Outsourcing Gone Wrong: 5 Horror Stories (& lessons learned)

Outsourcing Gone Wrong — 5 Horror Stories and Lessons Learned

Often, in the panicked desire to save money, small business owners are lured towards the “half-price” workers across the globe. That’s where good execution flies out the window and problems start to creep in. Outsourcing is not merely a cost-saving tool, nor is it for the ill-prepared. It is a business risk that requires deliberate calculations.

This is exactly why understanding what can possibly go wrong, is an excellent way to cut down the risks before you jump in. Once you know the loopholes, you can approach outsourcing with eyes wide open.

This blog gives you an insight into outsourcing arrangements that have gone terribly awry and the lessons you can learn from them.

Horror Story # 1:

Most small business owners are enthusiastic young people with a head full of ideas but a bank balance full of… well, (mostly) nothing. Naturally, they are forced to wear several different hats to save costs while simultaneously working on several other tasks. An overloaded ‘to-do’ list and a lack of technical know-how make judgments cloudy.

Let’s take a look at how a small business owner had to bear the brunt of one such cloudy judgment in her previous outsourcing stint.

She was sharing her woes of juggling between the core and non-core tasks with a fellow entrepreneur when he suggested offloading some technical tasks of her accounting software project to a freelancer. Soon after, she directed her browser to google and looked and looked for the cheapest freelancer available to do the job… and voila! She found the perfect match — an offshore freelancer, who claimed to be an expert and was willing to work on tech-related tasks well within her budget!

Within no time, the work began. Every time the code was delivered, the small business owner ended up going through lines and lines of badly written code with absolutely no stability or scalability, and when the client tried to send the fixes to the occasionally disappearing freelancer, another dozen issues seemed to crop up. All of this ultimately resulted in missed deadlines and months of going back and forth.

To top it, when she tried to fix the code in a desperate attempt to adhere to deadlines, she realized that she has no control over the code or even the server!

As a result, she had to cut off all ties with this so-called technical expert and enlist our help to undo the damage by rewriting the entire code from scratch.

How we solve this problem at Clarion:

Although the cheapest option may seem like the best option, small business owners must understand that it may end up being the costliest, if not scrutinized thoroughly.

In such situations, we first roll the bad-quality code into the analysis phase, where we identify the areas of improvement. These areas primarily revolve around security and performance issues. Once this is done, we create a further plan of action along with some coding practices.

Horror Story # 2:

An outsourcing provider’s sales rep and solution architect promised a client (Manufacturing Industry) a large transformational technological solution. A solution that the client had specifically thought of to meet his business requirements and was banking upon the outsourcing provider to develop it. The client was thrilled that it would save him a considerable amount of time, money and enable the realization of all his objectives. He was eagerly looking forward to the pioneering functionalities that he would be able to see at the end of 3 months, the end of the fixed-price contract.

Over the course of this time, the client was in touch with the sales rep and the solution architect about his requirement.

But, when it was time for the results, the solution promised by the solution architect and what the client actually expected was completely different

Unfortunately, the client’s requirements had been a complete mistranslation.

Unsurprisingly, the deal faltered, and the provider was terminated, but the client also had to bear a significant brunt because of this whole fiasco.

How we solve this problem at Clarion:

It is crucial to make sure everyone on the project is crystal clear about the requirements and on the scope of the project right from Day 1.

At Clarion, all goals and objectives are clarified, and the status of the project is notified to the client at regular intervals. There are internal as well as external kick-off meetings to ensure that every team member working on the project is in sync with the client’s expectations.

The best part — direct contact with the developers working on their project through their phone numbers, makes it easier for the client to verify that the project is headed in the right direction.

Horror Story # 3:

An IT outsourcing giant was entrusted with the task of developing an application to administer payroll by a reputable client in the health sector. The outsourcing giant proposed to complete the project within 6–7 months at a cost of $6 million.

