Why outsourcing fails and what to do about it

Why outsourcing fails and what to do about it

Outsourcing has success stories as well as disaster stories.

The disaster stories go from absolutely horrible to situations where some money is lost. In this post we’ll discuss how to make sure your outsourcing story becomes closer to a success story than a disaster story.

Disaster stories with outsourcing.

I got two disaster stories I want to share. The first one is absolutely horrible, and the second one is just “lost money”.

Story number one starts with a friend of mine. He is the market leader in an interesting niche in Denmark (~200k USD revenue a year). It’s a digital product that requires some programming every year.

To save some money, he outsourced this to a company in East Europe. As every new marriage, it started out great:
Fast turnaround time, plenty of new features and very affordable.

Time went on. Slowly quality fell. Turnaround time went up. Bugs were introduced. More and more errors occurred.

Then the disasters started. URLs started to change without it being allowed – this resulted in traffic from Google instantly DYING. One Friday afternoon developers went home after releasing some stuff – but could you purchase anything? Absolutely not.

Things only got worse. This team managed to delete some important production data. Loss in traffic. Less and less trust in the brand.

How do you save yourself in a situation like this? That is very difficult. My friend decided to stop working with the team, but then they stopped responding to requests to deliver the source code…

It went on.

Luckily my friend got the code back, got a Danish developer on the task and now it’s getting closer to its former strength.

Ouch.

Story number two starts with an earlier customer of mine – a real entrepreneur. He decided to make his prototype in India (the good old story).

The Indian developer kept confirming: “Yes, yes, I understand the task.” 3 weeks went by, where the developer kept confirming: “It will be done by end of week, sir.”

And no deliveries were made.

2 more weeks went by. No delivery. My former customer started to make demands.

A week more went on.

No results.

Then my former customer made a demand: “I am going to stop this collaboration if this project isn’t delivered tomorrow, and try to get all my money back” (the project was made on the outsourcing platform Elance, now Upwork).

Suddenly the Indian could “deliver”. The website was put onto the test server.

Exciting day.

Only… It was nothing like expected:

  • Wrong design
  • Functionality was wrong
  • No usability
  • Errors on most functions

This kept on, until the project was cancelled and my earlier customer ended up paying ~4.000 USD for nothing.

Now, the money is obviously annoying – but 2 months(!) were wasted on nothing.

Does all outsourcing have to be a disaster story?

Absolutely not.

It really comes down to some key differences in how you approach it.

I see it in my own business too. Some of my customers would fail miserably if they attempted normal outsourcing themselves, some of them would probably do just fine.

While I don’t have any research to support my thinking, I see two very big things when it comes to success/disaster in outsourcing:

  • The right partner.
  • The attention to details.

The right partner.

I won’t spend much time on this. Just as there are horrible hair dressers and wonderful hair dressers, there are both horrible and wonderful outsourcing companies.

It’s all about finding the right partner, who is both trustworthy and able to deliver high quality.

How to find a good partner? Use us of course 😉 !

No, seriously. While you’re of course welcome to use us, it’s a tough one. Ask friends and business partners, read reviews and make sure you don’t pay too little.

When that’s covered, you can actually make a huge difference with the next point:

The attention to details.

There are very different ways of explaining a project.

Let me start out with two real-life examples with different customers:

“I want the user to be able to log in on my website.”

vs

On our website we want users to have a profile. The profile should have address information, e-mail, name, phone number and a VAT ID. We should be able to create the users inside the admin interface, and it should be possible to log in with an e-mail and password for the users.”

Without a doubt, the second explanation will be better.

Unfortunately, neither will most likely work very well if you outsource. Even the second one is way too unspecific:

  • Where in the admin interface?
  • Should there be a reset password functionality?
  • Should the user get an email about it was registered?
  • [Insert a lot of questions]

So to succeed with this, you need to make everything EXTREMELY detailed: mockups, explain use cases and go into pixel-detail on everything.

Even then, it might fail sometimes. Sometimes it requires a technical specification as well (how the programming should be done).

But this takes a lot of time!”

And this is why outsourcing sometimes becomes a disaster story.

My friends in disaster story #1 and #2 made a huge mistake. They assumed that when you outsource you get the price benefits “for free”. You save money AND everything stays the same.

No.

When you start outsourcing, you have to respect that level of detail becomes insanely important. The devil is in the details.

And this is why outsourcing is not for everyone. Some of our customers could easily have outsourced and paid 20 USD an hour, instead they pay us 40 USD an hour – why?
Because we deliver a system where they can be extremely vague about their ideas, and we still make sure it is implemented as they expectWe ask all the important questions plus we understand technical architecture.

You always have to make a choice.

If you’re 21 years old and you’re studying at university, then it’s both an extremely good learning experience + economically sound to outsource to 10 USD an hour.

If you’re trying to run a business you should probably get someone professional to do it, so you can focus on earning money instead***.

What is your alternative to outsourcing?

  • Employees. Which is great if you have the money and stability.
  • Consultants. Which is great if you have a ton of money.

Now I hate when people go all “self-promotion” on their blog, but there is also a third option. There is a new breed of companies, that handles your outsourcing and gives you a Western project manager. We are one of them, others are TryGigster and X-Team. This breed of companies is very affordable compared to alternatives, and they bring very high quality.

Of course it’s cheaper to do your own outsourcing to wherever, but that is the main point of this post:
Choose what you have time for. If you have plenty of free time, I’d strongly suggest outsourcing on your own. If you are a busy person – I strongly suggest you go for some of the optioned mentioned above.

If you want to hear more from us, you’re of course welcome to contact us or discuss a project with us. Please also check our competitors TryGigster and X-Team out – they’re also doing awesome work.

[*** But why are big companies doing outsourcing – you’re saying they should stop doing that? Absolutely not – when you become bigger you have an IT department which understands how to do detailed specifications. I was paid – very well – to manage a team before I started Jarboo. The only thing I did was to make sure a remote team of 5-10 people did the correct thing.]

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