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  • Outsourcing Failures Internationally

    Many businesses love the fact that outsourcing work to another country because of the cheap labor is good for their profits.

    Does anyone know of some failures that could occur because of outsourcing internationally? It's not worth risking profits if your business is failing due to something you didn't expect to occur when you started outsourcing your work to that other country 2,000 miles away.

  • #2
    Re: Outsourcing Failures Internationally

    Originally posted by hades_leae View Post
    Many businesses love the fact that outsourcing work to another country because of the cheap labor is good for their profits.

    Does anyone know of some failures that could occur because of outsourcing internationally? It's not worth risking profits if your business is failing due to something you didn't expect to occur when you started outsourcing your work to that other country 2,000 miles away.
    I outsource regularly, but I have suffered from such mistakes and failures. Some of the mistakes which hampered my business were:

    • Not asking for Daily reports
    • Not scrutinizing the work in initial days
    • Not monitoring the number of working hours
    • Disclosing Excessive Info of business to outsourced employees


    These are all the mistakes which I have committed in the past, due to which my business has suffered. Since then though I have rectified all of these mistakes.

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    • #3
      Re: Outsourcing Failures Internationally

      Well I know that there is a pretty big public image hit for some companies who make the decision to outsource. If there are questionable practices in the country that it gets outsourced too as well, then you are really in for a PR battle. I am sure that there are some cases when the decision has backfired, but nothing is really coming to mind right away. I would be curious to see what the main reason for any failures would be though, and I wonder how much of it is public image related.

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      • #4
        Re: Outsourcing Failures Internationally

        There are so many foreign companies here that outsource the local labor force particularly for the call center. The Philippines is one of the best outsourcing place for call center agents because reputedly we have the best and the brightest in the field. But there is one industry that also outsource the local labor force which is computer programming. We have good programmers here that do the programming for foreign companies. Some are okay and progressive but some also fail. One actual example is a Japanese software house that outsourced an entire team of programmers and project managers. It failed because of the fault of the interpreters who messed up the communications.

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        • #5
          Re: Outsourcing Failures Internationally

          Originally posted by hades_leae View Post
          Many businesses love the fact that outsourcing work to another country because of the cheap labor is good for their profits.

          Does anyone know of some failures that could occur because of outsourcing internationally? It's not worth risking profits if your business is failing due to something you didn't expect to occur when you started outsourcing your work to that other country 2,000 miles away.
          Im not sure that they do it only for the wages, there are many many other cost-related factors at play (not least of which that some countries actually pay the company to open a branch so the local corrupt autocrat can brag and say "look I'm taking care of the economy") but anyway...

          I personally know of one issue with a call center, long story short some of the young desperate people that this company was employing in a third world country as modern day salves, were caught selling iphone unlocking codes. They didn't really think they were doing something grave because no one explained to them that this was a serious breach of confidentiality. It may seem natural to the foreign management but this stuff is not obvious in such countries where there is almost zero culture of professionalism/deontology etc, and where everything is often conceived of with the same prism as friends & family stuff.

          Generally there are some things that should never ever be outsourced, unless you, as management, know where you're putting your foot, which -case above as an example- is seldom the case. Would you trust "name your backward kleptocracy/mafia state" run by a bunch immature careless nabobs with the handling of sensitive data such as credit card numbers, private data etc? Yeah me neither. I wouldn't even get web hosting in a such country because they could, e.g., sell your database password for 10 bucks and get you hacked big time and it will all be just a game to them, because there is no accountability no true state no judiciary nothing.

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          • #6
            Re: Outsourcing Failures Internationally

            If planned carefully, the losses incurred through outsourcing will be compensated as soon as the company starts earning revenues. Outsourcing will only fail if the client and the outsourcing firm do not see eye to eye. How the outsourcing firm is being managed can also affect success.

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            • #7
              Re: Outsourcing Failures Internationally

              I have heard some stories where the product concepts got stolen and sold for cheaper so the ones who outsourced essentially just created their own competition, though to be fair there is no telling that this would not have happened anyway even if they didn't outsource since the product isn't that complex anyway, or to be more precise it can also be argued that it may not be a problem with outsourcing itself but maybe just the company that they ultimately chose to use.

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              • #8
                Re: Outsourcing Failures Internationally

                Outsourcing can be risky anytime but if your outsourcing to another country entirely then the risks can be doubled. I'm sure that every business owner will undertake the necessary due diligence to make sure that the company that they choose to use is fit for purpose, if that company is in another country it makes it twice as hard to make sure that they will then continue to maintain the standards that you desire.

