1 Contact us for a FREE CONSULTATION! How to Evaluate Outsource Development Partners Creating an Evaluation Scorecard
2 How To Evaluate Outsource Development Partners  Few business organizations or IT departments would argue against the value that can be derived by leveraging outsource application development partners. Over the past few years, significant advancements have been made in the outsourcing model, in preventing international communications breakdowns, in monitoring and governance and in the very pricing models used with outsource partners. Given these changes in the outsource infrastructure, the challenge that remains for business and IT leaders is simply how to evaluate and select the best outsource development partner for their organization and project. This whitepaper will review the current state of the IT and application development outsourcing industry and review the areas of focus an organization can use to confidently evaluate their potential outsource development partners, namely: 1) business needs analysis and creative collaboration, 2) responsiveness and 3) process maturity. Finally, a scorecard will be provided that leverages these conclusions to help the organization score potential vendors and make the final determination.
3 How To Evaluate Outsource Development Partners  Current Trends in Outsourcing Software Development At various notable times in history the prevailing market and economic conditions had a significant impact on particular industries. This is certainly still true today. In relation to the information technology arena and more specifically the use of outsourcing to augment software development staff, the economic and market drivers are joined by the forces of innovation and technological improvements as well. Currently, the globalization of enterprises as a market driver has led the way for a continual array of new technologies such as cloud, mobile, web, and automation (BPO) designed to serve these enterprises. The outsourcing industry and its models have been tried and tested for over a decade, generating more business confidence and yielding more mature outsourcing models. The well- known locations for international outsourcing such as those in India and Eastern Europe, known for beneficial economies of scale and talent pool have been joined by other geographies and developing talent pools attracted by the opportunities. One example is the outsource industry that is developing near shore to the U.S. clients in Latin America and the Caribbean. Where the outsource business was primarily utilized by Fortune 500 clients in the early years, it is now mature and attractive to Fortune 1000 and small- to- medium businesses as well. Businesses of all sizes now understand the value of extended access to pools of global talent. Technology initiatives focused on social, mobile, analytics, and cloud (SMAC) will result in the supplier mix becoming more complicated, as new service models, delivery mechanisms, and skill sets become essential to supplier success. Simultaneously, vendors will become more closely tied to the business outcomes of their customers, and a select few will take on the role of strategic partners. Three Trends That Will Influence Your 2014 Outsourcing Plans, Iyenga, Forrester Research, Feb To accommodate the project needs of an ever- expanding client base, the mature outsource industry has developed new business models. Some examples include innovative sourcing and shared service models - hybrids of outsource, near- source, in- source and most recently outsource cooperation contracts that focus more results, on outcome, rather than simply outsourced project hourly billing.
4 How To Evaluate Outsource Development Partners  Business Needs Analysis and Creative Collaboration Success in developing applications depends upon much more than technically superior application programming or coding. Even when a highly functioning application with exceptional speed and usability is generated by a project team, if the necessary business result is not achieved, the application is worthless and the funds spent on the project are wasted. The appropriate outsource partner for your project must first be able to understand your business. The partner must be able to comprehend your specific business drivers. Finally, this potential partner must grasp how it is that the planned application development project will yield the desired business results and satisfy those business drivers. Getting to know the business stakeholders is an important step for your potential development partner in the business needs analysis. As the partner gets to know your organization, they should display an understanding for not only the business drivers, but how those drivers relate to the various entities that the application will affect. For example, an application might affect two departments and their operating processes. It might touch the business customers, or affect the way they interact with the business. It might change a process that older employees might have difficulty adjusting to. These considerations must be ferreted out during the discovery process. Once that general understanding of the business and business needs is accomplished during the presales phase of engagement, the potential development partner must develop an understanding of your business environment and culture. Those that choose to pursue a hybrid model should get all stakeholders on board first This impacts both the business users within the company and the end consumers of the company, Karthik says. Think about that impact and align internal stakeholders. It s also important to build a fully loaded business case; a hybrid model is not a hands- off effort. Do not underestimate the effort of managing this, says Karthik. [You also] have to choose the right service provider and create a long- term vision. H. Karthik, vice president of sourcing consultancy Everest Group, quoted in Does a Hybrid Offshore IT Outsourcing Model Make Sense for Your Company?, Overby, CIO Magazine, Dec Once and understanding of the business is demonstrated to your satisfaction, you should next be confident that this partner will be willing to engage within your specific cultural context and creatively collaborate with your organization in order to develop a quality solution that goes beyond the written specification. This will ensure that the resulting product or application will meet your organization s actual business needs. It is, after all, the business need that generates the project in the first place. A quality application development partner will demonstrate a thorough understanding of your business and your business need, and a willingness and enthusiasm to operate within those parameters.
