13 common mistakes of first time outsourcing to avoid (2024)

Many small business owners are trying their hand at outsourcing their business needs to a third-party agency to deal with increasing demands and workloads. As a result, the Business Process Outsourcing (BPO) industry has grown rapidly.

Outsourcing offers several benefits, including cost savings, increased flexibility, improved efficiency, and access to specialized talent. However, you can also potentially fall prey to the common mistakes that most outsourcers often make on their first try.

In this article, we’ll be covering the 13 most common mistakes of first-time outsourcing and how to avoid them.

Let’s get started.

13 avoidable mistakes of first time outsourcing (and their solutions)

While the benefits of outsourcing are plenty, doing so for the sake of it can be counterproductive. So, first-time outsourcers should be careful to avoid wasting their time and resources on easily avoidable mistakes.

Find out more about Business Process Outsourcing here!

Here are some of the most common and costly outsourcing mistakes to look out for:

1. Outsourcing without assessing your needs and budget

Instead of delegating a random task, you need to focus on the processes that would yield the best results per your company’s needs and requirements.

For instance, you can evaluate your needs with the following questions:

Does my business currently have the bandwidth for outsourcing?
What aspects of my business do I need to outsource?
What are my company’s capacities in terms of budget?
How am I going to integrate the outsourced employees or freelancers into my company?

These questions will offer better clarity on the right outsourcing processes for your company, and how you can proceed with them.

2. Prioritizing cheaper labor over quality

One of the primary reasons people outsource their business processes is to save costs.

However, it’s important to note that the lowest price won’t always benefit in the long term. Hiring the right outsourced or offshore team is just as important.

When you outsource with the sole intention of cutting costs, you may compromise on the labor quality, defeating the whole purpose of outsourcing.

So instead of being guided just by the vendor prices, you can focus on the other important benefits of outsourcing. This includes specialized talent, increased flexibility to meet your goals, more capacity for core competencies, ability to scale rapidly, etc.

3. Choosing an outsourcing partner without thorough research

Most outsourcers will only look at the general background of the candidate while hiring them, but that’s not enough.

Here’s an example:

If you’re outsourcing an accounting role, you’ll look for someone with experience in finance. However, an outsourced candidate should not only have strong technical skills but also be equipped with robust soft skills such as effective communication, time management, and problem-solving.

So it’s vital to consider some key factors that may impact your decision-making process.

You may want to consider the following questions:

What kind of domain knowledge does your outsourcing candidate have?
Do they have experience for the exact role you’re outsourcing?
Does the outsourcing partner share the same core values, beliefs, and company culture as you?
Do they have a lot of long-term clients? That could reflect a low turnover rate and good communication from the vendor to the client.

Finally, make sure you also assess the vendor’s previous track record by checking client feedback on various channels. This information can be useful to make a more informed choice.

4. Skipping the interview process

Hiring the right outsourcing partner lays a solid foundation for the work quality and services you expect from your provider.

So if you rely only on your background research and don’t interview multiple candidates or vendors, you may miss out on some great talent.

Moreover, you can’t know if a potential outsourcing company or freelancer is a good fit for your business unless you personally converse with them.

So what’s the solution?

After you research and shortlist potential candidates, start by screening, shortlisting, and interviewing them. Next, finalize and hire candidates that:

Have the capacity to take on the required company workload.
Can effectively communicate with your outsourced team and express any concerns or expectations.
Have a strong background in your field and/or strong referrals from previous clients.
Understand and fit well with your company culture and values.

5. Not setting clear expectations for the outsourcing partner

Miscommunication during outsourcing can not only impact your day-to-day operations, but also your long-term business goals. It could result in ambiguity about your expectations relating to work quality, quantity, or communication modes.

That’s why it’s important to clearly state your objectives right from the hiring process.

Think of it this way:

Setting clear expectations right from the beginning ensures there are no resource crunch or workload issues later on.

For example, if you’re hiring a software development outsourcing team, you should outline your expectations from the developers and set relevant time frames for the projects.

Here’s how you can set clear expectations with your BPO company:

Define your current projects, the quantity, and quality of resources you need, your KPIs, any specialized tech required for the project, etc.
Convey your expected deadlines.
Inform your vendor about the kind of communication etiquette you expect.
Consider setting up an orientation session with your vendor to define any duties and clarify doubts about their responsibilities.

Transparency with your potential vendors will help them commit to your company better. Some vendors may also back out early on in the process due to incompatibility, saving both your time and resources.

6. Not having proper onboarding processes in place

Many organizations often neglect the importance of onboarding the outsourced vendor on the project. This can leave the outsourced employees feeling lost since they don’t have the necessary information or resources to kickstart the project.

So whether you’re outsourcing to a freelancer or a company, never leave them to figure out the project on their own.

One way to do this is to set up a knowledge base that freelancers or outsourced employees can use to learn all work procedures. You can also conduct online or offline training sessions for your extended team.

Additionally, you can take measures to facilitate communication between your outsourced and in-house team members. This will promote peer learning and help the outsourced team understand the work processes quickly.

