Key Takeaways
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Set specific goals and establish what is expected from the start to avoid confusion and scope creep during the course of outsourced work.
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To make outsourcing work, select contractors for the long-term value they can provide and their demonstrated track-record, rather than the lowest cost.
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Develop rigorous communication and collaboration channels to ensure continued oversight, transparency, and accountability through governance structures.
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Counter cultural differences with training and frank discussion to encourage positive cooperation between internal teams and their external outsourcing partners.
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Adopting technology tools for continuous project monitoring, performance tracking, and automated reporting can improve decision-making and transparency.
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Encourage an iterative process Foster an ongoing evaluation of outcomes, collection of feedback, and adjustment of tactics to meet evolving business objectives.
First, outsourcing failed before because teams did not have clearly defined objectives, consistent methods of communication, and proper oversight on deliverables. What I witnessed were missed deadlines, crossed wires, and a chasm between what each party believed was correct.
Where things fell apart was when folks began trying to nickel-and-dime and relying too heavily on the buzzword-y jargon. They didn’t set boundaries on schedule, budget, and accountability.
To avoid a repeat, I lay straight with obvious goals, plain language, and regular updates. You’re going to achieve a much better fit by working with a team that understands how you work and is aligned with your long-term objectives.
In this post, I’ll lay out why it hasn’t worked in the past. After that, I’ll provide practical advice to give you actual, tangible benefits from outsourcing, saving you thousands of hours and loads of frustration.
What Went Wrong Before?
Even the most experienced teams can be tripped up by outsourcing failures when they allow the fundamentals to fall by the wayside. Soon, many outsourcing projects were facing delays as they found out that communication deteriorated almost immediately. Teams communicating over each other, missed updates, and even basic questions caused a backlog of weeks.
When Accenture failed to meet basic platform requirements, their outsourcing solution only functioned within North America. Without transparent, continuous communication, enormous chasms develop between expectations and reality, leading to costly problems in the outsourcing process.
Cultural gaps are a huge factor as well. Often, it’s hard transitions, like different work styles or feedback habits, that create that surprise. For instance, the Navy and EDS failed because neither party defined clear boundaries on who gets to make decisions, resulting in poor knowledge transfer.
This created a blind spot for both parties, and EDS eventually lost over $500 million in assets. When cultures collide, straightforward outsourcing solutions turn into complex problems. As an illustration, Navitaire’s last minute switch to a backup drive posed huge challenges.
Unclear Goals and Scope Creep
Failing to clearly articulate what you’re looking for creates an environment for mission creep. RBS’s 2012 banking disaster stemmed from lack of defined responsibilities and moving goalposts. You don’t just need a plan, you need a plan that has specific actionable steps defined, timelines, clear accountability, and a checklist of things that need to happen.
Otherwise, you’ll have some pulling one way and some pulling the other way.
Choosing Price Over Value
Choosing an outsourcing provider based solely on price often leads to outsourcing failures. J.P. Morgan’s attempt to save costs with IBM resulted in a staggering project cost of $1.2 billion—16,000% over budget. Successful outsourcing relationships are built on demonstrated outcomes rather than just the lowest bid.
Poor Communication Breakdowns
Without those basic mechanisms in place, including adequate technology infrastructure and regular conversations, outsourcing failures can occur. Using tools that track tasks and keeping notes helps everyone see where things stand.
Hidden Costs Erode Savings
Outsourcing has hidden costs that may not be immediately apparent, such as legal fees and travel expenses, often stemming from outsourcing failures. Queensland learned this lesson the hard way when it attempted to cut costs by bypassing the procurement process, resulting in costly problems with IBM.
Loss of Control and Oversight
Even when you outsource work, you don’t get to stop looking. Defined parameters, defined roles, and defined deliverables help mitigate outsourcing problems and ensure everyone’s time is used wisely.
Ignoring Cultural Differences
Teams are most successful when they understand and appreciate each other’s style, which is crucial for avoiding outsourcing failures. A simple list helps: set norms, swap feedback, and train teams.
Lack of Strategic Alignment
Your outsourcing efforts need to reflect your overall high-level aspirations. The U.S. is the only country that spends more than 3% of its GDP on outsourcing services. You only realize that value when the outsourcing solutions fit your unique circumstances perfectly.
Redefine Your Outsourcing Strategy
Since then, a lot has changed in the world of outsourcing. Digitalization and globalization continue to raise the bar on customer expectations. This dynamic has changed the game, and I believe leaders in logistics today require a new perspective on how to successfully plot a course through outsourcing.
The numbers are astonishing and tell the story. According to the latest Dun & Bradstreet report, as many as 50% of outsourcing deals end in failure within five years, pointing to an imperative for a different approach that is sorely needed. Now, outsourcing is not simply a place to save dollars today—it fuels true transformational business.