As the project was being developed, the client wanted to incorporate new features into the product to make it more robust and in-sync with the market trends.

However, the IT outsourcing provider faced several unanticipated technological challenges and announced to the client that the project would now cost $27 million.

The project dragged on for several years and the payroll platform never really functioned as expected. By end of the project, the costs had escalated to $1.2 billion! (a whopping 16000% above the projected cost!). Obviously, the outsourcing provider ended up being sued by the client.

The primary reason behind this exceedingly high escalation of time and costs leading to the ultimate doom of the whole engagement was the wrong choice of technology. The outsourcing provider had chosen a technology that was not scalable and therefore found it difficult to accommodate the requests for new features.

How we solve this problem at Clarion:

It takes experts to correctly forecast the project requirements beforehand, and choose the technology that can withstand the test of time and market fluctuations. The technology experts across Clarion have an in-depth experience of working on several projects across technologies.

Get introduced to an outsourcing model that guarantees flexibility, assurance, innovation & security. Find out how!

Horror Story # 4:

Miscommunication happens even when there are face-to-face discussions. The room for miscommunication is even larger when people communicate only via email, phone or through Skype. Add technological glitches, a variety of accents, cultural differences and you’ve just created the perfect recipe for miscommunication. Sometimes, it’s a total breakdown in communication that is responsible for an outsourcing horror story.

An outsourcing vendor once failed to grasp the complete scope of the project in the fervor of winning it from a client. Little did they realize that they had signed up for integrating or replacing tens of thousands of legacy applications.

When the project began, the outsourcing vendor was aware that the project involved integrating and replacing legacy applications. However, it was only during further discussions that they realized that it was for 10,000 applications!

To add to the misery, the failure to scrutinize the contract thoroughly had left the vendor vulnerable to some really expensive obligations.

As a result of this communication debacle, the client was left with a half-baked project and the vendor ended up shelling out handsome amounts for some costly obligations which later resulted in its shutdown.

How we solve this problem at Clarion:

Scrutinize contracts thoroughly and seal all the loopholes tightly. Clarion believes in complete transparency. Therefore, at every level in Clarion, the client and the developers ensure that they are on the same page through various mechanisms and meeting such as daily standups. Moreover, the contracts are water-tight, and NDAs are signed at every level to protect data.

Horror Story # 5:

Could there be anything worse than being stranded at an airport because of some outsourcing debacle? (Yes, this actually happened!)

Back in September 2010, a well-known airline’s Internet booking, reservation, check-in, and boarding system, and other mission-critical applications abruptly crashed — and this was the second time it happened within three months!

The airline’s IT outsourcing provider was quick to trace the cause of the latest failure to a failed disk drive. Yet, it took nothing less than 24 hours to resolve the mission-critical system failure, during which time the FAA grounded all the flights of that airline, leaving over 50,000 passengers stranded and they were not happy!

To come to think about it in hindsight, it would have been a better option for the IT outsourcing provider to simply switch in backup hardware instead of attempting repairs on the bad unit.

Although this is a story of the past, it is still very relevant today as SMBs often fail to check if their outsourcing vendors are properly equipped with back-ups and disaster recovery mechanisms.

How we solve this problem at Clarion:

With world-class infrastructure and technology for project development, Clarion’s clients have absolutely no reason to worry about having to face such an issue. We also have sturdy data back-up facilities as well as disaster recovery facilities which ensure that such disasters never happen.

Moreover, Clarion’s clients get support throughout the week, despite the time-zone difference.

As far as we have observed, the companies who’ve had to live through outsourcing horrors have two things in common — lack of preparation before entering an arrangement and lack of communication while working together on projects.

The ones listed above are just a few examples, there will always be more horror stories that may ensue. But, with enough due diligence and a little initial effort in finding the right partner, you can skip the horror stories entirely and reap rewards and operate smoothly.

Clarion Technologies, a leading IT Outsourcing & Custom Software development company catering to Small & Medium Enterprises