Handle Today’s World Obstacles and Stay Ahead
CEOs and decision-makers primarily go the outsourcing route to cut costs, get access to the global talent pool, reduce administrative operations, and more. However, they may be unaware of the risks of outsourcing that come hand in hand with its benefits. Therefore, it’s essential to clearly understand the potential drawbacks in advance and build a well-thought-out strategy to mitigate them.
Based on our experience in IT recruiting, we can say with confidence that if you do decide to go down the outsourcing route, go with a reputable (preferably large) vendor that comes with recommendations and can be vetted. Yet, you should also consider all possible scenarios, like what can happen when you choose the wrong vendor and what risks will you have to deal with? That’s actually what we are going to talk about in this article.
What are the disadvantages of outsourcing?
At Bridge, we speak with clients in the US and Europe who have been severely hampered by outsourcing engagements gone wrong. Essentially, what happens is all of the benefits our clients thought they were getting are nowhere to be found. So instead of saving money, outsourcing ends up costing them more. Just imagine: instead of getting access to a large talent pool, you get junior engineers who can barely put two words together. And instead of focusing on their main tasks, business leaders end up frustrated.
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We’ve discovered that the best way to avoid problems with outsourcing is to direct-hire remote talent. That’s actually what we do at Bridge. But let’s come back to the disadvantages of outsourcing IT services to ensure you’re ready to effectively manage them.
A misalignment of expectations & goals
The first risk stems from an inherent misalignment in goals and expectations. Simply put, your goals and the vendor’s goals might not be similar.
Software outsourcing companies serve many clients at the same time, and their goal is to make money. Your goal and vision are to best serve your customers and produce something people need. No vendor or freelancer will have the passion or drive that an employee will.
Solution: Thoroughly vet outsourcing partners, and when the one is chosen ‒ keep your communication channels open and regularly assess KPIs. Fortunately, you shouldn’t have such concerns partnering with Bridge. We’ve seen this problem time and time again with our clients, and one of the reasons we started Bridge is to provide team members who show initiative and a desire to see your product succeed. For that, we offer two types of services ‒ sourcing-as-a-service and IT staffing.
Sourcing-as-a-service is a working method to find qualified candidates for current or future projects. In brief, it works like this. We source candidates according to your requirements and provide you with a list of the most suitable ones. This way you don’t have to spend weeks or even months searching for engineers on your own and can devote this time to other project tasks. On average, we provide 15-30 viable candidates a month.
IT staffing works best when you need expert engineers here and now. In this case, we search for the required tech experts and help you onboard them. We also cover hiring, payroll operations, paperwork, team setup, and more.
Communication issues
Communication is the cornerstone of any business. Companies often have extensive documentation on who to contact regarding certain issues, how to escalate issues, and rules of day-to-day communication. But from time to time, IT outsourcing providers are not communicative and it can spell a disaster. Without having specific communication mechanisms, you start finger-pointing and playing the blame game when the problem arises.
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Also, there’s the language barrier problem. Since you may not have the opportunity to interview each outsourced team member, you may get stuck with someone who doesn’t know English well enough to communicate effectively.
Solution: Make sure all issues are handled through structured frameworks and resolved within a reasonable timeframe. Have an interview with potential candidates to assess their skills. With Bridge, you don’t have to do it on your own. We work with tech-savvy recruiters who speak the same language as candidates, so you may be sure you get top talent with the required tech skills.
Poor quality of service and lack of innovation
If you take something away from this guide, it should be that outsourced workers are not part of your company. They’re not invested in the product you’re building, nor are they motivated to go the extra mile for your sake, since they have other projects to handle.
Because outsourced developers don’t see themselves as your employees, but rather as employees of the outsourcing company, they don’t see the bigger picture, and they can’t fully meet your vision.
Solution: Choose a reputable outsourcing partner with an innovation track record. Or you can go the other way ‒ hire talented individuals directly. We at Bridge understand how crucial it is for our clients to find like-minded employees to join their teams. That’s why we never hire talent without client’s approval: we screen for the best talent from local job markets and send their resumes to our clients, making them the final decision-makers on each hire.
Legal, security & privacy concerns
Of all the risks of outsourcing, this is arguably the biggest one.
Do you think a signed contract is fully protecting you? Unfortunately, it might not hold up in court (if it comes to that). Another major issue is that in some cases companies neglect to look into intellectual property laws in the country they’re outsourcing to as well. It could turn out that the code might legally belong to the person who wrote it in some countries. And we’ve heard of cases when the code could be legally considered the vendor’s property, too. In any case, these are risks that you simply can’t afford to take.
In the same vein, another thing to consider is that outsourcing ties you down to an external dependency. What happens when something like COVID 2.0 occurs and the vendor you’re working with goes under? Are you willing to risk your company’s financial stability and well-being to save a few bucks? I bet you aren’t.
Solution: Make sure you clearly comprehend the laws of the country where your outsourcing partner is registered or hire a specialist who will do it for you. At Bridge, we work with local recruiters who understand labor laws and regulations to mitigate legal, security, and privacy risks.
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Damaging your corporate culture
Corporate culture is one of the most important parts of any business. Now, take your in-house team and compare it with the outsourced team you’re hiring. Do you have any idea what their culture is like and how it matches up to yours? Well, to save you time, in most cases, they don’t match up.
Additionally, by making the choice to outsource, you may be unknowingly causing a rift to form in your company. If your in-house staff has to deal with all of the risks we’ve talked about previously, just imagine how frustrated they could get. And here comes another hidden cornerstone of outsourced hiring – cultural clash. If you can’t walk and talk the same language with your outsourced developers from the beginning, your in-house and outsourced teams end up working against each other.
Solution: Choose culturally aligned outsourcing vendors and assess their business values beforehand. Luckily, you can avoid this time-consuming selection process with Bridge. We thoroughly screen each candidate to find a 100% fit.
Hidden costs
There can be significant hidden costs associated with signing a contract with a software outsourcing company. In addition, often, those contracts don’t cover every possible scenario, which means there could be additional charges/fees.
Not to mention the hidden costs of not meeting timelines. A missed timeline means you’re going over budget, and this can occur for various reasons. For example, the vendor may lie and assign junior or middle engineers instead of senior engineers. Unfortunately, this is a common practice and results in poor code quality, extra expenses to rewrite the code, and money you spend on skills someone doesn’t have.
Solution: The only thing you can do here to secure yourself from unexpected expenses is to make a detailed contract, regularly audit invoices, and monitor costs. Partnering with Bridge, your expenses are crystal clear ‒ you either pay a fixed monthly fee (sourcing-as-a-service) or a salary for the actual developer’s work (IT staffing).
Hiring employees to join your core team is the best solution because it gives you full control and offers transparency. Our clients agree that having all the benefits of outsourcing without the risks is ideal.
Hire remote tech talent with Bridge
We created Bridge because we were sick and tired of seeing the vast number of offshore outsourcing relationships struggle or completely fail due to a lack of understanding, cultural distance, and other similar issues.
It’s time to stop ignoring the truth ‒ the value you expect to get from traditional outsourcing isn’t guaranteed. Moreover, the risks of outsourcing IT services to the wrong vendor are too high to take that chance.
At Bridge, our mission is to help tech companies tap into the world’s brightest talent pools directly, in a much more transparent, reliable, and affordable manner. We recruit only top-tier talent from 13 countries, including big tech hubs like Mexico, Ukraine, and Argentina. With our approach, you hire only the engineers you want to work with, onboard, and ingrain them into your company on your terms.
Team up with Bridge to find top talent eliminating pitfalls and hidden costs!
