Software (Out-)Sourcing has been a successful option chosen by many companies across the globe to achieve large business objectives. Over the years we have seen that companies of small, medium or big Multinational Corporation (MNC) categories have been and are still outsourcing software development to offshore or nearshore locations to save time, costs, or most likely to scale up and get assistance from best skills around the world.
This strategy to hire an outside company as SW service provider has proven beneficial and stood the test of times. It has also helped to scale up important and rare skills so that the companies own employees can concentrate on other core business tasks.
With the evolution in technology there was a gradual rise in each business for innovation. This demand for innovation was accompanied by several other factors such as need for automation to replace repetitive manual work. Most pressing today is the need to build upon innovation to have an edge over the competitors, perhaps becoming pioneers in their business domain. Thus giving rise to Digital Disruption. This is considered a key task for the rare internal IT experts. A clever sourcing strategy allows them to be focused on exactly this.
Everyone would agree to the fact that certain reforms in recent years such as Brexit in Europe, change in H1B Visa Policies or immigration rules in the US etc. had jolted the outsourcing industry. The trends and demands were changing in global markets and many economies had to face some unexpected slowdown in progress. There had been instances where outsourcing did not prove to be as beneficial as it was being expected. All this made customers to fall in doubts of IT outsourcing industry.
Humans have a quick tendency of judging the results without going deep into the reasons why the outcomes were not according to what they had planned. Reasons for failure in software development outsourcing should not be judged and blamed just in the name of bad service providers as it may also be due to the company’s internal planning, execution and management carelessness. The strategies used by CTOs and CEOs of an organization are one of the most important aspects for success of the entire software development projects. In fact the major portion of responsibility to get their work done successfully depends heavily on their own planning and execution lines.
The managers and CTOs responsible for outsourcing software development for the organization should definitely re-consider the following pointers from time to time to escape higher risks in outsourcing software development detrimental to their organization:
1. UNDEFINED GOALS & OBJECTIVES:
It is absolutely important to define the goals and objectives right from the first phase of any outsourcing project. Those goals and objectives need to be understood and supported by all parties involved, at customers as well as providers site. The CTOs, CIOs and IT Managers should have crystal clear objectives and goals set for the project. It is important to understand what one requires so that it is easier to make the SW service providers understand this without any dilution in any aspect.
Most of the failures in software outsourcing projects are due to this simple fact which can create room for unwanted risks in executing a software project and finishing it with desired outcomes. A simple but highly effective tool to evaluates ones approach concerning SW outsourcing is to use the online tool Outsourcing Advisor.
Pic 1: Undefined goals lead to unwanted outcomes (source: pixabay)
2. NO PARTNERSHIP CONTRACT:
Software outsourcing is not the same as customer service or back office outsourcing. It represents an extended part of your organization expected to innovate and change and the SW service providers play most vital role in bringing the expectations and goals of the organization to reality. The theory of third party contracting where a vendor simply delivers the goods for an income does not hold good in case of custom software development projects.
Having a partnership or considering the vendors as partners and engaging more with them gives the sense of belongingness and a part of organization. Thus, this helps in boosting the confidence and makes the SW service providers more responsible towards their tasks. Properly implemented agile processes with a very close continuous alignment of product backlog and their importance, supported by an open and continuous collaboration (e.g. well-established daily video conferences and use of online collaboration tools like Jira, Confluence, Slack or our Outsourcing Director for governance) is vital in this aspect.
Pic 2: Make SW service providers as partners in your business (Source: Pixabay)
3. LOSS OF CONTROL AND VISIBILITY OVER THE PROCESSES:
The biggest fear for a CIO is the loss of control and visibility on processes during their outsourcing venture. This may happen due to poor communication between the parties or unclear goals at the beginning. It is equally responsible for the providers and the customers to have a smooth streamlined process of communication to keep the steps aligned and in place. Once again, agile processes and the collaboration tools as mentioned before play a vital role.
Pic 3: Losing control on the project line may lead to failure (source: Wikipedia)
4. INADEQUATE SKILLS IN SW SERVICE PROVIDERS:
It should be most surprising to know that the SW service provider you choose was not vetted properly. Using unidentified and not fully authentic channels of provider selection is a major setback and reason for failure in numerous software outsourcing projects.
Authentic sources of provider selection for comparing abilities and reviews with their previous clients combined with a proven (“scientific”?) approach towards provider selection should be common. If you do not want to run this process alone, partners like us can help with tools as well as running the whole process.
5. SPOILED BUSINESS CASE DUE TO HIDDEN COSTS:
One of the beauties of software outsourcing lies in fact that it can help the organization reduce major costs which would have been incurred in an In-house software development. However, customers should be clear with their outsourcing partner about any additional or hidden costs.
A previous evaluation of the cost will give more better planning and execution of the outsourcing venture. A high level of transparency is key in any sourcing project and set-up.
Pic 5: Hidden cost in software development outsourcing (Source: iseeit)
6. PERCEPTIONS AND OTHER EFFECTS OF OUTSOURCING?
After Trump’s taking over as president of US, outsourcing gained a certain bad image and so were the market situation after that. This perceptions at one’s own staff or one’s customers as well as other “hidden effects” when dealing with Outsourcing, especially offshoring or nearshoring need to be considered.
Not everybody will easily agree that outsourcing gives or allows companies to become more competitive in international markets. We think, no outsourcing often means no access to needed skills and no innovation. But this might not be welcomed by everyone.
Since a customer’s perception towards buying services largely depends on trust, identifying truly trustworthy providers through our B2B Marketplace should be very helpful.
Pic 6: Customer’s perception towards buying services largely depends on trust (source: pixabay)
One can also refer Major Mistakes Customers Should Avoid in Software Outsourcing on our global sourcing blog.
Additional reading: intetics.com
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