Open-Minded Outsourcing

How open-minded is your project? Learn about cooperation types between a customer and an outsource provider, and select a matching approach to smooth product development.

Almost every organization that has defined its business needs and is involving a vendor (outsource provider) to achieve its goals, faces two questions that cause uncertainty in the decision making process:

  • What scope of work and services are required?
  • How to define vendor competency levels for those services?

Correct answers to these questions are key to the successful project realization. However, finding the answers is not a trivial thing. In the majority of cases, it’s related to the lack of trustworthy information about the outsource provider and insufficient experience in working with outsource providers from the customer side. So the organization’s decision-making process is mainly governed by their previous experience or recommendations from other companies.

Such an approach provides an opportunity to set a direction for the project, but it appears to be too broad, and effective cooperation is built during the project based on the ‘trial-error’ principle. If the organization manages to correct mistakes in a cost or time-effective manner, then sooner or later proper cooperation will be established. However, if the price of corrective action is too high, projects tend to fail.

To understand the root cause of such situations, let’s have a look at different types of cooperation that can be established between a customer and outsource provider. They depend on the outsource project type and the level of project risk defined between both parties:

Type 1: Outstaffing

The easiest type of cooperation is engaging the outsource provider’s employees to perform certain work. Traditionally in such an approach, the customer gets professionals with the right qualification level to perform the work. Organization of the work, management and control functions remain the responsibility of the customer. The employees are generally on the provider’s site and use their own infrastructure while performing customer’s tasks.

Type 2: Remote Team

The next type is a ‘remote team’ that works on the provider’s site. The team has their goals set and they should be achieved by pre-defined volume, duration and quality characteristics. Good examples of the remote team’s activity are implementing part of a product’s functionality, or quality assurance for an entire product. With this approach a customer delegates team management activities to the vendor, including resourcing and risk management, which can affect the final result.

Type 3: Product Development

This type presupposes providing a full product development service. Compared to the previous two types, here an outsource provider takes total responsibility for delivery of the final product under predetermined conditions and within an agreed time span. All activities including project management, collection and processing of requirements, as well as maintenance of a working infrastructure are the responsibility of the provider. The customer doesn’t need any expertise or experience in the provider’s field.

Type 4: Product Management

Customers and outsource/service providers who have experienced successful cooperation and gained appropriate expertize can work under a "product management" basis. Here the service provider bears full responsibility for the success of a particular product in the market. The entire spectrum of activities ranging from definition of product development strategy to its implementation is the responsibility of the outsource/solution provider. Often companies will establish remote departments in countries with a favorable outsourcing climate.

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Reactive Approach

Most customers start cooperation with providers using the first type of engagement and retain control of all activities. This way they attempt to mitigate risks and maintain influence on the project, typically because they don’t trust the partner. This cautious attitude is particularly evident for companies that are cooperating with an outsource provider for the first time or have had a negative experience working with a provider in the past. Over time, long-term and successful cooperation tends to move towards the more mature types or engagement.

In reality, the parties are not always ready for the relationship they are trying to establish. This may be explained by the customer’s inability to ensure sufficient quality of their inside processes for the type of cooperation and work required (for example, eliciting the stakeholder’s requirements, assessment and planning, ensuring necessary IT infrastructure functioning, etc.). On the provider’s side, it may be an inability to provide the appropriate quality for a specific service, insufficient expertise, facilities or resources. These situations lead to incorrect expectations on both sides, which may result in further conflict and additional corrective actions.

Preventive Approach

To prevent these problems arising it’s important to define the most effective outsourcing type for your specific case.  Both sides need to know on which level they are ready to cooperate as well as understand what should be done to start cooperation and how to maintain an effective working relationship at the highest level possible. Providers with vast experience tend to apply a preventive approach and try to create conditions that facilitate a successful launch and the most effective implementation of the project.

For example, SoftServe created its own unique SmartStart methodology, which includes a number of activities to collect and analyze information on the current state of affairs that may influence the project. It involves both the customer and the contractor. Based on the processed data, a team of consultants provides recommendations on the most effective type of outsourcing and provides advice on preventive actions that both parties should take before the project start.

SoftServe has evaluated that projects based on a preventive approach are 5-25% more productive in comparison to other projects, and client satisfaction ratio is higher by 25%. Similar figures will apply if all the existing projects undergo a review of cooperation type and implement recommended improvements.

Let’s have a look at the following example. A previously successful project based on the remote team cooperation type started decreasing in productivity. A project assessment revealed that the client’s key stakeholders gained new responsibilities and team management focus was lost.  Based on evaluation outcomes, SoftServe offered to take over the implementation ownership. This decision allowed the cooperation to be modified to reflect the recent changes and as a result, product development time was reduced and the distribution of stakeholders’ responsibilities was optimized.

A preventive approach enables both the customer and the provider to get a wider look at the subject of outsourcing, build correct and realistic expectations, as well as facilitate optimal involvement of other valuable resources. After all, each party has its own heritage and experience (accelerators, knowledge in a particular subject area, partnerships with suppliers of products, etc.), which may lay the fundamentals of success in specific projects and act as catalysts to open new common points of mutually beneficial cooperation.

All in all, companies that decide to cooperate with service providers who use their experience in work with other partners and with different types of cooperation have a chance to get not only the services they specified, but also comprehensive and professional consulting on the most beneficial type of cooperation and services.