This post was written by Ty Hyderally

Ty Hyderally (Tayeb Hyderally) is an employment law attorney in New Jersey, he specializes in employment law, discrimination as it pertains to employment and sexual harassment.

Sending work offshore can be a valuable tool for firms looking to enjoy the benefits of labor arbitrage, increased geographical penetration and strengthening ties with national governments. It can also be a nightmare. Done incorrectly, offshoring can undermine the very foundations of a company with bills that could draw tears from a stone. It’s amazing, then, how often it all goes pear-shaped…

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The Shared Services & Outsourcing Network asked a number of experts for their thoughts on the most common, and the most potentially dangerous, mistakes companies make when sending work offshore. So here it is: the SSON guide to the Top Ten Mistakes Made When Offshoring. Recognise anything?

1. Not allocating sufficient time and resources to transition

Especially when cost-savings are a primary driver, there’s an understandable impulse to get an offshoring move completed as quickly as possible. The organization’s biggest cheeses – not to mention the shareholders – may find it hard to resist the temptation to push hard for a speedy transition so the big move can start demonstrating cold hard gains speedily (as cash spent on the transition – especially to a new captive center – tends to be seen as dead money). However, that way lies if not madness then at least the risk of creating significant, and potentially very costly, difficulties in the longer term.

2. Not making the appropriate choice between outsource and captive

Offshoring work can be done whilst keeping it within the organization, or of course as part of an outsourcing deal. There are pros and cons to either solution (and indeed to the hybrid model as well). However, companies sometimes make the mistake of looking at offshoring itself as the key to solving the particular problems they’re addressing, without looking fully into all the options as to who might be best-placed to carry out that work once it’s been sent overseas. There might be overwhelming advantages for some firms in retaining the work within a captive set-up; similarly, outsourcing might be a preferred option for others. The critical issue is that in many circumstances the outsource/captive decision might well be a more important one than the onshore/offshore debate; simply voting for “India” or “Malaysia” over onshore locations isn’t taking a sufficiently big-picture perspective.

3. Having insufficient disaster-recovery plans and backup

It’s a dangerous world out there – and with climate change and associated socio-political instability looming, it’s probably only going to get more so – and moving work and resources to a new location means having to prepare for new dangers. Even over the past few weeks we’ve seen catastrophic natural calamities in the Asia-Pacific region (including devastating floods in the offshoring hot spot of the Philippines) damaging infrastructure and placing serious obstacles in the way of beleaguered workforces. Failing to plan correctly for negative phenomena is an unforgivable sin that tends to be uncovered only when it’s too late to be redeemed. Don’t be a sinner.

4. Skimping on the due diligence

There’s no excuse for this one. Whether investing bundles of precious cash in an offshore center or handing over key processes (and more precious cash) to an outsource provider, failing to carry out the requisite due diligence isn’t just asking for trouble, it’s walking up to the counter, slamming your fist down and demanding it. An organization needs to be as diligent as possible even at the expense of a delay in implementation. No matter how close the relationship between buyer and provider, or how confident an organization might be in the integrity and stability of a proposed new location, the due diligence must be seen as an indispensable part of any offshoring process.

5. Lacking a corporate offshoring strategy

Offshoring is a major proposition with major consequences. A failure to look at this proposition holistically across the organization means some of these consequences could impact negatively on areas which might have been off the radar for those behind the drive to offshore who might have their own horizons limited by their own responsibilities. A corporate offshoring strategy will allow the company to make the very most of their offshoring while preparing everyone within the organization for the changes which are about to take place.

If you would like more information on offshore business formation please visit the offshore business formation blog.