Risk Mitigation in Offshoring
In general, there are risks involved in offshoring since you are exposing some of your business functions to another company, but there are ways to reduce the impact of these challenges. Here are the common risk factors in offshoring and ways to mitigate them:
- Communication barriers / difficulties
While many service providers can speak and understand English, certain aspects such as time zone differences make communication difficult for both parties. Some service providers assign staff dedicated as the first point of contact to quickly address problems and relay updates. This helps in establishing a good and smooth working relationship with buyers. Video conferencing, chat, and email make communication with people from any point of the world easier. In offshoring, it is very important to hold regular meetings and for the vendor to provide a weekly report about the status of the project.
- Unclear requirements
Poorly defined project specifications will lead to various problems later on and they are usually costly, so the entire idea of offshoring to cut costs will be pointless. You cannot outsource work without the very crucial step of analyzing your requirements, and this does not stop at sending a project brief or overview. To avoid having problems, start the offshoring process by providing detailed project specifications. In this way, both parties would know how a particular project should be done.
- Data security / Protection of intellectual property
The level of security risk is raised when you outsource business processes offshore. Offshoring players are constantly reminded to take a closer look at their contracts and service level agreements but unfortunately, some companies still fail to do so. To reduce the risk of data theft and other security-related issues, share only what is necessary. Verify that the service provider enforces information security management policy. Both parties should address privacy concerns as well as licensing and ownership of source code made in the duration of the outsourced project. Also, the buyer and service provider must be aware of their responsibilities should there be any problems in data security and intellectual property.
- Failure to deliver
Offshoring means you trust the service provider to do the work for you. The problem comes in when it failed to deliver on time or the project is not done based on what youíve discussed. That is why it is important to choose a reputable service provider, with an impressive track record in handling clients and service delivery.
- Cultural differences
This risk factor affects not only the communication process but also the overall management and work styles and attitudes. Bear in mind that work practices in Western countries are different from those in Asian nations. To mitigate this risk factor, buyers can go for service providers with a cultural background that is compatible with the Western culture.
The key to having a good and long-lasting offshoring relationship is to understand and accept that the process comes with various risks. Both parties must work hard together to mitigate those risks and meet each otherís business goals.