Offshore outsourcing can keep you up at night, and not just because you’re on the phone with workers 10 time zones away. You worry because you’re handing over important work to people you can’t monitor directly and who don’t have an insider’s built-in knowledge of the way your systems and processes work, or even of your language. All the details you normally have the luxury of overlooking need to be carefully documented. Your sense of project status becomes tenuous and unsure, because you can’t see the day-to-day progress or read the expressions of the people providing you with project updates.
And what if you don’t like the way the product turns out or the code isn’t as robust as it should be? Worse yet, what if there’s political unrest or a massive power outage or some other disaster where the work is being done, or you find out that your intellectual property has ended up in the hands of a competitor?
All valid concerns, and there’s more. Offshore outsourcing implies an inherent gulf—in miles, time zones, language, culture, legal and political systems, and network and communications infrastructure—between customer and supplier, which in turn makes coordination and communication more difficult and costly and introduces new and unfamiliar risks.
These very real challenges must be carefully accounted for in planning, budgeting, and managing an outsourced IT initiative. The following four-point plan is designed to keep you on the straight-and-narrow path to “success at a savings” and help you fall asleep at night—right after the midnight project status meeting is over.
Part 1 of 3
Read the first article, "Offshore development reduces cost, decreases production cycle."
Pick a suitable project
Some projects and services are a poor fit for offshore outsourcing because they require high levels of internal knowledge, process integration, or collaboration, or because their failure would be too costly or mission-critical. The best candidates are those with clear, well-documented specifications, leveraging a standardized skill set, and with a well-defined owner. For example, a recent META Group study reports that several companies that outsourced their entire IT help desks offshore had to bring them back in-house, while outsourcing of customer service and HR call centers has had a high success rate.
Pick the right partner
It’s essential that you verify a prospective offshore outsourcer’s delivery credentials by interviewing reference accounts in depth and performing standard due-diligence activities. In the recent article "What To Ask Before You Outsource Anything," the Institute of Management and Administration (IOMA) provided a checklist of evaluation criteria for a prospective offshore outsourcing supplier.
- Is the offshore outsourcing team committed to service, with a track record to prove it?
- How will the outsourcer manage your account?
- Who are the outsourcer’s current customers, and how do they rate the outsourcer’s services?
- What is the nature of the outsourcer’s experience? What special skills does the outsourcer possess?
- What is the quality of the outsourcer’s infrastructure and of the personnel who manage it?
- What security measures does the offshore team have in place?
- Does the outsourcer have a migration methodology and plan that fits your environment?
- How are services priced? Is the bottom-line figure comprehensive, or are incidentals priced separately?
- Is the outsourcer financially stable?
Verifiable and robust disaster recovery procedures and resources are also critical, as well as basic operational disciplines such as version control, backup and recovery, and an appropriate quality assurance methodology.
The Everest Group recommends selecting an outsourcer that documents everything it does and is willing to send representatives to the United States on request. And the Aberdeen Group strongly recommends that clients select suppliers that have local representation, either directly or through an established partner, to facilitate project and resource management and also to guarantee domestic legal recourse.
Aberdeen also suggests that contract terms and conditions should specify binding procedures for contract enforcement and legal redress, including enforceable terms for protection of intellectual property rights and protection from major shifts in labor costs. And as a result of the events of Sept. 11, enterprises are also including political and economic risk assessments in their evaluation of offshore development and outsourcing.
The Everest Group’s report includes the following crucial preparatory steps among the lessons learned from their case studies:
- Define requirements so the offshore team knows exactly what is expected.
- For projects involving specialized or proprietary background knowledge, members of the offshore management and technical team should be brought to the United States for training.
- Make sure the offshore infrastructure and testing environment is in place.
- Give the offshore team remote access to the buyer’s network and software archives with the appropriate security controls.
- Make sure the outsourcer knows about all of the buyer’s system complexities so they can test.
- Put in place a mechanism for status/management reporting that allows the buyer to keep a finger on the pulse of what the offshore team is doing.
Actively and diligently manage the project
It is impossible to overstate the critical role that effective project management and discipline play in successful outsourcing and the importance of deep client involvement throughout the process, especially in requirements specification and testing. A recent META Group report found that Global 2000 IT organizations must achieve a minimum level of internal process maturity and specific sourcing competencies to be ready for successful offshore outsourcing.
Organizations that already have fairly mature standard processes for developing, deploying, and managing their applications have much lower risk from outsourcing and greatly reduced time required to obtain a return on investment. META recommends that organizations allocate at least 5 to 7 percent of the outsourcing project budget for extra management resources dedicated to the outsourcing initiative.
Offshore outsourcing brings with it high risks and great rewards. In our next article, we’ll look at the best techniques for managing offshore development projects.