Align Outsourcing with Core Goals
For outsourcing to be a mutually rewarding arrangement, I begin with my overarching business objectives. Each and every project must connect all the way up to what really matters—whether that’s improving speed, increasing customer service, or better controlling costs.
When the team understands these objectives, everyone is working towards the same end. So if I know I want improved customer support, I turn up the dial on my partner’s response time and customer satisfaction score. Here’s a checklist I use: define the goal, map it to a project, and share it with all team members.
Focus on Value, Not Just Cost
I don’t just look at the sticker price. More than ever before, what’s most valuable is quality and new ideas. A vendor might offer lower costs, but if they bring new tech or smarter ways of working, that’s real value.
I created a grid to evaluate vendors based on value-added services. They had better support, speed, and technology skills. It helps the entire project team understand what the long-term return on investment should be and thereby make the better decision.
Treat Vendors as Partners
A collaborative, mutually beneficial relationship with vendors leads to stronger program results. With difficult work ahead, I negotiate collaboratively on mutually beneficial objectives and measurable outcomes focused on powerful rewards for achievement.
An easy-to-understand incentive structure and frequent communication go a long way toward establishing trust. A shared inbox and central database ensure that everyone is on the same page. This is even more critical in cross-cultural collaboration, as in the U.S. Japan.
Make Outsourcing Succeed This Time
Though significant, outsourcing in the U.S. Only adds about 3% of total GDP. This goes to show just how much companies are relying on outside help. Yet, many past failures stem from bypassed phases, muddled objectives, or selecting an unsuitable vendor. Each part of the journey is important to making outsourcing work, this time.
Prioritize impact by clarifying your goals and fostering collaboration to ensure outsourcing succeeds this time around.
1. Set Crystal-Clear Objectives First
Begin with outcomes that are specific, measurable and trackable. Ensure that these expectations are achievable. Provide vendors with reasonable timelines based on the scope of the work, rather than forcing unreasonable deadlines.
When every team is aware of the common goals, you’re more likely to have everyone—SHRMs or other teams—rowing in the same direction. Here are essentials for guiding your project:
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Finish on time and on budget
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Hit key milestones
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Meet agreed quality standards
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Stick to planned costs
Return to goals in regular intervals to ensure everyone stays oriented and accountable.
2. Select Vendors Rigorously
Thoroughly vet vendors from the start and during onboarding. Research their previous undertakings, converse with their personnel, and employ a project selection guide.
This process serves to identify any gaps or refueling issues before they become a crisis. Look for:
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Technical skill
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Past project results
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Team experience
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Fit with your needs
3. Craft Watertight Agreements
A solid contract clearly defines what each party needs to bring to the table. Implement service level agreements (SLAs) that have clearly defined parameters and metrics to gauge work performance.
Templates can help expedite this process and ensure fairness.
4. Establish Robust Communication Channels
Leverage technology tools such as Slack, Zoom, and project management trackers. Regularly convene and take minutes of every discussion.
This helps to ensure that everyone stays aligned and that issues are readily identifiable.
Build Strong Vendor Relationships
To make outsourcing succeed, these strong connections with vendors require much more than a signed contract. Trust is developed when both parties communicate frequently, openly, and transparently. Teams that collaborate on a daily or weekly basis are able to easily exchange information and deliver fast, meaningful feedback.
This strategy allows them to prevent minor concerns from developing into major complications. When both sides set clear targets like a high customer satisfaction score or a quick fix time, it helps set the bar. These objectives outline the definition of excellence and hold both parties accountable.
Prioritize Open Dialogue Always
Honest conversation is essential. I instituted regular check-ins, often short phone calls, sometimes more detailed meetings. Written notes from these discussions improve accountability, ensuring that we all do our part to stay on track and deliver on what we agreed to.
A good list of questions I use: How is the work going? So what’s holding you back? How can we inform one another to be of greater assistance? What should happen instead? This helps ensure competitive play and transparency.
Invest in Cultural Understanding
So I invest time learning their processes and identifying what’s important to them. We host rapid co-creative training sessions during which both teams expose each other to their work culture practices and frameworks of thought.
We usually have a day where we celebrate an important day from each group’s culture. Here’s a quick checklist for this: swap stories about work days, share meals, teach a word or two from another language. This allows us to be most successful in collaborating together.
Create Mutual Accountability Structures
I ensure that we establish specific, measurable objectives for both parties. We conduct postproject reviews to figure out what we did right and what we can improve. We negotiate outcomes, cross-cutting themes, etc. That require both of us to contribute.
