IT outsourcing has become a popular and effective method due to the significant reduction in time-to-market, as well as providing companies with direct access to world-class IT resources, skills and experience. But to ensure your company receives all the benefits of an IT outsourcing experience, it`s necessary to consider the possible hidden risks.
by Viktor Ianchak, Engagement Manager at SoftServe, Inc.
The IT Outsourcing Boom
Today, it seems like IT outsourcing is at the peak of its popularity. The results of a recent survey of “The State of IT Outsourcing” conducted by Bluewolf indicated that an average company spends about 10%-25% of its budget on IT outsourcing. In addition, 32% of the respondents said they plan to increase their IT outsourcing budgets in 2013.
Even though cost reduction continues to be an important factor for IT outsourcing, the reason why a growing number of companies throughout the world choose to outsource is more complex. IT outsourcing has become a popular and effective method due to the significant reduction in time-to-market, as well as providing companies with direct access to world-class IT resources, skills and experience.
Cliff Justice, a partner in KPMG's Shared Services and Outsourcing Advisory, recently stated in his report titled “The Death of Outsourcing,” that since 2006 companies have started moving "from outsourcing as a commodity that's very price-focused to a service that's much more value-oriented". Meaning, companies worldwide are moving from task or issue-oriented engagements to an "extended global enterprise" – thus shifting to integration with service providers and managing this integration in a way that achieves business goals.
Why the Need for Shift in Outsourcing Relationships?
In order to minimize any potential project risks both the client and the service provider should be experienced in starting offshore projects. They should also be familiar with industry best practices, as well as have full visibility into both the client`s and service provider`s environments.
But this is usually not the case.
An average company (especially if it’s a technology-enabled company, not an ISV) planning to outsource has no experience in offshore project management or a set of processes to govern outsourcing relationship. As a result, these companies mainly focus on the delivery phase of the outsourcing lifecycle and ongoing operations, with a special emphasis on scope and specifications, development and system environment aspects. However, the “hidden depths” of an IT outsourcing relationship are usually overlooked – like project planning, expectations, communication, standards and many more. Sooner or later in the project they`ll have to be addressed, but leaving them unmanaged until the end of a project may lead to missing deadlines, lost revenue and damaging the relationship of potential customers.
Mitigating the Hidden Risks
In order to ensure your company receives all the benefits of an IT outsourcing experience, it`s necessary to consider the hidden risks listed above. When choosing an outsourcing provider, remember: a reliable software development and quality assurance provider always starts with considering the product quality aspects at the very beginning of a project.
Quality of a product should be constantly verified and validated starting from the requirements specification stage or the initial user story definition – through the whole project lifecycle. This approach allows the development of products with better code quality and fewer defects.
Thus, discovery of potential risks and issues at the beginning of a project is the key to its success.
Choosing the Right IT Outsourcing Partner
In order to mitigate project risks by ensuring full transparency of the project and full visibility into the both environments, you need to establish an effective communication with your service provider and achieve a common vision of the project goals, your product specifications and so on. Obviously, the best way to do this is to find a long-term IT outsourcing partner. Being aware of your company`s needs and expectations and having a good knowledge of your company`s internal procedures, they will become a trusted resource, fully capable of supporting a mutually beneficial and effective long-term partnership.
A full-fledged and reliable IT outsourcing partner ensures:
a smooth and successful project start;
effective management of all aspects of a new engagement;
identification of the project risks early in the project;
creation of a roadmap for mitigation of these risks and monitoring how the mitigation process is being performed.
IT Outsourcing Consulting – Getting it Right from the Start
During the project start-up process, an experienced IT outsourcing consultant acts as an unbiased expert who analyzes the outsourcing process from both the client`s and service provider’s perspectives in order to eliminate any issues that may have a negative impact on the project start-up and execution.
Of course, the involvement of such a professional is an additional investment, but it’s relatively small in comparison to the potential losses that may be caused by critical issues found in the middle of a project development cycle or a few days before the planned release date. An outsourcing expert will not be able to fully remove all the roadblocks or hidden risks, but – being aware of them – you`ll have the possibility to create a mitigation plan for every potential obstacle, ensuring a successful project.