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Home » Articles » 8 IT outsourcing challenges and how to overcome them

8 IT outsourcing challenges and how to overcome them

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This article is a submission by Rootstack. Rootstack is a software development services company focused on helping businesses achieve their digital transformation goals.

The digital transformation that every business sector is going through has led companies to focus on strengthening, improving, and evolving their technologies and all work processes that involve software products.

IT outsourcing is one of the most popular services to take care of the aforementioned digital processes.

In this article, we will explore the most common challenges that arise when outsourcing IT and how they can be solved quickly and accurately.

What is IT outsourcing?

IT outsourcing involves the use of external providers for different work processes, infrastructure solutions, and other technology-based solutions to improve the productivity of the contracting company.

Like any external service, IT outsourcing brings various benefits but also presents challenges. Both the client and the supplier must collaborate to overcome these challenges and achieve a successful business partnership for the desired positive outcome.

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What is IT outsourcing?

8 common IT outsourcing challenges 

Outsourcing IT services can offer a variety of benefits, such as cost savings, access to specialized skills, and greater focus on core business activities. However, it also comes with a number of challenges.

Based on experience and diverse industry applications, these are the common challenges that often arise in IT outsourcing services and how to overcome them:

IT outsourcing challenge #1: Communication barriers

Differences in language, time zones, and cultural nuances can cause misunderstandings. If not resolved appropriately, they can stop the project or lead to an undesired result.

Solution

Both customer and supplier should establish clear communication channels, use collaboration tools, and ensure both parties have a shared understanding of expectations. Regular video conferencing and written documentation can help close communication gaps.

IT outsourcing challenge #2: Quality of service

Concerns about the quality of work performed by the outsourced partner are another challenge. This is one of the most common challenges that must be faced from the first meeting between both parties.

Solution

Implement a robust selection process when choosing an outsourcing partner. Clear quality standards must be defined, periodic reviews must be carried out, and key performance indicators (KPIs) must be established.

Continuous monitoring and feedback mechanisms can help maintain service quality.

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IT outsourcing challenge #3: Data security and privacy

Protect sensitive data when acquiring IT outsourcing solutions. All companies have data, whether internal or external, that must be kept secret. This can be a vulnerable aspect when deciding to involve a third party in the work process.

Solution

Clearly define data privacy and security requirements in the contract. Ensure that the outsourced partner complies with relevant industry regulations and standards.

The client or contracting company must implement an encryption system, protect data transfer protocols, and perform regular security audits.

IT outsourcing challenge #4: Supplier dependency

Overreliance on a single IT outsourcing provider can pose risks. The internal team can lose sight of how some processes are being worked on. This can cause damage to productivity when the provider’s services are no longer available.

Solution

Diversify outsourcing partners where possible to avoid a single point of failure. Develop contingency plans and maintain internal expertise for critical functions.

Encourage collaboration with multiple suppliers to spread risk.

IT outsourcing challenge #5: Cost overruns

Although a budget agreed upon by both parties is always reached before signing a contract, unexpected costs can arise during the outsourcing process.

Solution

Conduct a thorough cost analysis before outsourcing. The contracting company must clearly define the scope of work and the pricing structure in the contract. Include provisions to handle changes in scope and associated costs.

Review and optimize costs periodically through performance evaluations.

IT outsourcing challenge #6: Lack of flexibility

Difficulty adapting to changing business needs and technological advancements. It’s one of the least common IT outsourcing drawbacks on the list. IT providers tend to stay ahead of changes in technology, but it can happen.

Solution

Incorporate flexibility into subcontracting contracts. Include provisions to expand or reduce the scope of work, adjust schedules, and incorporate emerging technologies.

Maintain open communication to address changes promptly.

IT outsourcing challenge #7: Legal and compliance risks

Another disadvantage of IT outsourcing is navigating legal and compliance issues in different jurisdictions.

Solution

Clearly define legal and compliance requirements in the contract. Ensure that the outsourced partner complies with relevant laws and regulations.

Consult legal experts to address any potential risks and establish a legal framework that protects both parties.

IT outsourcing challenge #8: Cultural fit

We have already talked about cultural barriers. We must be aware of the internal culture of the company to be outsourced and ensure that this does not affect work collaboration.

Solution

Assess cultural compatibility during the selection process. Promote cultural exchange programs, team-building activities, and intercultural training.

Foster a collaborative and inclusive work environment.

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8 common IT outsourcing challenges 

Avoid these IT outsourcing challenges 

By proactively addressing these challenges and incorporating effective management strategies, organizations can maximize the benefits of IT outsourcing while minimizing potential risks.

Regular communication, a well-defined contract, and ongoing follow-up are crucial components of a successful outsourcing relationship.

The main goal should always be a harmonious collaboration free of defects and problems between the contractor and the supplier.

It is the client’s responsibility to have clear objectives and establish sincere communication with the IT outsourcing provider. Thus, there will be no loose ends.

Finding an IT consultant or agency is of great importance to achieve the success of the company’s projects and commercial goals. It is best to find an experienced consultant, evaluate them with similar projects and technologies, and verify relevant certifications and training.

Also, trust previous clients and recommendations. Look for the greatest number of references about the agency you want to hire, opinions and testimonials that it has on its website, and success stories.

The goal must be the success of the project. This will only be achieved if there is an appropriate professional relationship between the IT outsourcing provider and the client.

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About Derek Gallimore

Derek Gallimore has been in business for 20 years, outsourcing for over eight years, and has been living in Manila (the heart of global outsourcing) since 2014. Derek is the founder and CEO of Outsource Accelerator, and is regarded as a leading expert on all things outsourcing.

“Excellent service for outsourcing advice and expertise for my business.”

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