Here’s a simple table:
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Measure |
Vendor Role |
Client Role |
|---|---|---|
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Customer Satisfaction |
Track and share data |
Give feedback |
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Fix Time |
Report on speed |
Flag slow fixes |
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Team Updates |
Send daily notes |
Review and reply |
Measure Success Beyond Cost Savings
Success when outsourcing goes far beyond cost savings alone. When we only look at dollar signs, we miss out on other gains like sharper processes, happier teams, and better goods or services. It costs when all we track are the cheap whatevers.
A comprehensive review requires considering the dollar figures, but the transformations we’re beginning to experience in our everyday work. If we can save $50,000 on payroll annually, we have succeeded.
Wait—we need to factor in that $15,000 we spend just to get the vendor up to speed. Account for savings, like decreased payroll and lower building costs. Implement this in addition to measuring the real Return on Investment (ROI) for a full financial picture.
Track Quality and Innovation Gains
As with all procurements, quality is equally important as cost. When we augment with external expertise, we can look out for better solutions or more efficient modes of operation.
For example, if one partner develops a great new solution or tool, that’s a success. While there will be larger capital wins to pursue, we can continue to measure success beyond cost savings with quarterly or bi-annual check-ins and tracking.
A handy checklist for quality might include: error rates, user feedback, downtime, and speed of delivery.
Monitor Impact on Core Business
Outsourcing is meant to improve planners’ day-to-day work life—not the opposite. We measure success not only by how it informs our vision, expedites the process or pleases the public.
For instance, we can lay out before-and-after numbers for things like how fast we answer calls or fill orders:
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Metric |
Before Outsourcing |
After Outsourcing |
|---|---|---|
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Response time (mins) |
30 |
15 |
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Customer rating |
3.5/5 |
4.2/5 |
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Orders filled/day |
100 |
140 |
Evaluate Strategic Value Added
We don’t just need to save money — we need to ensure outsourcing aligns with our overarching long-term goals. Measuring this looks like: Does this opportunity fit with our overall strategy and objectives?
Positive indicators would be the acquisition of new skills, entry into new markets, or development of a more robust brand identity. Here’s what we track:
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Skills gained
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New markets reached
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Brand strength
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Aligns with company vision
Integrate Technology for Better Oversight
Integrating technology into how we monitor and manage our use of the private sector arms-length provides greater transparency, accountability, and oversight. Increasingly, these companies are being held accountable through a lack of direct supervision and shared governing.
At the same time, there’s a growing lack of sponsors overseeing CRO work. With the tools available today, we can track real-time project progress. Now, everyone working on the project has the same information and updates available to them at the same time.
They can only discover this sort of information through dashboards or other shared platforms. Yet most teams continue to avoid using industry-standard metrics, despite the fact that it is essential for equitable tracking and meaningful goal-setting.
Use Collaboration Tools Effectively
Choosing the best platform creates seamless communication and collaboration among teams. Cloud-based collaboration tools such as Slack, Microsoft Teams, and Trello allow seamless sharing of notes, files, and updates.
Proper training is essential—every member of your team needs to be aware of how to use these types of tools to help with assignments and schedules. Regularly checking in to see how those tools are being utilized helps ensure the ship continues sailing smoothly.
Here are some of our top picks for outsourcing:
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Slack
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Microsoft Teams
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Trello
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Asana
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Zoom
Implement Performance Monitoring Systems
Performance tracking keeps vendors on task and helps us spot slowdowns. Gone are the days when the majority of firms operate under a fee-for-service or functional service mentality.
Unfortunately, only 12% use common metrics, preventing us from making important strides. Well-established systems such as SAP Fieldglass, Workday, or Smartsheet allow us to establish service levels and rules for shared risk.
Here’s a quick look:
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System |
Key Feature |
Best For |
|---|---|---|
|
SAP Fieldglass |
Vendor tracking |
Large vendor networks |
|
Workday |
Data integration |
HR and task oversight |
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Smartsheet |
Task management |
Day-to-day tracking |
Automate Reporting Where Possible
Automated reporting ensures that all stakeholders are informed, without the need for someone to manually search for information. Dashboards give a quick look at KPIs, while tools like Tableau, Power BI, and Google Data Studio build reports fast.
Here’s a checklist for reporting tools:
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Tableau
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Power BI
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Google Data Studio
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Looker
Learn, Adapt, and Improve Continuously
As outsourcing has become inextricably interlaced with the fabric of everyday business, the majority of outsourcing projects today still underperform. The true progress lies in your determination to advocate for lasting transformation and your willingness to be surprised by new paths. As the head of a creative enterprise, you’re constantly refining and expanding the products and services you create, applying new technology and innovative processes in your outsourcing efforts.
