The 10 Things to Consider When Choosing an Outsourced Vendor

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1 The 10 Things to Consider When Choosing an Outsourced Vendor Patrick Kelly; June 27, 2005 Choosing an outsourced partner means considering many different factors. The right outsourced partner will work with your company s specific needs and execute your unique solution. The wrong outsourced vendor will cost you time and money and will leave you with an inferior solution. The stakes are high, but if you have the right approach, you can make an informed decision and cross the finish line successfully. To assist you, we have compiled the following 10 things to consider when choosing an outsourced partner. We will list them once here, and then go into the details of each. Consideration 1: Understanding the Power of Team Consideration 2: What is the Vendor s Core Competency? Consideration 3: Do You Know the Total Cost? Consideration 4: Are You Really Hiring Experts? Consideration 5: Does the Vendor Have Sufficient Project Management Experience? Consideration 6: How Does the Vendor Ensure Scalability? Consideration 7: Can the Vendor Commit to a Schedule? Consideration 8: How Stable is the Vendor? Consideration 9: Will Your Company Own the Source Code? Consideration 10: What is the Vendor s Overall Reputation? Having reviewed all ten, let us now begin with consideration one. Consideration 1: Understanding the Power of Team MS SQL Server, mysql, waveform files? What frameworks will be appropriate? Test Executive, Queued State Machine, Event-Driven, ActiveX,.Net framework, etc.? These are just the beginning of the critical questions that the Architect will need to discuss with you. The Software Architect will then work with you on a number of design documents, including the Requirements Document, the User Manual, the Risk Assessment, the Software Test Plan, and the Software Project Plan. These documents (which are generated at the beginning but constantly evolving) will guide the whole team from vision to solution. With the architecture in place, there are four other functional categories that will need to be resourced. The first category relates to the Graphical User Interface and the High Level Application Software. The second category relates to the instrumentation and sensors. The third category relates to proprietary algorithms or mathematical models. And the final category relates to reporting of results and database storage. While it is possible to find one person who can be the Software Architect and be an expert in all four categories, it is exceedingly rare. You are much better off with multiple experts making up the team. Let s talk in a little more detail about the categories. Category 1: User Interfaces. Once you start to define the requirements, there will be Graphical User Interface (or GUI) Design issues to discuss. Every customer wants a slick, professional GUI which responds to their every need in intuitive ways. To handle this, you ll need someone who is an expert at creating professional GUIs. Since cost is often an issue, you will also want the expert to guide you in the most cost-effective way to build your GUI s key functionality. Category 2: Instrumentation. When communicating with GPIB-based instruments or Data Acquisition cards, you will want someone who is an expert at programming software to work with your set of equipment and sensors. All of the work done with the hardware drivers will need to integrate seamlessly with the total software solution. So, you ll need an instrumentation software expert on the team. Today s software projects are far more complex than they have ever been. Because of this complexity, it is virtually impossible for a single person to be an expert at all aspects of the total software solution required. The first person you ll need on the team is a Software Architect. Temporarily ignoring the complexities of the hardware, fixtures, instrumentation, and unit under test, let s just discuss the many complexities of the software architecture. You first need a Software Architect to examine issues relating to application software. For example: when should LabVIEW be used vs. Visual C++, Visual Basic, Java, a script language, etc.? What data storage mechanisms should be used? INI files, Excel files, XML, an Access database, ORACLE, Category 3: Mathematical Algorithms. Most projects have proprietary protocols, custom algorithms, and critical mathematical models that have to be incorporated in the design. You ll want to have a strong mathematical programmer on the team who can translate your needs into code, and integrate that code with the rest of the software. Category 4: Reporting and Databases. For your reporting, people typically want to have web-based reports, accessible from anywhere, which are pulling real-time data from an enterprise database (such as ORACLE, MS SQL Server, mysql, etc.). Many customers want reports to contain waveforms of captured data a unique requirement which is not common for a standard database or script developer. So, you ll probably need a database and web-based reporting expert on the team. Labviewexpert: The 10 Things to Consider When Choosing an Outsourced Vendor page 1

