Outsourcing gets a bad rap.
To the average person, outsourcing is when companies decide to transfer jobs overseas for pennies on the dollar compared to what a locally hired employee would make.
And, when people hear that taboo word, their blood starts to boil. It’s understandable. However, “outsourcing” is an umbrella term that encompasses a host of different models.
Is outsourcing that bad? Are there types of outsourcing that can benefit a company without affecting locally-hired employees?
Let’s take a deep dive, get our feet wet, and discover what challenges you will face with an outsourcing vendor.
The 6 Major Challenges You’ll Face with Outsourcing
If you’ve ever outsourced something, you know that there’s a vast number of outsourcing engagements hampered by a lack of understanding, cultural proximity, or the offshore team’s inability to fit into the corporate culture.
And hampered is the best-case scenario.
Challenge #1 Expectations & Goals
The first challenge stems from an inherent misalignment in goals and expectations. Simply put, your goals and the vendor’s goals don’t coincide.
Contractors and vendors put food on the table by serving multiple clients, and their goal is to make money. On the flip side, when you launch a startup, your goal is to create something that gets traction (and obviously also make money).
However, there’s a problem — an inherent misalignment in the paths to success. For a startup, success means product/market fit and validation. A third-party vendor sees success only in completing the scope of work. They take on a certain amount of work for an agreed-upon sum of money.
Also, when going the outsourcing route, you need to check your expectations at the door. The third-party vendor doesn’t share the same passion for your product, and their mission isn’t the same mission that drives your company.
Challenge #2 Communication
The cornerstone of any business is communication.
Whether it’s between team members, management, or client and service provider, the language barrier isn’t the biggest concern.
The IT outsourcing provider does not and cannot proactively communicate with the client. Businesses want to be secure in knowing that their partners will communicate with them regularly. A structure must be in place and include a schedule and frequency of communication.
Additionally, there are no escalation mechanisms in general business, issues, and disputes. Anyone who has ever worked a day in their life will tell you – escalation and dispute management are required to solve problems and manage relationships effectively.
Without these mechanisms, you start finger-pointing and playing the blame game. That’s why you need to ensure that issues will be handled through structured frameworks and resolved within a reasonable timeframe.
Challenge #3 Engagement & Initiative
Outsourced workers are not part of your company. They have little investment in the endeavor and have no incentive to improve efficiency.
You might think that outsources is like a mercenary squad of specialists that go in and get the job done no matter how bad the circumstances are. However, this is only good for short-term engagements.
There are none of the non-quantifiable advantages of collegiality, proximity, and communal creativity. So, your hired help is already in the wrong mindset of what it takes to get a product off the ground.
Because software developers don’t see themselves as your employees, but rather workers of the outsourcing company, they just build and code all day. They don’t see the bigger picture, and they probably don’t care.
As you progress along the journey of getting your product built, you may end up pivoting multiple times. To create something that catches on and brings you the success you’re aiming for, it’s vital to leave in only what you have 100% validated. In other words, leave out all the parts that users/clients don’t need or want.i
Challenge #4 Security, Legal & Business Issues
You’ll face a multitude of problems when you host your team at a middleman’s premises and on a middleman’s promises.
That contract you think is protecting you? It might not hold up in court (if it comes to that). Plus, NDAs may mean nothing overseas, so weigh the risks carefully to ensure your interests are being protected.
Nobody ever thinks to look into intellectual property laws in the country they’re outsourcing to. Sounds scary already, right? Well, it gets worse. It turns out that in some countries, the code belongs to the person that wrote it. Sometimes the code can be legally considered property of the vendor as well. These are risks that you simply can’t afford.
Business-wise you’re tied down to the vendor. That means you’re also tied to the company’s financial well-being, just as you would be with any partner. What happens if the vendor goes under? What happens when the taxman comes to visit? Another risk you can’t afford.
Challenge #5 Culture
When Brian Chesky, co-founder & CEO of Airbnb, asked Peter Thiel for the single most important piece of advice for his company, Peter replied, “Don’t f$%# up the culture,”
What’s the driving force in a startup?
What’s the fuel for any successful startup?
Now take your culture and compare it with the culture of the team/vendor you’re hiring — do they match up? In most cases, they don’t!
Outsourced workers will never truly be part of the team, no matter how much they get paid or how many freebies you throw their way. And what’s more — your local (in-house) employees will feel undervalued and confused by your attempts at saving cash.
Challenge #6 Costs
Outsourcing is rarely about finding better talent or more qualified specialists in a different country. It’s all about money. You get more or less the same result, but you spend less, right? Not always.
There can be significant hidden costs associated with signing a contract with an outsourcing company. Often those contracts don’t cover all the details (that’s almost impossible), which means there could be additional charges.
Takeaways: The Solution
It’s time to stop ignoring the truth — the value you expect to get from traditional outsourcing isn’t guaranteed.
But there’s a way to invest in remote teams without involving a middleman — direct-hiring software engineers (or opening a captive R&D branch overseas). All the legal, security, HR, and other processes are covered by our network and team of accountants, lawyers and tech experts.
When we set up Bridge, our biggest mission was to help technology companies tap into the world’s brightest talent pools directly, in a much more transparent, reliable, and affordable manner. And that is still our mission today.