                With a lot of companies, as soon as they have been awarded the contract then it's only natural for them to let their standards slip, and while sometimes that isn't an issue because you can continue to monitor them and what they do, if they are in another country sometimes it's not always that easy.

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                • #9
                  Re: Outsourcing Failures Internationally

                  Many people fail to understand the true costs or risks of offshoring product development. I know Many small business and websites that since they lack sufficient funding or profits will quickly look overseas to find an affordable development team. Unfortunately for these companies, in the long run in can do more harm than good. While it is true that a merit of outsourcing is that it should help you save money in comparison with employing a full-time employee, this doesn't mean you should be a cheap jerk by taking advantages from the misery's conditions of a foreign country. The lowest rates often come with a higher cost--poor quality. In other words, you get what you pay for. Create a reasonable budget and stick to it. Never compromise quality to save a few dollars.

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                  • #10
                    Re: Outsourcing Failures Internationally

                    "Not scrutinizing the work in initial days", that is a good one, I never thought about that one. "Not monitoring the number of working hours, Disclosing Excessive Info of business to outsourced employees", those are good ones as well. Disclosing excessive info is something I had in mind as well because I don't want the business info out and about, especially overseas.

                    Not monitoring hours is one of the most important things I must pay attention to, were you talking about people working too much over time, or is it something else?

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                    • #11
                      Re: Outsourcing Failures Internationally

                      I dont know if there have been many failures in the outsourcing jobs to foreign countries regime. The problem would probably arise from misappropriation of resources than anything else. The reason for most of these outsourcing activities are the advantages, from tax breaks, concessions and low wages. Whaterver reduction in revenue would mostly be derived from lower demand which would be the same as it was in the home country. These companies are always looking to exploit better advantages, hence, the frequent shif from country to country.

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                      • #12
                        Re: Outsourcing Failures Internationally

                        Originally posted by Norm View Post
                        I have heard some stories where the product concepts got stolen and sold for cheaper so the ones who outsourced essentially just created their own competition, though to be fair there is no telling that this would not have happened anyway even if they didn't outsource since the product isn't that complex anyway, or to be more precise it can also be argued that it may not be a problem with outsourcing itself but maybe just the company that they ultimately chose to use.
                        This is very possible to happen and I guess there are cases like that particularly in the 3rd world countries. The rule of the mother companies in outsourcing is to outsource only the workers in the lower level of hierarchy so they can still have full control of their business. Like the company of Coke, they are very careful with the formula for there were countless of attempts of stealing the well-guarded formula because for sure that formula will be bought by the competition at a high price.

                        Comment


                        • #13
                          Re: Outsourcing Failures Internationally

                          Originally posted by Corzhens View Post
                          This is very possible to happen and I guess there are cases like that particularly in the 3rd world countries. The rule of the mother companies in outsourcing is to outsource only the workers in the lower level of hierarchy so they can still have full control of their business. Like the company of Coke, they are very careful with the formula for there were countless of attempts of stealing the well-guarded formula because for sure that formula will be bought by the competition at a high price.
                          I heard that once an employee of coca cola went to Pepsi trying to sell them the secret formula and the employee was reported to the head of coke by the head of Pepsi. It gave me great pleasure and hope knowing that happened because stories like that make me feel like there is a chance for everyone to stay civilized while still being in competition and that we don't have to turn ourselves into criminals just to get ahead.

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                          • #14
                            Re: Outsourcing Failures Internationally

                            I know of one outsourcing that failed. The company wrote secure code for a very secure product, I'm not saying what as it would be identifiable. As a result the coders were well paid. A new manager decided that to save money, they would simply outsource the coding overseas and let the coders go, because coders were inmterchangeable...

                            Except that the code that came back did not match the international standards that were needed for the product, and the company quickly discovered that training the coders at the outsourced company up would be several times more expensive than running their own department had been, since the coders at the outsource company kept taking the training and going elsewhere for more money. They ended up effectively rehiring their coders to check and correct the code coming in from the outsourcers until the contract ran out. It cost them a substantial amount of money because they didn't check exactly what they were outsourcing.

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                            • #15
                              Re: Outsourcing Failures Internationally

                              When it comes to outsourcing internationally, many failures may present themselves. Cultural and language lack of communication is, perhaps, one of the biggest here. Not being able to reprimand poor performance, or not being present to do so, is also another major sub-problem presented here. There are many others out there....

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