Why Global Sourcing Projects Fail
Not all global sourcing projects fail – many outsourcing companies have great success with global sourcing providers. When a project does fail, there are usually numerous reasons and not just one underlying cause.
Lack of global sourcing vendor strategy
The management of the outsourcing company must have a strategy established for handling IT projects. For example, how will the process be managed? What are the expectations for the offshore resource? Too often, outsourcing companies do not properly prepare for how the projects will be administered. Management should clearly define how global sourcing will be implemented and effectively communicate the strategy to the internal IT department as well as to the vendor.
Underestimated time involved
Outsourcing companies do not always calculate the amount of time it will take to get a project in operation with a global sourcing partner. It takes time and effort to transfer technical and business knowledge to the vendor. Once the transfer is made, hours will be spent maintaining the business relationship.
The outsourcing company and the global sourcing provider also have to coordinate between the teams involved to make sure that everyone understands the details of the project and to communicate the timelines and processes. If an outsourcing company does not account for the extra time it will take for the project, the deadlines set may not be met.
Unrealistic cost-reduction expectation
A project can be unsuccessful if an accurate budget was not put in place. Outsourcing companies sometimes have unrealistic expectations regarding the cost savings associated with global sourcing. Even though labor costs may be lower, there are other hidden costs that can cause a project to go over budget. As the years go by, the cost savings will go up because the global sourcing model will begin to operate efficiently.
Communication barriers
Communication doesn’t just refer to language. Challenges arise when there are various time zones and locations involved. While having an operation that runs virtually 24 hours a day, which is done with an offshore partner, is a major benefit of global sourcing, it can make it very difficult to communicate crucial information in a timely manner. Consequently, this barrier to communication can negatively impact an IT project. By creating a communication plan, including accepted modes of communication and points of contact, this barrier can be eliminated.
Chose an incompetent offshore vendor
When price is the main motivating factor in choosing a vendor, there is a risk of choosing the wrong one. An outsourcing company will find that a low-cost vendor most likely will not provide high quality work. Cost should not be the only criteria in choosing a global sourcing provider. A potential global sourcing partner should also be evaluated on multiple areas, such as trained personnel, technology and processes. A thorough analysis of a prospective vendor will allow the outsourcing company to have a good sense of what to expect.
Cultural differences
The variation in cultures is frequently overlooked when working with a global sourcing provider. However, it can play a major role in the success or failure of an IT project. Cultural differences include religion, mode of dress, social activities and work ethic. Even the way a question is answered can differ depending on the culture. To overcome cultural obstacles, it is important that the outsourcing company takes measures to clearly outline project specifications and encourage feedback from the project managers.
By understanding the common reasons global sourcing projects fail, an outsourcing company can take necessary steps to avoid potential problems. A&E Consulting will work with you to ensure that your IT projects succeed. We will assist you in choosing the right global sourcing provider and establishing the business relationship. In addition, we will manage the first outsourced project to make the transition as smooth as possible.
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