The Dark Side of Outsourcing

by

Jan 20
 

Outsourcing is a common practice in today’s business world, with companies seeking to cut costs and access specialized expertise by contracting out certain tasks or functions to third-party vendors. However, while outsourcing can bring many benefits, it also comes with its own set of challenges and potential downsides. In this article, we will explore the dark side of outsourcing, discussing the various communication, cultural, and logistical difficulties that can arise when working with remote teams and vendors.

Worker Exploitation:

Worker exploitation in outsourcing is a growing concern as companies look to cut costs by outsourcing jobs to countries with lower labor standards. This can lead to workers being paid very low wages, forced to work long hours, and subjected to poor and unsafe working conditions that are detrimental to the growth and development of the person. Typically exploitation comes in the form of lowballing fees for skills, zero rest days and even having employees be on call 24/7.

How to Fix?

There are several steps that companies can take to address worker exploitation when outsourcing work to another country: 

Implement a fair practice – code of conduct: Companies should implement a code of conduct that sets out clear standards for working conditions, wages, and worker rights. This code should be communicated to all suppliers and vendors, and should be regularly monitored and enforced by the outsourcing entity.

Conduct regular employee temperature checks: Companies should conduct regular checks to identify any issues with worker exploitation and allow the company to take action to address them.

Encourage transparency and communication: Companies should encourage transparency and communication with their suppliers and vendors, and should be open to receiving feedback from workers. This can help to build trust and promote a culture of respect for worker rights.

Communication barriers and cultural differences

One of the biggest challenges of outsourcing is effectively communicating with remote teams. Due to time zone differences and language barriers, it can be difficult to schedule meetings and ensure that everyone is on the same page. Miscommunication and misunderstandings can also occur, leading to delays, rework, and frustration.

Another major challenge of outsourcing is understanding and navigating cultural norms and expectations. Different cultures may have different ways of communicating, making decisions, or approaching work, and this can lead to confusion and misunderstandings. Additionally, it can be difficult to build trust and long-term relationships with remote teams and vendors, which can impact team dynamics and productivity.

How to Fix?

Establish clear communication channels: Companies should establish clear and regular communication channels with their outsourced teams. This can include regular team meetings, video conferencing, and email communication.

Hire local staff: Companies should consider hiring local staff in the outsourcing country to act as a liaison between the company and the outsourced team. This can help to bridge cultural and communication gaps and ensure that the company’s needs and expectations are clearly understood.

Provide training: Companies should provide training on communication and cultural differences to both the outsourced team and the company’s internal staff. This can help to build understanding and appreciation of different cultures and communication styles.

Embrace cultural differences: Companies should embrace cultural differences and seek to understand the cultural context of the outsourced team. This can help to build trust and create a more positive and productive working relationship. Companies and their staff should be open to learning about the culture, customs, and communication style of the outsourced team and be prepared to adapt their own communication style accordingly.

Data security concerns

Another concern when outsourcing is data security. Companies may be entrusting sensitive information to third-party vendors, which can lead to data breaches and cyber-attacks. It is important for companies to have strict data protection policies in place and to ensure compliance with data protection laws. Additionally, maintaining data privacy and confidentiality can be a challenge when working with remote teams and vendors.

How to Fix?

Conduct thorough background checks: Companies should conduct thorough background checks on their vendors and outsourcing partners to ensure that they have a good track record of data security.

Implement strict data protection policies: Companies should implement strict data protection policies that comply with relevant data protection laws. These policies should be clearly communicated to all vendors and outsourcing partners and enforced regularly.

Use encryption: Companies should use encryption to protect sensitive data when it is transmitted or stored.

Train employees: Companies should train employees on data security best practices and ensure that they understand the importance of protecting sensitive information.

Have incident response plans in place: Companies should have incident response plans in place in case of a data breach. These plans should outline the steps that will be taken to contain the breach and protect sensitive data.

Conduct regular security audits: Companies should conduct regular security audits to identify and address vulnerabilities in their data security systems.

Use secure cloud services: Companies should use secure cloud services to store sensitive data, which can provide additional layers of security and compliance.

Use a third-party security provider: Companies can use a third-party security provider to provide additional security measures such as firewalls and intrusion detection systems.

