How Outsourcing Knowledge Transfer Actually Happens?

Why do some outsourcing projects fail while others succeed? According to a 2005 Gartner survey, 50 percent of offshore outsourcing initiatives were reported as failures – many projects that failed were due to insufficient outsourcing knowledge transfer during the transition process. In this article, Back Office Pro offers insights about the knowledge transfer process and how it can be accomplished effectively.

Structural Knowledge Transfer in Outsourcing

In the most basic form of outsourcing, there are two primary stakeholders – the client and the outsourcing partner. In order to prevent outsourcing failures, it is critical for the stakeholders to start with a shared understanding of what is being supplied and how.

A key reason that half of offshore outsourcing projects fail is because of the rush to provide the product or service before the stakeholders understand expectations and capabilities. Without a workable structure (the outsourcing process and framework) in place, failure is an all-too-natural outcome.

An experienced outsourcing provider such as Back Office Pro can help clients avoid this pitfall by demonstrating a willingness to spend additional upfront time learning more about the client’s needs and expectations — and then implementing an outsourcing structural process that “works” for all stakeholders.

Social Knowledge Transfer in Outsourcing

Effective social relationships are the key to exchanging knowledge and getting work done in an outsourcing relationship. Building the required “social capital” can be time-consuming — this undoubtedly explains why many outsourcing providers eliminate or reduce “social knowledge transfer” to the bare minimum. This is indeed another primary reason why 50 percent of offshore outsourcing initiatives fail.

Experienced outsourcing providers such as Back Office Pro have learned that it is worth their time to develop and nurture a long-term outsourcing relationship by devoting additional time and effort to cementing workable social relationships. This commitment to a sound social knowledge transfer process can also be seen in other ways — for example, Back Office Pro provides clients with one designated “point of contact” that makes it easy for the client’s team to communicate with the outsourcing team at all times.

Psychological Knowledge Transfer in Outsourcing

Effective knowledge transfer can also depend on intellectual aspects — for example, Nooteboom suggests that an appropriate “cognitive distance” is required for psychological knowledge transfer to occur. This concept can be a difficult one to implement in outsourcing, and that can also contribute to outsourcing failures when this aspect is ignored. For example, sharing knowledge effectively can be reduced by either working together extensively (the cognitive distance is too short) or by having stakeholders having no common interests (too much cognitive distance).

What is the practical solution to this intellectual dilemma? The stakeholders need a common stock of knowledge that facilitates the desired knowledge transfer — including advanced technology, higher capacity and specialized knowledge by the outsourcing provider that leads to the desired knowledge transfer to the client.

The Importance of Well-Established Knowledge Transfer Systems

The positive benefits of outsourcing have led to many companies considering and using outsourcing as a primary part of their business strategy. Despite occasional negative outsourcing perceptions by politicians, outsourcing has grown in popularity during the past decade. However, ineffective knowledge transfer has been shown to be instrumental in contributing to a high percentage of offshoring failures.

Don’t under-plan or overlook the importance of knowledge transfer when you outsource. How can your company avoid this pitfall when you are outsourcing? The most practical solution is to use an experienced outsourcing partner with a well-established system and process for knowledge transfer — Back Office Pro is a leading example to consider.

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– BackOfficePro