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Outsourcing of Software development is probably one of the most sought-after approaches that comes to action whenever CEOs, CIOs and other IT leaders of an organization identify a need to develop back end Software, a web application or a mobile application that will help to improve or boost their business productivity. Information technology today has become more advanced and undergone changes manifolds and lately the IT Outsourcing market faces many challenges. This can also be attributed to the globalisation of teams (Offshore, nearshore), globally changing IT Infrastructure and more advanced technologies like IoT, machine learning, AI etc.

Customers have become more experienced. Expectations were on the rise. Customer do not want to invest in a service provider located far off, e.g. in a different time zone, unless high quality results are guaranteed. In case of doubt, they would rather have the work done close by, onshore or even onsite.

After having a bad experience by Outsourcing their Software development to offshore/nearshore locations some customers are of the view that Software Outsourcing – especially to remote locations – does not work and it has rather led to outflow of large chunks of money from the customers. If a service provider at an offshore location fails to accomplish the objectives of its customer there seems to be no point in doing the same mistake again. There have been some instances in past where Software Outsourcing did not prove to be a viable decision for the customers. One example we can draw from 2012 might be of Royal Bank of Scotland, when a Software update failure left millions of bank customers unable to access their bank accounts for withdrawing funds and viewing account balance.

The bank itself was unable to conduct transactions for commercial or non-commercial customers. The customers from other banks who faced difficulties with this were from British Bank NatWest and Ireland’s Ulster Bank. While the bank did not disclose the reason for the temporary halt of its banking system concerning the IT vendor’s responsible for their Software update failure, it sounds obvious that they did not have a backup plan for such contingencies or if they did have it was not sufficient.


Pic 1 Outsourcing Best Practice pliXos on Piyush Baheti
Picture 1: Pitfalls in IT Outsourcing by pliXos
(based on Outsourcing Best Practices by Piyush Baheti)

Not only big companies, also SME’s (Small and Medium Enterprises) might face similar situations of “technical failures”. These companies often have limited IT budgets which makes it difficult for them to hire high salaried, experienced local senior Software engineers or technically skilled professionals to get their work done. As a result, these companies may be left with one best option only i.e. Software Outsourcing to low cost locations, Near- or Offshoring.

Mindless Outsourcing can make companies to become fully dependent on service providers. This is where they fall into the pits of Outsourcing. Just as the coin has two sides IT Outsourcing also has two facets, good and bad. It appears all good during the start of an Outsourcing agreement as both the parties tend to respect each other’s goals and objectives. Later on, the story might take a different route all together. This can be attributed to several factors. There may be many reasons as to why Software Outsourcing can become a nightmare instead of a solution to the customers. Some important ones to consider are:

Finding Cheapest Software Service Provider by keeping quality and productivity in mind: If you are looking to outsource your Software development to a vendor at an offshore/nearshore location, with the main intention of cost reduction to maximum then you seriously need to rethink on your strategies and goals and the plans to achieve them successfully. Identifying provider with least cost as the key criteria will bring outputs accordingly.

This may be understood simply “as you sow so you reap”. Customers should consider more criteria for Outsourcing Software development instead of just keeping cost arbitrage as their main agenda for fruitful outcomes. When comparing costs, quality and productivity need to be carefully considered!

Governance of costs: The Outsourcing of Software development process may put the customers in hands of “money eating sharks”. This has been seen occasionally as a bad practice which destroys the real benefits of IT Outsourcing. Software service providers may charge handsome fees in small packets, so it goes very imperative to decide the terms and agreements and keep space for some amendments wherever necessary without disturbing the customer’s budget to an unpleasant stage.

Cultural Differences: The Software Outsourcing firms more precisely the offshore locations belong to different culture and the customers might face big challenges in dealing with them. It makes a difference for a customer in California to deal with a Software developer nearby, or located in Beijing, Cairo or any other country far off. An understanding of the cultural differences at both ends, customer as well as service provider is necessary.

Poor Accountability, track of progress: Many Software Outsourcing projects are suffering from this disease. The customers have no idea of what the developers are doing, and how far they have accomplished the task. Seriously, there is a need to build up a mechanism which can allow the customers to keep a watch on the Software development. One important move the customers can make here is having an employee of their organization visit the Outsourcing solutions provider for creating a framework of the Software architecture and specifications. Agile methodologies and fitting tools for communications, requirements /backlog management and governance can help a lot.

Lack of proper knowledge: It is one the most dangerous reasons why Software Outsourcing is not working anymore. Many customers are deceived by the Outsourcing solutions provider believing that they are the best Software developers in a certain region, city or state and have great experience of serving top notch companies. The customers should undertake a thorough research before closing a deal with such Software service providers. However, a scientific approach to examine a vendor to know their capabilities and talking with their previous clients gives us the best insights and saves us from selecting a team of Software developers with little experience.

Innovation in work procedures: Customers have become very selective in today’s market. Customers demand for Innovative services from service providers which would enhance and upscale their work. With new technologies coming into play customers have become quite demanding in choosing their Software service providers. Without any extra services like, online chat support, keeping in touch with key staffs always, timelines for meetings, proper governance, security of intellectual data etc it will be difficult for a Software service provider to win a customer, long term.

However, the above inconveniences can be dealt efficiently now with online SaaS tools and Sourcing Advisory as a Service . Customers can further explore pliXos B2B Marketplace in changing the overall scenarios in IT Outsourcing, that helps customers to find verified and highly qualified service providers for their upcoming Software/application projects.


BBC News on RBS:
Piyush Baheti on Outsourcing Best Practices:


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