5 How To Evaluate Outsource Development Partners  Project Methodology and Process Maturity Once the business meetings and pre- project investigations have taken place on the business side, it is time to understand better how the outsource application development partner operates their business. What does their software development process look like? Is the process they use to deliver projects on time and on budget a mature one? How many times have they used this process to yield successful completion of projects in the past? Do they have references from these projects? Do they have the necessary IT infrastructure sufficient to handle your project? These are just a few of the questions you might ask potential vendors. The technical skills and development experience the outsource partner has are of course important. In evaluating the outsource development partner, it is of primary importance that they are experts in the particular development languages that are planned for the project. A partner may have a number of developers that are fluent in many application development languages, and can perhaps assist your team in deciding on the best technical path for the project. It is prudent to have an understanding of the current trends in application development but even more so to understand how various technologies will plug in to your current infrastructure and how they will interface with your other critical business applications. For example, if your business critical applications are part of a primarily Windows- based infrastructure that leverages current Windows Server farms and perhaps Microsoft Exchange Server and Microsoft SQL Server, then it may make better sense for your new application to be developed in.net as opposed to say PHP. If however, you plan for the application to be standalone and web- based, not having any ties to other applications in that infrastructure, it might be more economical to proceed with a LAMP- based application development environment, leveraging free Linux, Apache, MySQL and PHP offerings. A strong potential outsource application development partner will be able to discuss and guide your project team through these technical decisions. The partner will be able to relate the skill set that they have currently available on their bench, such as the above example below from an outsourcing firm s solicitation. They will also provide references as mentioned and highlight the technologies (and results) they have delivered on recent projects.
6 How To Evaluate Outsource Development Partners  You should request a process description and sample process artifacts from any potential outsource development partner. For the qualified vendor, this request should provide no difficulty, as they should have such materials readily available. Your IT leaders should also request a description of tools used by your prospective outsource provider for project planning, project tracking, issue management, and communication management. These tools, beyond their technical competence will help determine the success of the project. Web Development Designing & Creative Mobile Technologies SEO & Internet Marketing Services Offered (actual example from an outsource development partner solicitation) PHP, Asp.Net, MySQL, Word Press, Smarty, Drupal, Magento, Joomla, Os Commerce, OpenCart, X- Cart, OS Date, CakePHP, CodeIgnitor, Ajax, CSS, Jquery, Java Script, Flash, HTML, MVC, ROR etc. Mobile Responsive Twitter Bootstrap, HTML5, Photoshop, CS3/4/5, Flash, HTML, DHTML, Ajax, CSS3, Java Script, PSD to Word Press Android, ios, J2ME, Black Berry, Symbian, Brew, GPS Tracking etc. On Page SEO, Off- Page SEO, SMMO, Link Building, PPC, Marketing, Content Writing, Internet Marketing Packages etc A vendor may have wonderful, very intelligent programmers in their tool kit, but poor project management methods, or poor application development methodology or perhaps a poor code version tracking system, any of which could spell disaster for your project. With innovation and digital transformation rising in importance in the minds of many business leaders, one strategic lever that I have seen work well for companies looking to tap into these advantages and opportunities is leveraging global talent. KPMG
7 How To Evaluate Outsource Development Partners  Project Communications and Responsiveness All outsource vendors claim to adhere to the highest of standards in communication. The first indicators of a prospective outsource partner s ability to deliver the necessary level of communication and responsiveness appear in the pre- sales communication, from the very first contact that the vendor makes with your business. It sounds like an obvious question, but Can the outsource vendor speak your language? Do all of the vendor s employees who will be communicating with your project team have the necessary language skill level for the native language of your business? Is the language level of these individuals sufficient to communicate technical concepts? Can they communicate in a remote setting if necessary? Are the appropriate people able to communicate with personnel at the various levels necessary for the project (i.e. Technical, Project Management and Business Management levels)? Pre- engagement communication quality is a good indicator of a cultural adherence to a comprehensive communication standard within the vendor. Responsiveness of any outsource partner will be a key component of your project communications. Timely communications can advance or retard a development project, in particular when the project team is a mix of internal business employees and outsourced development team members. Most businesses have a communication standard, either written or implied within the work environment. For example, the business may require that all communications are responded to within a given time frame, say 12 or 24 hours. Likewise all telephone communications may have an expected response time. This is an area where the culture of your business often dictates the expectations for the outsource partner. It is advisable to include the communication and responsiveness expectations in the contractual arrangement with the outsource partner, thus not leaving any ambiguity with regard to this aspect. The outsource partner should adjust their schedules, if necessary, to meet the expected responsiveness standards of the business client. The ideal outsource development partner will appear and operate as a natural extension of your business, and as such will adhere to the normal communications and responsiveness standards within the culture of the client s business, regardless of their physical location.