2 Whew. So, we ve just described a summary of the software issues needed to make a project successful. Hopefully, you will agree that a team of experts is far superior to a single person. A team is also valuable if you consider turnover issues. It is very risky to have all of the development responsibility and knowledge in the mind of only one developer. Whenever possible, you should protect yourself against that risk. So, you may ask, what do we at LabVIEWexpert do about these issues? As you may have guessed, we have experts in all of the key software categories described here, and these experts are used as needed on projects. If a database or web-scripting expert is needed for only a week, then you ll get that person for the week. If an expert at automating spectrum analyzers is needed for a few weeks, then you ll have access to that person for the time needed. Your project gets to benefit from the team that we have already built. That is the Power of Team. Consideration 2: What is the Vendor s Core Competency? If you look around at service company websites, you ll see that most companies claim to be experts at everything. But, as we all know, it is impossible to focus on everything. For that reason, most of these companies become jack-of-all-trades, master-of-none. At LabVIEWexpert.com, we made a conscious decision to focus on a narrow market. Namely, we focus on automation software, using PC s with instrumentation, sensors, and databases, typically running LabVIEW and/or TestStand. This is our core competency, and our narrow focus helps us to be a world-class provider for these types of solutions. Our experience in this area is very strong, and the testimonials on our website are the best proof. We cover a number of industries, but our focus stays the same. For example, in the telecom industry, we build PC-based automation solutions which use instrumentation such as Vector Signal Analyzers, Call Boxes, SMIQ s, etc. In the Biotech industry, the instrumentation is often spectrometers, machine vision, motion control, and RS-232 controlled devices. In the Automotive and Aerospace industries, we use Data Acquisition cards and Signal Conditioning modules, with sensors such as thermocouples, strain gauges, accelerometers, humidity sensors, etc. Our solutions span different industries, but the only aspect that changes is the instrumentation and unit under test. All of the other software development principles stay the same. Because our core competency is software management and development focused on automation software, we can build solutions across a wide range of industries. Consideration Two reminds you to make sure that you understand the core competency of any vendor you are considering. Consideration 3: Do You Know the Total Cost? When looking at outsourced vendors, many managers make the mistake of focusing on hourly rates, rather than the total cost. This process is analogous to shopping for a new car and focusing only on the monthly payment instead of the sticker price. The salesperson may want you to do this, but you d be much better off focusing on the big picture. So, what is the big picture? Our answer would be the following: Total Cost. The next question is: How do I best determine the total costs associated with a given outsourced vendor? Our answer is a fourstep solution. 1. It is not realistic to get a total cost quotation if there are not documented requirements. The better the requirements document, the better an estimate you can get on total cost. So, make sure that you have done a thorough job of documenting requirements. If necessary, have vendors bid on a first phase where the requirements document (and other appropriate documents) will be written. Once this phase is complete, you can move to step two. 2. The proposal from the vendor should read like a restaurant menu, showing you the costs for specific features and linking features to requirements. This approach will allow you to best choose the feature set desired, given your budget. 3. The vendor should be clear with you about how scope changes will be handled. Software scope changes are a part of life, and you should discuss up front how they will be dealt with. 4. Once you have all of this information, you can assess the costs for each feature, and choose how to move forward. Remember, you want to be thinking total cost and not price per hour. This paradigm of thinking will ensure that you know the total costs before you get started. Consideration 4: Are You Really Hiring Experts? We live in a specialized world, and software is exploding with specialization. One person may be great at networking computers, another at writing web pages, another at databases, another at embedded software, etc. It has been said that when your only tool is a hammer, everything looks like a nail. As an engineering manager, you need to know when your project requires a screwdriver, and you have to make sure that you don t hire the hammer guy. Labviewexpert: The 10 Things to Consider When Choosing an Outsourced Vendor page 2

3 But how can you know? We offer these three suggestions. 1. Are you hiring a team? As we discussed earlier, it is difficult to find one person who can be an expert at everything. Hiring a team lowers your risk, especially when you have access to a strong software architect. The software architect can help you see which problems are screws requiring a screwdriver, and which are nails requiring a hammer. 2. Is the vendor certified? For example, National Instruments offers certification for users of LabVIEW. If your project uses LabVIEW, you ll want to make sure that the company you work with has certified developers, architects, and instructors. 