- Underestimating the difficulty of maintaining privacy in offshore locations.
- Underestimating the difficulty of maintaining corporate security in offshore locations.
- Failing to investigate or understand the importance of government or corporate restrictions on offshoring information related to national security.
- Failing to take into account unreliable infrastructure, government instability or poor technology in the offshore country.
- Underestimating the impacts of currency fluctuations on the project ROI.
- Underestimating the impacts of rising wages on the project ROI.
- Weak customer service measures.
- No customer preference measures (many customers prefer, and in some cases demand, “local” service).
- Not planning for the possible backlash when customers or the public finds out about offshore work (because of job loss fear or “buy U.S.” preferences).
- Failing to realize that some offshore cultures and employees are unable to quickly adjust to the fast-changing production requirements of fast-changing corporations.
- Offshoring weak or poorly designed processes that cannot be effectively outsourced until they are fixed.
- Utilizing U.S.-based outsource managers who are not trained or skilled in handling the more complicated offshoring model.
- Miscalculating the ramp-up time and costs of offshoring.
- Failing to take into account high employee turnover in highly competitive offshore locations (especially among managers).
- Failing to take into account U.S. managers resisting or sabotaging efforts for personal reasons.
- Failing to understand complexities in offshore country hiring, firing, and benefits laws and practices.
- Over-relying on a single consultant to guide the offshoring process.
- Outsourcing the wrong tasks based on the education and training level of the local population.
- Never planning for or considering the need to pull back from offshoring (for example, if local staff and infrastructure have been dismantled, leaving no options).
- Failing to understand the difficulties in communication and interpretation that can occur between two different languages and cultures.
- Failing to accurately assess technology and communications incompatibility.
If a vendor is used to perform the offshore work, a separate class of problems can also emerge:
- Failing to restrict outsource vendors from further outsourcing your work to other vendors.
- Failing to accurately assess the vendor’s privacy and security controls
- Guarantees not being included in the contract or significant penalties for poor performance being omitted.
- Not requiring a service-level agreement which outlines specific service requirements.
- No measures of service quality delivery (such as error rates or responsiveness).
- Relying on vendor reports rather than independently assessing service quality on your own.
- Failing to check references and accurately assessing the vendor’s track record and capabilities (some vendors that have had a good track record can become overburdened when they too rapidly expand their business).
- Failing to take into account that vendor service levels may drop dramatically after a long-term agreement is signed (once they know you have few options).
- Selecting a vendor using subjective rather than objective screening criteria (which have been validated by other successful firms).
- Vendors’ inability to rapidly adjust their processes and stay in sync with the rapidly changing world of business.
Conclusion When new business models arise, much like new products, it is often those who quickly follow the early adopters who reap the greatest benefits. The pioneers and early adopters experience the brunt of the problems, and then develop solutions which others can leverage to make their initial adoption of the model more successful. Despite political pressures, the necessity of participating in a global economy practically ensures that offshoring is here to stay. Most business are already dealing with offshoring issues, either those of their own doing or those of a vendor they have hired who utilizes offshoring. Smart business leaders will leverage the mistakes of others and learn from the past to decrease the probability of more errors in the future.