 |
 |
|
Outsourcing IT Development: Advantages And Disadvantages
You
can outsource almost anything. Maybe you don't know it yet, but it's true.
A couple of days ago, when I was drinking coffee in the kitchen, my wife
pointed at the faucet that was leaking big time. The good ole faucet was
there when we moved in about ten years ago, and trying to fix it again
didn't make sense any more. Since I religiously believe in DIY, I bought a
new faucet and set about working. When the old faucet was gone, I found
out the metal pipe under the sink had to be replaced, too. There was no
way I could do it without recourse to welding. I realized I was ready to
outsource that part of the project, so I called the plumber.
IT
development outsourcing isn't much different than any other kind of
outsourcing. When you face an insistent need to start a new IT development
project, you have to weigh your current in-house capacity first. If your
experience and budget allow you to cope with the task without resorting to
any outside expertise, you should probably take full advantage of your
potential and do it yourself. However, if there's danger that you'll bite
off more than you can chew, it's about time to consider the advantages and
disadvantages of outsourcing.
Advantages
Basically, outsource service providers offer you higher quality services
at a lower cost. This makes the advantages of IT development outsourcing
obvious, so let's have a look at just a few of them.
Outsourcing IT development is a most effective way to stretch your budget.
When managers plan IT development outsourcing, they usually make it their
aim to cut down the company's expenditures by 30%. This is a figure that
speaks for itself. Of course, there's always the risk of failure, but if
you outsource prudently, you'll afford to implement projects of such a
scale that would be impossible for you to reach on your own.
If you need to have state-of-the-art IT solutions worked out and
innovations implemented with small losses, outsourcing may be the only way
out. It will save you from the nightmare of retraining your employees (or
even hiring new ones) and/or paying for re-equipment.
Cutting your costs and upgrading the quality of the services you offer
will allow you to expand the competitive capacity of your business. I
suppose the state the IT market is in today makes this simple argument a
crucial one.
When you outsource IT development to an outside company, you can
concentrate on your core activities. You won't be able to completely
forget all about the project or its part that you have chosen to outsource
as soon as you sign a contract with an outsource service provider, but you
won't have to get scattered, either.
If you deal with an experienced and highly qualified vendor, you'll be
able to gain valuable expertise in support of your IT capacity. Almost any
vendor will surely try to set a dependency trap for you, but it doesn't
mean you have to acquire the dependency pattern instead of learning
everything you can derive from the vendor's expertise.
Disadvantages
So, you have finally decided in favor of outsourcing. Will it
automatically make you wealthy and happy? This is far from true. Various
studies show that 20% to 35% of IT outsourcing contracts are not revived
after they expire. Needless to say that most customers in these cases are
not satisfied with the quality and/or price of the services. Outsourcing
as a nightmare was eloquently illustrated by Beth Cohen, president of Luth
Computer Specialists, Inc., "There was a company in Dayton that
decided to outsource much of its IT and production to a foreign company
about five years ago. After about nine months of outsourcing, the company
realized that there was a huge loss in quality for both production and IT
support. The company decided to cancel the contract and rehire their old
employees. They ended up getting most of their old employees back but at a
higher wage than before. Most people would think that the story ends
there. However, as hard as it is to believe, the company is actually
considering outsourcing again. They think it will be different this time.
It will be interesting to see what happens."
If you need to have state-of-the-art IT solutions worked out and
innovations implemented with small losses, outsourcing may be the only way
out. It will save you from the nightmare of retraining your employees (or
even hiring new ones) and/or paying for re-equipment.
Cutting your costs and upgrading the quality of the services you offer
will allow you to expand the competitive capacity of your business. I
suppose the state the IT market is in today makes this simple argument a
crucial one.
Forewarned is forearmed. This is why I suggest we discuss the pitfalls
expecting a business that puts out to the sea of outsourcing.
You will lose control over the project or at least over the part that you
have chosen to outsource. This is the problem that frightens almost any
manager who has little or no experience in outsourcing. This is the
challenge any business involved in outsourcing faces. This is the risk you
have to take. It is inevitable that outsource service providers should
take control - at least in part - over outsourcing projects. However, they
are not supposed to abuse the confidence reposed in them by their
customers. In order to minimize the risk, you have to be extremely careful
studying the background of your potential vendor. Once you decide in favor
of this or that company and begin negotiating the contract, you should try
to make the whole process of the project implementation as transparent for
you as it is possible.
