The Biggest Threats in IT Services Offshoring

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By Pratik H

IT threats

With the emergency of automation, Artificial intelligence, and machine learning, a lot of IT service providers think that emerging technologies will disrupt the industry. This is the exact opposite, predictions are not a threat. What poses a threat is the basic operating model and standard business practices in the industry. These are the existing threats.

Limited Resources, and Narrow Skill-set

The latest trend in the IT industry is to recruit thousands of engineers to come into organizations. The problem with this is, most of these engineers come with limited narrow skill-set. What the organization does is to push them into a client team when they have not yet grasped their role or even customer needs. And the biggest problem is, customers will have no control or have to say that because they are at the mercy of the service provider.

For example, when the team member is unavailable today, IT companies will substitute that person with another who may not be suitable for that role. This could affect the services delivered to the customers.

Lack of Transparency

Customers who may want IT services are only restricted to interact with the sales and operational personnel in the company and not the top-tier in the team. That shows there's a lack of transparency and the customer has less interaction with other team members. The customer may not know the internal working dynamics of the team and this limits the scope for integration.

Top Heavy Management

One of the prevalent management structures in the IT industry is the top-heavy management structure. A structure like this can safeguard the IT service provider and its decision-makers from unnecessary risks but it will add less value to the end clients. Over time, the structure like this will become a problem for the customers.

Upsell rather than right sell

A lot of IT service providers focus more on growing the topline. What that means is, they want to sell more of their product and drive revenue to the customer. While they do this, they don't have any disregard for whether they are adding value or meeting the needs of the customer. The ultimate focus should be meeting the customer's experience.

Code quality

When we said earlier that meeting Q-onQ numbers is a dilution in the quality of people we meant it. A lot of people hired will come with a narrow skill-set or lack the necessary training and exposure to do their work well.  The final results are that most of these engineers have no focus on code quality. Of course, there is an island of excellence in a sea of mediocrity, what these companies have to do is to acknowledge the facts.

Vendor Failure to Deliver

Any person that operates in an IT organization knows that it is important to have a contingency plan. The questions that senior management asks is, what will happen if the offshore company fails to deliver. Although failures are not common, they do occur even with the best strategies on the part of the vendor. Before outsourcing any project, the organization needs to assess the impacts of vendor failure.

The question to ask is whether the failure will have an impact on business performance and the cost. High-risk projects will deter an organization from outsourcing, it might make the company change its outsourcing strategy, or it might make the company move towards outsourcing. This level of risk will vary from different companies.

Turnover of key personnel 

Outsourcing has grown and spread to markets such as Bangalore and India. That's because companies want key personnel that are in demand and can work on high profile projects. There's a high risk of a person being recruited by other offshore vendors. While offshore vendors will offer you low turnover statistics, the statistics you need to know are those of the turnover of key personnel.

Most turnovers are in the 15% to 20% range and creating terms of the contracts around that range is considered a reasonable request. According to the Meta Group research center, the place of "liability" on the vendor's personnel should be replaced. That's because the impact of high turnover affects the IT organization, which will increase the time the company spends on knowledge transfer and training new personnel.

Hackers and Thieves

Criminals are in many forms. Some actors are waiting to steal your critical data. The idea is a hacker working from home can access the development network and bypass the security protocol.

If your offshore vendors don't have tight IT security protocol, this is an easier crime to commit. Or, you can think of personnel who have access to your data, and whether they will abuse the privilege. Sometimes, bad employees can vandalize the servers that house your data on their way out. Or think of a student touring office who is up to mischief. Another case would be personnel leaving the proprietary information in a bar or taxi. As you have seen, the scenarios to which your data can get into the wrong hands are many. All that is required is having offshore vendors who take precautions to save your data downline.


Despite all these threats, the IT industry has evolved, changed a lot of economies, and contributed to growth. That has helped many businesses focus on their core functions, market needs, and customer services. This transformation is what is knocking in the IT service industry. When the industry evolves and matures, companies start providing great value to meet customers' needs.

Offshore service providers will take strategic steps and measures to ensure they meet some of the challenges and to minimize their impact. When outsourcing your software development needs, you will achieve a lot in your business but you will also incur some limitations. 

That’s why it is important to understand the options you have before you move forward. Another better alternative you may implement is employing a nearby offshore company like outsourcing insights to limit the challenges of cultural, language, and time zone differences. We would be happy if you shared this post on your social networks to reach more people who may want to learn a lot about offshore services.