According to Deloitte’s global outsourcing survey in 2016, 31 percent of IT services have been outsourced, and that trend is expected to increase in the future. Just think about that: one-third of work in the software industry isn’t done in-house.
IT is a 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 in finding, interviewing, and training new employees in-house.
Outsourcing projects can be risky, but its become popular because it also comes with numerous benefits. First, it’s an excellent way to keep down the payroll while improving work efficiency. Second, it offers a reduction in turnaround time, can be a significant competitive advantage. Third, it breaks geographic limits and provides the opportunity to cooperate with the best industry professionals, no matter where in the world they live.
What follows are examples of outsourcing failures, but also how companies can ensure that their outsourcing initiatives are successful.
Why Outsourcing Can Be Bad
Both the 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 with the above-mentioned benefits, there are numerous risks and problems of outsourcing that companies should be aware of before engaging in this practice. So, here are a few reasons why outsourcing fails even in the most mature IT enterprises?
IT outsourcing risks
- Lack of control: Since the work will not be carried out in-house, it’s 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.
- Compromised quality: Companies are usually concerned about the quality standards of their outsourcing partner that can be lower than those used in-house.
- Security issues: To an extent, outsourcing means allowing access to the company’s or clients’ confidential details, which is always a risk.
Moreover, such instances don’t necessarily translate into true cases. 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.
Examples of Famous Outsourcing Failures
IBM and Queensland
Even renowned companies aren’t insured against failures. This is what occurred 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 a result, the estimated budget of $6 million ended up being 16,000 percent 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 the U.S. Navy
Broken communication can lead to a failed project and considerable losses, which is what happened with the U.S. Navy. The organization 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.
Unlike the above examples, if you don’t want to fail at outsourcing, it’s not enough to know what can lead to failure. It’s of primary importance to learn and follow the best practices for successful outsourcing.
How To Make Offshore Development a Success
IT and software development are spheres where outsourcing is most widely used. So, what’s the recipe for outsourcing success?
1. Define the basics of the project
To clarify this opinion, 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 proper outsourcing partner
Don’t focus on costs only when looking for the company or a developer for the project. Low charges can cost you much more 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 a portfolio of 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 the outset to the outsourcing vendor and clarify any points that need it. Then, work out the way and schedule of communicating on the project. It’s 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 who’s responsible for the project to track its progress, monitor any updates, and make sure it’s 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’s 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.