It's usually difficult to avoid the inherent problems of communication.
Telephone conversations are bad enough, but email and communicating via
some instant messaging program online takes even more time. You'll have to
put up with an endless amount of emails to be sent and received. Besides,
if you are dealing with an overseas vendor, the time zone problem will
surely arise - the difference between your vendor and you may be seven
hours or more. Just imagine: you arrive at the office at the same time
when your vendor's employees are going to leave. The best way around this
problem is to set the mutually acceptable time for online meetings and to
require that your vendor should stick to the schedule. In fact, you can
even benefit from the difference in time zones between your overseas
vendor and you. For instance, you transmit a rush order to the vendor at
the end of your working day, the vendor receives it in the morning (their
morning) having those seven or more hours behind, and by the time you
arrive at the office, a considerable amount of work will have been done.
Standards of correspondence may be different to the extent of
misunderstanding. If you are having any problems like that while
corresponding with your potential outsource service provider, you should
try to work out some standards that both of you will find easy to follow,
or you'd better start looking for another vendor.
Language and/or cultural problems might contribute to all kinds of mix-up.
For instance, a lot of people knowing some fundamentals of English are
sure that when they ask your opinion about something and you say,
"It's okay," it means you like it a lot. Don't waste your time
on foreign vendors communicating in something like "Pidgin
English," and even if the person you're contacting has a fairly good
command of English, ask for the resumes of those employees who are going
to be responsible for each part/stage of the project to make sure they are
fluent in English.
An outsource service provider might be trying to diversify the business so
zealously that achieving progress in one particular area becomes
questionable. The solution to this problem lies in the company's
portfolio. Examine the relevant case studies and success stories, ask the
vendor for references, and, if you are still uncertain, do not hesitate to
check these references.
Some vendors advertise services and even take up projects having little or
no experience in the corresponding areas. Apparently, they intend to farm
out at least some parts of such projects to subcontractors - which
certainly doesn't look very attractive to the customer. This problem
resembles the previous one, and the recommended solution is the same.
Almost all outsource service providers place the highest emphasis on the
most advantageous projects. It's only natural, but it surely doesn't make
the life of the customers with lower profit potential easy. In order not
to become a neglected customer, you should:
Insist on appending to the contract a project implementation schedule that
includes as many milestones and deadlines as you find it necessary;
Stipulate for tough financial sanctions in case the vendor fails to meet
any of the deadlines;
Agree on some incentive payments for completing the project on schedule
(or even ahead of schedule);
Last but not least, build partnership relations with the vendor whose work
you are satisfied with and whose high-value customer you want to become.
Most vendors try to accumulate as many projects as they can. It's also
easy to understand. However, the burden might appear to be beyond the
vendor's strength, and this will most likely wreck the project schedule,
if not the whole project. If you don't want it to happen to you, you can:
Find out the scale of the vendor's operations including the approximate
number of employees and customers - of course, if it's possible;
Request the resumes of all the vendor's employees that are going to be
involved in the project implementation;
Ask the vendor to describe in detail these employees' responsibilities;
Follow the advice given in the previous paragraph.
An unscrupulous vendor may be simply unqualified for the project that an
imprudent customer have chosen to outsource. One of the ways to solve this
problem is to focus your attention on the expertise of your potential
outsource service provider at the selection stage.
A number of problems may arise due to the incompetence of a customer who
is a novice in outsourcing. That's right, you don't have to think that an
outsource service provider is the root of all evil. Incompetent customers
tend to make modifications in standards and procedures that have been long
established. A vendor who knows that the customer is always right tries to
implement the project the way the customer wants it, which finally leads
to a total mess-up. In order to avoid this kind of situation, try to find
out as much as you can about IT development outsourcing from your contacts
and… from articles like this.
Conclusion
Will outsourcing IT development really profit your business? Uh, maybe
yes, or maybe no. In other words, it depends.
If you don't possess in-house expertise and/or budget necessary to
implement a vital IT development project, outsourcing it - in full or in
part - to an outside company seems to be the best solution you can find.
However, you should be discreet selecting the vendor, examining the
vendor's expertise, negotiating the contract, and monitoring the project
implementation. In this case, outsourcing IT development will be
rewarding, and the return on investment might be the greatest you have
ever had.
Then again, if you are not cautious and thorough enough, you might end up
paying through the nose for much worse service than you expected to get.
This is what I'm thinking of right now, when the plumber's bill is laying
before me.
|