For example, if you hire an outsourced project manager for your remote team, brief them on your company’s work culture, processes, protocols, tools, etc.

Once your outsourced employee is successfully onboarded, they’ll be able to blend in with the team and collaborate without any delays.

7. Neglecting data safety and security protocols

Companies that outsource their business operations need to share important company data with an external vendor. And since first-time outsourcers often tend to focus on low costs or cheaper labor, they may neglect to inquire about the data security or safety protocols.

However, it’s imperative that you inquire about the company’s data security protocols before hiring them, or your company’s data may end up in the wrong hands.

One way to do so is to ensure that your vendor has an Intrusion Prevention System (IPS) to protect sensitive company data against malicious traffic over the internet. You can also outline all the important security protocols you’ll be needing from your outsourcing provider and add them to the service contract.

8. Not having an execution plan in place

Hiring an efficient service provider with strong technical skill sets is one of the key steps in outsourcing. However, it’s just as important to create an execution plan for the outsourced team.

Why is that?

As a business owner, you have better insights into the work processes of your outsourcing project as compared to the subcontractors or freelancers you hire. As a result, the more information and directions you provide, the better results your outsourced contractor can deliver.

Moreover, it’s essential to create a well-versed outsourcing strategy and execution plan. You should consider things like the amount of work and its distribution, outsourcing team size, etc.

Also, take into account the hierarchy of the outsourcing team (if you hire multiple freelancers) and how to facilitate control to individual members.

9. Not defining professional boundaries

Outsourcing for the first time can be tricky because there’s a risk of micromanaging the new team. There should be a healthy balance in terms of your outsourcing relationship with the vendor.

Being too ambiguous with professional boundaries or holding the reins too tightly can yield poor results in the end.

Instead, you can draw out appropriate professional boundaries in your service agreement contract.

These can include:

Defining the shifts based on different time zones.
Establishing communication preferences (no calls after work hours, not contacting the in-house team outside communication channels, etc.)
Defining the feedback process.
Setting payment terms and preferences.

Lastly, ensure that you give your outsourcing partner enough space and freedom to work on the project and get back to you with the final product. This encourages a healthy relationship with your vendor.

10. Outsourcing a customer-related position

One of the most common first-time outsourcing mistakes that companies make is employing an external vendor for their customer operations right in the beginning.

However, outsourcing sometimes requires a bit of a learning curve. So delegating critical customer-facing tasks on your first try could be a risky bet and potentially impact your brand image.

So does that make outsourcing customer service roles a bad idea?

Not really. In fact, it’s one of the most commonly outsourced roles to call centers in most companies.

However, it is crucial that you first acquaint yourself with how outsourcing works before thinking about customer support outsourcing.

Instead, you can first outsource other less risky operations like admin work, data entry, etc. This way, even if you make some minor mistakes during the process, it won’t directly affect your brand name and will also give you insights for the future.

11. Not having a detailed service agreement in place

Every business transaction requires a solid contract (in case of any service quality issues). However, first-time outsourcers (especially small businesses) can be unaware of this and proceed to work with companies without signing a contract.

In such a case, it can be difficult to clarify expectations and set quality work standards. It could also lead to miscommunication and eventually impact your business process.

So what can you do?

If you’re in the process of hiring someone, it’s the best time to draw up a rough outline of the kind of services you’re looking for.

And if you’ve already onboarded a vendor or freelancer without a written agreement, you can speak to them and negotiate a new outsourcing contract at the earliest.

The service agreement should include:

Services (core competency, task functions – in detail) expected from the vendor.
Project milestones with time frames.
Technical resources required by the vendor.
Modes of communication and collaboration.
Details about contract duration, payment, product ownership, etc.

12. Neglecting the outsourcing partner’s feedback

Your outsourced employee will have great insights into how you could optimize your workflows related to the following:

Alternate solutions.
The use of different technologies.
Adding additional quality assurance standards to improve the project, etc

These insights can greatly benefit and improve your final deliverables and project quality. So it’s in your best interest to take note of this feedback and include it in your decision-making process.

13. Not thinking long-term

When you outsource your business to another vendor, you’re expanding your team. So there’s a good reason to believe that you’ll be working with your outsourced team for the next few years at the very least.

Most first time outsourcers often forget this when hiring an outsourcing agency. As a result, they can run into compatibility issues with the vendor in the long run.

This results in two things:

You may have to re-negotiate your contract based on your new expectations.
You’ll have to change your outsourcing vendor, which can be time-consuming.

So, it’s best to have a long-term plan before you partner with a vendor or freelancer. Consider your future goals, the vendor’s flexibility regarding costs, and their continuity plan for the next five years. More importantly, plan an exit strategy if things don’t work out with your service provider.

Want to know more about outsourcing? Here are 30 Useful Outsourcing Articles to check out!

Final thoughts

Outsourcing can be a great option for many entrepreneurs with startups and small businesses. However, it’s important that you conduct thorough research into the best practices and common mistakes of first time outsourcing.

So before you hire an outsourcing vendor, make sure you go through our detailed guide to identify the most common mistakes of outsourcing and understand how you can skillfully avoid them. We hope it’ll help you make a more informed decision!