10 Rules for your First Outsourcing Project

Last week I had a chance to connect with an old friend of mine – a serial entrepreneur, a pioneer of electronic commerce and outsourcing survivor. His first outsourcing initiative turned out a complete disaster and almost cost him the company. The human memory works in very peculiar way – we look back through pink spectacles – most of the negative events of the past do not seem nearly as painful as they felt at the moment. Yet John did not have any sentimental memories about his outsourcing attempt or anything good to say about the experience his team went through. He, as most successful business people, doesn’t blame someone for it, learned from it, and I am certain that if he ever goes through another outsourcing deal it won’t be anything close to the ordeal he went through. That’s if he ever tries outsourcing again…

So, what do you need to do to make sure that your first outsourcing project doesn’t become the last one?

1. Do your homework. You wouldn’t attempt to fly airplane without learning how to do it first? Outsourcing is a very sophisticated tool and using it without understanding is certain to backfire.

2. Start small. Was your first driving experience a trip around the country? Most likely not. Consider it when picking your first project.

3. Minimize risks. I do not mean to state blindly obvious. What I mean is that outsourcing is a risk by itself, so minimize every risk that you can. Learn about risks and cons of outsourcing and eliminate as much as you can. For example time difference introduces a high risk – so go with a nearshore vendor to eliminate it.

4. Treat the vendor as a key employee. Imagine that you a hiring a key member to your team, you would not beat them down during interview process or salary negotiation. Consider that an offshore vendor could be equally as important. In that light

a. Be very picky. Don’t just go with the first company that spams you, find the vendor that is right for YOU.
b. Don’t be cheap. Avoid mixing “cost cutting focus” in your first project. Like a key employee, you want to pick the right one not the one who accepts a few thousand less in salary.
c. Delegate don’t abdicate. Delegating is a long running task that involves giving the direction, controlling execution, providing on going feedback, and keeping your employee accountable for their actions. It’s not an act of passing a buck. Same with the vendor – make sure that you support them in the process of delivery of the task you delegated to them.

5. Create a safety net. Like for any other high risk activity you need to make sure that you have a plan B, and plan C, and… Create a safety net for your outsourcing project and it will serve at least two purposes – will save you from braking your neck if you fall and allow you to act with more confidence and thus making fewer mistakes.

6. Use tight PM control. If one role that you can not compromise on and the role you should not outsource it’s a project manager. Make sure that your outsourced initiative is managed by a skillful and trustworthy PM.

7. Communicate A LOT. Communication to outsourcing is what location is to real estate, develop a meaningful communication plan, follow it and improve as you learn more. In particular use daily status calls. Whether you believe in Agile or not there is one thing that you should borrow from it – daily status calls.

8. Don’t cut corners. Follow your SDLC (and you should have a solid one before you even think of outsourcing). I don’t mean excessive documentation, runaway meetings, never ending sign offs. Just remember that cutting any corner increases the risk (see rule #3).

9. Respond early. I do not mean to pull the plug at the first sign of vendor performance issue. I do mean increased scrutiny, tighter project management, etc. Minor issues if ignored will become large problems.

10. Get off the slippery slope. If engagement continues to deteriorate even with your continuing efforts to salvage it do not lengthen the pain, cut it off. If you are driving down the wrong road you will need to turn back sooner or later, and the sooner you do the more gasoline you will have left to try other roads.

3 thoughts on “10 Rules for your First Outsourcing Project

  1. I’d say Kudos! — to mentioning not to go cheap. Many have this misconception that they can get away with cheap stuff that’s almost like e-slavery on the rise. You get what you pay for in the end. To lessen the risk, try building trust and communicate your goals clear and if it works out, be generous with incentives. I love what you wrote here – right on target for many who are about to commit a huge mistake.

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