How Not to Fail with Outsourcing?
February 26, 2017 - IT Management
According to Deloitte’s global outsourcing survey 2016, in the previous year, 31% of IT services have been outsourced, and the tendency will continue in the years to come. Just think about it – one third of all the work in the industry isn’t done in-house. IT is the sphere where outsourcing isn’t just a trend that’s getting more and more widely used. It has become a way of keeping pace with the rapid technology development for many companies. They have got a chance to have the work performed by skilled specialists without investing into finding, interviewing and training new employees.
In spite of certain IT outsourcing risks that are inevitable, it’s popularity is determined by numerous benefits. First, it is an excellent way to keep down the payroll while improving work efficiency. Secondly, it allows to reduce the turnaround time, which may become a serious competitive advantage in the long run. Third, it breaks the geographic limits and provides the opportunity to cooperate with the best industry professionals to handle specific tasks.
Why Outsourcing is Bad, or Seems Such
Both advantages and disadvantages of outsourcing are not so easy to state clearly due to different objectives that companies are looking to achieve using it as a medium. Still, along the above mentioned benefits there are numerous risks and problems of outsourcing that companies should be aware of before engaging into this practice.
IT outsourcing risks
Lack of control – since the work will not be carried out in-house, it is the outsourcing partner that manages and controls it for the most part.
Hidden costs – if poorly planned, the project may call for extra investments when unexpected issues arise.
Compromising quality – companies are often concerned about the quality standards of their outsourcing partner that may be lower than those used in-house.
Security issues – to an extend, outsourcing means allowing access to company’s or clients’ confidential details, which is always a risk.
In fact, such instances don’t necessarily translate into true cases. However, as the saying goes, forewarned – forearmed. There are certain outsourcing examples demonstrating what can happen when things go totally wrong. Let’s view them in order to learn from their mistakes and not to get into a similar trap.
Most Famous Outsourcing Failures Examples
IBM and Queensland
Even renowned companies aren’t insured against failures, and this is what happened with IBM in 2007, which failed to adequately evaluate the project of payroll administering app development for Queensland’s health department and foresee the challenges. As the result, the estimated budget of $6 million ended up being 16,000% above the original – $1,2 billion, the term of half a year stretched to several years and finally IBM was banned from this as well as from other government projects.
EDS and US Navy
The broken communication can potentially lead to a failed project and considerable losses, which is the case with the US Navy, which outsourced to Electronic Data Systems (EDS) the task of providing them with voice and video hardware, network, desktops, and staff training. Due to poor communication and project evaluation, EDS lost over $150 million due to its inability to fulfill the contractual obligations.
In order not to follow the above scenarios and be one of the companies that can be called good examples of outsourcing, it is not enough to know what can lead to failure. It is of primary importance to learn and follow the best practices of successful outsourcing.
How to Outsource Development to Make it a Success
IT and software development are the spheres where outsourcing is most widely used. So, what is the recipe of success from outsourcing example companies?
1. Define the basics of the project
To clarify this point, answer the following questions in as many details as you can:
– Why: the purpose of the project
– What: its features and tasks
– Who: key duties and roles
– When: milestones and deadlines
– Where: web/mobile/cloud
– How: methods, tools, testing performance, consequences of poor performance
2. Find the right outsourcing partner
Don’t focus on costs only when looking for the company or a developer for the project. Very low charges can cost you much in terms of quality and time lost. Therefore, opt for providers with realistic rates. You may want to employ some initial testing to ensure the candidate has enough qualification. Also, request for portfolio of the previous projects. This way, you’ll be able to choose the best balance of cost and quality.
3. Take care of legal aspects
Make sure you retain all rights for the software that’s being developed for you. So, have your outsourcing vendor sign the contract protecting your rights and defining the terms, compensation and consequences of delays.
4. Ensure communication
Once selected, communicate everything from point 1 to the outsourcing vendor and clarify any points that need it. Then, work out the way and schedule of communicating on the project. It is important to sound and discuss any concerns or issues as they arise for the sake of their timely correction.
5. Track progress
Appoint a manager in-house responsible for the project to track its progress, monitor any updates and make sure it is moving forward at the necessary pace. You can also use project management software like Jira or Trello to stay on top of things.
6. Check quality continuously
It is important to test not only the functionality of the software, but also the quality of the code. Moreover, it is recommended to do so before the software is ready to go. At each milestone, go over the part that’s finished and in case of any issues spotted, they will take less time and efforts to fix than when the whole project is almost finished.
No doubt, in spite of all the IT outsourcing pros and cons, it is a promising venture and can be particularly useful for businesses, providing the lacking experience, saving time and cutting down expenses. By taking the time to find out and follow the successful outsourcing examples, companies can drive their business forward and beat the competition to gain new opportunities for growth.