Limited oversight and accountability

When outsourcing, it can be difficult to monitor and measure performance, and enforcing accountability and discipline can be a challenge. This can impact team motivation and productivity, and may make it difficult to achieve desired outcomes.

How to Fix?

Establish clear expectations and guidelines: Companies should establish clear expectations and guidelines for the outsourced work, and communicate these expectations clearly to the outsourcing partner. This can help to ensure that the work is completed to the required standards and on schedule.

Set up a system for monitoring and reporting: Companies should set up a system for monitoring and reporting on the progress of the outsourced work. This can include regular check-ins, progress reports and performance evaluations.

Use technology to track progress: Companies can use project management software and other tools to track progress and hold the outsourcing partner accountable for meeting milestones and deadlines.

Conduct regular audits: Companies should conduct regular audits of the outsourcing partner’s work to ensure that it meets the required standards and that all guidelines are being followed.

Have a contract in place: Companies should have a contract in place that clearly outlines the expectations, responsibilities, and penalties for non-compliance for both parties.

Have a communication plan: Companies should establish regular communication channels with the outsourcing partner and establish a protocol for addressing issues that arise.

Foster a culture of transparency: Companies should foster a culture of transparency and open communication, and encourage the outsourcing partner to raise any concerns they may have.

Have a fallback plan: Companies should have a fallback plan in place in case the outsourcing partner fails to meet expectations. This can include terminating the contract or finding a new outsourcing partner.

Lack of understanding of local laws and regulations

Understanding and complying with local laws and regulations can be difficult when outsourcing, and navigating cultural and legal differences can be a challenge. This can impact compliance and legal liability.

How to Fix?

Conduct thorough research: Companies should conduct thorough research on the local laws and regulations in the outsourcing country before establishing a partnership. This includes understanding the legal requirements for doing business, labor laws, and data protection regulations.

Hire legal counsel: Companies should hire legal counsel familiar with the outsourcing country’s local laws and regulations. This can help to ensure that the company is in compliance with all relevant laws and regulations.

Stay informed: Companies should stay informed about any changes to the local laws and regulations in the outsourcing country and take steps to ensure that they are in compliance with these changes.

Have a compliance plan in place: Companies should have a compliance plan in place that outlines the steps that will be taken to ensure compliance with local laws and regulations. This plan should be regularly reviewed and updated as needed.

Partner with local organizations: Companies should consider partnering with local organizations that can provide guidance and support in navigating the local laws and regulations. This can include NGOs, trade organizations, or business associations.

Use local experts: Companies should use local experts such as local legal counsel, local recruiters, and local accountants to understand and comply with local laws and regulations.

Have a local presence: Companies should consider having a local presence, such as a local office or local representative that can help to stay informed of local laws and regulations.

Train employees: Companies should train their employees on local laws and regulations and ensure that they understand the importance of compliance.

 

Conclusion

In summary, while outsourcing can bring many advantages to a business, it also poses its own set of difficulties. Amongst the most common challenges companies face when outsourcing are difficulties in communication due to language, cultural disparities, time zone discrepancies, quality control issues, data security concerns, cost management, limited oversight and accountability, and lack of understanding of local laws and regulations. These difficulties can make it hard to build trust and maintain long-term relationships with remote teams and vendors. To make an informed decision on outsourcing, it is essential for companies to weigh the pros and cons and have a well-designed plan in place to address and overcome these challenges. Furthermore, effective management is crucial in ensuring the successful execution of the plan and the mitigation of any difficulties that may arise.

Another common workaround/tried and tested solution to all these challenges is……

Outsource to the Philippines!

See, the Philippines is the #1 destination for outsourcing all over the world. It’s a mature outsourcing destination with the country being an outsourcing destination since the 70’s. That’s more than 50 years!

Outsourcing in the Philippines can offer companies access to a skilled workforce, a lower cost of labor, and cultural compatibility. The Philippines government support and the IT industry, good internet infrastructure, proximity to other major outsourcing countries and English proficiency all make it a good idea for companies to outsource in the Philippines.

And what better way to start your outsourcing destination than by avoiding the complexities and pitfalls? Give us a call and we’ll help you get started here in the Philippines.

Partner with ADDMORE who can help you navigate all of these costs effectively and efficiently.

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