No matter how collaborative your process might be, it always gets you farther to stop more frequently and allow time for reflection. This practice allows you to quickly address issues and adjust your strategy so you can maximize results. A culture of continuous improvement and growth within outsourcing teams allows for weak areas to be identified before they become an issue, ultimately preventing outsourcing failures.
Early and often check-ins, transparent conversations, and candid feedback foster trust and propel work forward. You see it with today’s engineering organizations, where velocity and experimentation are the most important things in the world. Too many projects die on the vine because departments fail to communicate, or project objectives change on a dime.
According to some reports, as many as 50% of all outsourcing deals fail before the five-year mark. This occurs when there’s a disconnect in messaging, misalignment of objectives, lack of clear timelines, or failure to follow up on outsourcing agreements.
Best practices for constant growth in outsourcing include:
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Set up weekly or monthly meetings with your partners.
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Share clear goals and deadlines from the start.
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Keep lines open for questions or updates.
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Give honest feedback and ask for the same.
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Document lessons learned and use them next time.
Conduct Regular Performance Reviews
From tweaking your program to guiding your long-range planning, you’ll find more effective solutions when you inspect progress at a regular interval. Engage every stakeholder—from your team to your collaborators partners—to capture the complete narrative.
Keep a list of successes and things that require improvement. A performance review checklist includes:
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Did the team meet set deadlines?
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Was the work up to standard?
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Were there any roadblocks or delays?
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How was the communication flow?
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What actions can improve next time?
Solicit Feedback from Both Sides
Transparent conversations like these allow you and your partners to identify what is working and contribute to everyone’s success. Whether through quick electronic surveys or facilitated team conversations, this qualitative input is invaluable.
When you listen, you discover how to be more effective partners. Sample feedback questions include:
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What made work smooth?
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Where did things slow down?
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Did both sides understand project goals?
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How did updates get shared?
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What would you change?
Adjust Strategies Based on Results
Evaluate the success of each initiative and adapt throughout the process. Be adaptable and transparent when you change direction.
A checklist for when to tweak your approach includes:
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Missed deadlines or cost overruns
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Low output quality
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Drop in team morale
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Changes in business goals
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New tech or market trends
Conclusion
Here’s what truly makes outsourcing work—or flop. As it turns out, concrete plans, frank discussions and genuine collaboration get stuff done. It’s not about taking a shot in the dark. I create trust with my partners because I lead with both our wins and our misses. The ultimate benefits lie in better quality work product and quicker outcomes. They save more than just bills though—they are the primary way they help us reduce stress on my team. Through basic metrics and basic tests, I help create a frictionless experience and identify friction quickly. Validation with prototypes, interaction testing, etc. I iterate, I refine, I correct and I persist. I like to keep it honest, transparent, and equitable. Not only do you have a smoother experience, but you achieve higher impact and lower annoyance. Keen to witness meaningful implementation? First, begin with a culture of trust, second remain continuously learning, and third, make it user-friendly. Contact us to tell us about your success stories—or your retired grievances. Together, let’s learn from one another.
Frequently Asked Questions
Why did outsourcing often fail in the past?
That’s because many outsourcing implementations failed the last time around due to inadequate planning, unclear goals, and poor communication. Businesses expected immediate savings from outsourcing services without considering quality, culture, or alignment with their outsourcing provider.
How can I redefine my outsourcing strategy for better results?
First, you need to set clear outcomes and develop specific requirements for your outsourcing projects while establishing achievable timelines. Prioritize long-term value over cost reductions and focus on quality outsourcing solutions and flexibility above all else.
What steps help outsourcing succeed today?
Choose the right outsourcing provider to establish clear communication and goals, while maintaining transparency. Continuously track progress on outsourced projects and adjust course if necessary. Make relationship management a priority.
Why is building strong vendor relationships important?
Healthy relationships enhance trust, collaboration, and creative solutions to outsourcing problems. This is done on the front end, resulting in clearer, higher quality results with less room for misunderstanding.
Should I measure outsourcing success only by cost savings?
No, they should measure success by improvements in quality, innovation, and business outcomes—not simply by lower spending in outsourcing services. Seek to improve and delight your customers.
How does technology improve outsourcing oversight?
Through technology, it was able to provide real-time data, automate many of the processes, and enforce accountability. Now, implementing dashboards and collaboration tools can enhance outsourcing services to track performance and spot outsourcing problems early, before it’s too late.
What’s the best way to ensure continuous improvement in outsourcing?
Hold frequent performance check-ins to mitigate outsourcing problems. Look to past outsourcing failures, change approaches, and channel resources toward on-the-ground engagement to ensure a successful outsourcing relationship. Never become complacent, or you will be left behind by your competitors and changing client needs or market conditions.