In the companion to this article – "3 Things You Should Always Outsource When Starting an IT Business" – we discussed how outsourcing can help a tech company. Now let's take a look at the things tech business owners should never outsource.
We spoke with four tech companies (ranging from developers to specialty hardware suppliers) and asked about the troubles they've had with outsourcing and what they would never outsource at their company. Here's what they had to say.
4 Things Tech Businesses Shouldn't Outsource
- Core code.
founder of tech company
says he's been tempted to outsource some of his coding (he admits that there are really talented coders out there), but he has high coding standards. He says, "A contractor is never going to have the long-term vision, care, or attention to detail that someone who works full time for the company will have."
- Customer service.
head of product at
recommends keeping all customer service in-house. "You need to know where the holes are in your product, design, or business model. Without that direct feedback, it's very hard to scale and learn," he says. By handling customer feedback yourself, you're tuned in to exactly how they feel about your product. That's crucial for a growing company – you want to make sure you're giving your customers what they want.
- Online marketing (in specialist industries).
Ken Vitto of cable supplier
(@Pasternack_Inc) explains that you can run into problems if you work in a specialist industry and outsource your online marketing. Pasternack supplies RF cables, microwave components, and cabling, and when the company initially outsourced its marketing, Vitto saw that the consultants didn't get the minutia. It's hard to build a proper marketing strategy without understanding the product specifics.
- Projects with sensitive data.
founder of web development company
(@GeeksChicago) warns against outsourcing projects that involve personally identifiable customer data. You have first- and third-party cyber liabilities, so you could be responsible for the contractor's mistake. Keep data under lock and key (or with a vendor you trust 100 percent) to reduce the chance of a data breach. Learn more here: "Third-Party Vs. First-Party Cyber Risk Insurance: Protect Your IT Firm Right."
Why Outsourcing Can Be an E&O Risk
Outsourcing can be a great way to free up time and even limit your risk exposure (because you're handing off a project to experts). But we've found a few legal risks that can sneak up on tech professionals if they're not careful:
- Careless contracts. Any time you outsource a project, make sure you have a contract that limits your liability. Too many business owners sign on the dotted line without reviewing the contract closely (and some even forgo the contract altogether and settle for a handshake deal).
- Data liabilities. Mark Tuchscherer's advice above is solid. And it's just the tip of the iceberg when it comes to data liabilities. For instance, if you hire a contractor, are you making sure their access to your data is limited? If they work with important data, does your contract spell out what they have to do with access or data once they finish a project? When third parties get involved, it opens up big legal questions. It's up to you to make sure vendors follow best practices. (See "Limit Your Liabilities by Closing Contracts" to learn more about protecting your company.)
- Poor quality. Remember that if a contractor or vendor delivers substandard work and it causes a project to suffer, your disappointed client may blame you and hit you with an Errors and Omissions lawsuit.
For more on the risks of hiring third parties, be sure to check out "Outsourcing Tech Work? Make Sure You Know the Insurance Risks."