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Painful lessons from IT outsourcing gone bad

Ephraim Schwartz | Aug. 26, 2008
Outsourcing has worked well for many companies, but it can also lead to business-damaging nightmares, says Larry Harding, founder and president of High Street Partners

It started when Hills took on an assignment from a major client. Rather than trying to develop Web design skills needed to complete the client's project, Hills decided to farm that part of the job out to an offshore provider in the Philippines, at a savings of half of the cost of working with a local Web site designer, says Hills.

As soon as the offshore provider began sending back completed work, Hills knew there was trouble: "Functionality and community features didn't mesh properly and the design wasn't what we were looking for." On top of that, the offshore provider continually missed deadlines.

Becoming increasingly frustrated, Hills didn't make the final payment. The result, of course, was a panicked wake-up call from his client telling him there was no e-mail and no Web site.

Looking back, Hills says that if had he to do it over, he would have been more diligent in checking references. He did only a perfunctory check of references, unfortunately taking it for granted that the offshore design firm actually created the Web sites they claimed.

Time differences also played a key role in the soured relationship. "We weren't able to communicate directly, only through IM," Hills says. And as a small startup at the time, he couldn't support multiple shifts at home to get overlap with India, nor ask his staff to work 20 hours a day to cover both time zones. And sending a manager to the Philippines was out of the question, Hills says.

Hills doubts he'll ever outsource again, but if he did, he would insist that the job be done with a U.S.-based company that puts its offshore staff onto the company's payroll. "No contract workers," Hills says tersely.


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