8 How To Evaluate Outsource Development Partners  The Final Evaluation: Scoring Potential Outsource Development Partners After understanding the current climate of the outsourcing industry, the new trends, market and economic drivers, your business then seeks to find and evaluate the right vendor for your project. Using the concepts discussed in this whitepaper, it is then a good idea to develop and use a scorecard that will help you evaluate all prospective vendors and ultimately select the best one for your business and your project. This scorecard, an example of which is provided on the last page in this whitepaper, will steer your project and business teams towards selecting a vendor who can provide you with cost savings, while still fighting the innovation, collaboration, high- quality communications, awareness of business drivers, and familiarity with your specific cultural context. Many companies will change their outsource providers this year according to a recent study quoted in the sidebar. If your company is seeking a new provider to be your outsource development partner, consider Pilgrim Consulting (PCI). PCI is a US- based company, with a US- based project management office, and offshore software delivery. The primary differentiating factors for PCI is cost, as compared to US based outsource firms, and innovation, communication and time to market as compared to the offshore service delivery model. Close to a quarter of outsourcing clients will actively seek to eject their current provider if they have not effectively helped them standardize, automate, or transform their processes within the next two years, according to the 2014 State of Outsourcing study conducted by outsourcing analyst firm HfS Research in conjunction with KPMG. Digital Disruption and Talent Without Borders, Atul Vashistha, CEO at Neo Group, Sept Find your own evaluation scorecard on the next page.
9 How To Evaluate Outsource Development Partners  EVALUATION SCORECARD Scoring Item Weight % Score Track Record 15% Current client relationships and engagement capability 4% Product development and maintenance experience 4% Current client list 4% Quality of customer references 3% Domain Expertise 15% Experience with software product development vs IT projects 3% Expertise in the target industry 2% Expertise on hardware / software 2% Expertise using development tools 2% Experience with any third party tools, technologies and platforms,including strategic industry partnerships 2% Expertise in User Experience Design (user research, usability, prototyping, omni- channel design) 2% New technology research and adoption practices (keeping the edge ) 2% Infrastructure 10% Geographical location 1% Offshore and local infrastructure 3% Quality of server, desktop, mobile, network, cloud & backup infrastructure 2% Communication and connectivity infrastructure 3% Power 1% Intellectual Property and Security 10% Contracts (vendor / client) 2% Contracts (vendor / employee and client / employee) 1% Physical security 1% Network security 2% IP security process and awareness 2% Audits, 3rd party verifications 2% Talent 15% Management strength / stability 3% Overall quality of technical pool 3% Ability to attract mind share, hire & retain talent, quality of recruitment and HR engine 4% Current attrition / attrition management 3% Professionalism, responsiveness and openness 2% Process 15% CMMi and ISO certification / other process & quality certifications 1% Tools used for process implementation 2% Code management / source code control process 2% QA process and test automation experience 2% Documentation standards 2% Knowledge Management process 2% Project Management methodology (maturity of off- shoring engine) 2% Communication transparency 1% Flexibility to adapt process to customer s needs 1% Deal 10% Pricing 5% Openness / flexibility for structuring a creative deal 2% Experience with BOT (build- operate- transfer) 3% Risks 10% Financial strength / long term viability 4% Conflicts of interest 2% Executive responsiveness & commitment to long- term relationship 2% Cultural fit 2% TOTAL 100%
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