Risks in Offshoring

Business startups have a strong desire to become successful and thus make wise use of the available resources. However, after they have achieved their initial objectives, they have to set up new and challenging goals that can enable them to remain expanding and competitive. Nevertheless, it may not be possible for such small and startup organizations to depend on their available resources, thus the necessity of outsourcing some services. Some of the standard services that can be outsourced include information technology (IT), and consultancy services. In some situations, some organizations can consider outsourcing these services from other countries, a concept commonly referred to as offshoring. Companies such as KonsultEtAl Incorporated that provides consultancy services may lack some of the expertise in IT, and thus consider advising their clients to consider offshoring them. Such experts in IT can be dependent on as they offer quality services after an effective review of the clients needs, and then aligning their business practices to meet the expectations. However, even if offshoring is a promising and reliable alternative, there are some risks that an organization should consider outsourcing such services from another country.

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Risks of offshoring IT services

Data security issues- one of the major risk issues of outsourcing IT services is data security. In this case, if the organization cannot take into consideration whether such vendors have proper security and data protection mechanisms in place, they risk being exposed to hackers and competitors, thus the eventual business failure. Additionally, the vendors must be able to meet the internal IT security requirements, meaning that the offshore IT vendors must have promising data protection mechanisms in place (Lewin, & Peeters, 2013). The risk of losing data is high when organizations work internationally, and this makes it necessary to have a strong security and monitoring platform to ensure that everything conforms to the set requirements. This means that security and privacy concerns have to be addressed on time before making a decision to offshore IT services. However, even if this issue may not be considered as important given that the vendors have expertise in dealing with such matters, it is necessary to make this risk issue formal and thus proper documentation.

Loss of business ideas and knowledge- most IT vendors use the business knowledge that can be used by the available IT applications. Therefore, offshoring may be a challenge for an organization because the vendors custom such IT applications by considering the market variables in the country. If there are differences in customer expectations and competition levels between the countries, it will be difficult for the IT vendor to meet their clients expectations. This means that companies need to assess the type of applications that the companies that offer offshoring IT services have before selecting them for the services. Otherwise, the company will risk losing its business practices and culture that it had set, thus leading to loss of direction and succumb to severe competition from its rivals.

Failure to meet expectations- at times, the offshore IT vendor may not deliver as expected and since the company is dependent on its services and thus lacks a qualified IT team, it will face the risk of failure in the competitive market. There should be contingency plans in place to counter cases of failure; this may eventually raise management costs, and other related charges, meant to ensure that everything is being handled as expected. Even if the offshore vendors have the expertise to offer quality services, they cannot be 100% efficient, meaning that there should be the risk factor associated with the business practice (Doh, et al., 2012). Therefore, before implementing the decision to outsource, the management should have contingency plans in case of failure and assess the level of impact that such uncertainty can have on the operational efficiency and future of the organization. If the management considers offshoring to be a high-risk business practice, it should be necessary to abandon the plan and device alternative means of getting such services, including having their IT department. Additionally, they can have multiple vendors to mitigate the risk of total failure such that in the case of vendor becomes inefficient; the other one will help the situation even if this means high offshoring costs.

The appropriate relationship management strategy (RM)

Relationship management strategies ensure efficient communication and understanding between a customer and a vendor. This results in long-term engagement and loyalty of the customer, thus meeting the short-term and long-term goals. In offshoring, one of the best relationship management strategies that can be applied is the efficient customer communications. Constant communication between the IT vendor and the company will increase the level of understanding and ensure efficient and timely achievement of goals, thus making it possible for the management to rely on offshoring. Constant customer communications will mitigate the risk of failure because the IT vendor will recognize the clients expectations in time, enabling it to adjust their services to fit the ever-changing customer needs in the competitive environment (Boyne, & Walker, 2011). These communications should feature the effectiveness of the services offered, anticipated needs, and recommendations on what should be done to increase and maintain the level of efficiency in the IT outsourced services.

References

Boyne, G. A., & Walker, R. M. (2011). Strategic management and public service performance: The way ahead. Public Administration Review, 70(s1), s185-s192.

Doh, J., Lewin, A., Massini, S., Hahn, E., & Bunyaratavej, K. (2012). Conceptual issues in services offshoring research: a multidisciplinary review. Group & Organization Management, 1059601110390996.

Lewin, A. Y., & Peeters, C. (2013). Offshoring work: business hype or the onset of fundamental transformation?. Long Range Planning, 39(3), 221-239.