3. Has the vendor done similar projects? This is the time to really probe and ask detailed questions. While some aspects of a previous project may be confidential, the vendor should be able to dazzle you with his knowledge of the subject. The goal of these three questions is to help ensure that you really, truly, get experts for your project. Consideration 5: Does the Vendor Have Sufficient Project Management Experience? There are many ways that projects get managed, but the ideal situation is when you work with people who have a closer mentality. These are people to whom you can delegate responsibility and know that the tasks will be done well. You want to communicate what needs to be done, and then it gets done. Ideally, your people can even anticipate certain needs that you didn t express and then wow you when they exceed your expectations. This experience is what we strive to give every customer. If you desire, we can assist you by handling much of the software management. We have successfully managed test automation projects ranging from one LabVIEW developer to fifteen. One of our customers on a large project gave us the following testimonial: LabVIEWexpert is a company with a closer culture and, frankly, that is the only way consultancy works. At project start, we worked together to distill written requirements and a mutual definition of project success. With that done, I was able to move on to other things, knowing that LabVIEWexpert would execute to and deliver the solution I wanted. With all of this said, consideration five is to make sure that any vendor you work with has the project management experience that you need. Once the project is under way, it will be a great relief to know that you can delegate much of the software management to professionals. Consideration 6: How Does the Vendor Ensure Scalability? If you ve seen as many projects as I have, you ll have experienced the following situation. A project is hatched and software is written once, used for a few months, and then abandoned. A new set of requirements comes along, and new software is written. The new software doesn t integrate with the old software for a variety of reasons. Six months later, and the process repeats itself. So, when someone on the team wants to use any software, they have multiple applications to choose from, none of which really does exactly what they want, and all of them have bugs. In fact, to use anything requires finding the original developer because: 1. There is no user manual 2. The software is riddled with subtle bugs 3. The user is not confident in the results If you have ever experienced this situation, then you have seen software that was NOT scalable. Scalable means that today the software will do ABC with virtually zero defects. And next month we will add D and E, and the software will still do ABC as well as ever. And then later we ll add F, and ABCDE work just fine. This is what it means to be scalable, and it is NOT a pipe dream. It is achievable, but you have to make it part of your design. So, make sure that you talk to the vendor about how they ensure scalable software. Ask them for references and testimonials of software that they have produced which exhibited scalability. As for LabVIEWexpert, scalability is always part of the package. Our software applications have been successfully used by customers all over the globe, and everyone is thrilled with the scalability we have delivered. For more information on this topic, we refer you to our article The Eight Best Practices When Managing a LabVIEW Project. Consideration 7: Can the Vendor Commit to a Schedule? I once hired a landscaping contractor who said that he would finish the whole project in May. He started in March, and worked through April. Then May came and went. Then June came and went. By July, I was pretty worried. I went back to the contract and found that we did have it in writing that he would be finished in May. So, I went to the website for the Contractors Board and was going to post a complaint. That is when I found out that this contractor had tons of complaints, with virtually every customer complaining that he was late. It was not the best time for me to get this information. It would have been nice to have known this information before I chose the vendor. If I had known his background, I never would have chosen him as a vendor. Labviewexpert: The 10 Things to Consider When Choosing an Outsourced Vendor page 3

4 My point is this: every vendor says that they can do your job on schedule. Some will even sign a contract stating the schedule. However, if the date arrives and the project isn t done, your only recourse is to sue the vendor. That doesn t get your project finished faster. So, what do you do? Consideration Seven is to determine if the vendor can really commit to the schedule. This means the following three things: 1. They can show you a documented project plan 2. They are willing to make a contractual agreement on dates and deliverables 3. Remember that this step alone is not enough 4. You have contacted references to ensure that they are a company who habitually meets their schedules 5. This is the step that I forgot to do with my landscaping contractor If you can find a vendor who meets all three criteria, then you can feel confident about their ability to meet your scheduling needs. Consideration 8: How Stable is the Vendor? When you choose to outsource, you should be looking for the vendor that can solve today s problem but also be around to help you next year. You might need a team of three today for a two-month project; after that, you ll want one person for maintenance for six months; and at some point in the future, you may need to bring a team of four back onsite. When you consider these long-term needs, it is wise to look at the stability of the vendor. For example, if the vendor company is a one-man-shop, you have essentially no stability. Once this project is over and he has moved on to the next, it could be impossible to get him back onsite for future work. Lots of one-man-shops work in consulting only until they can find employment somewhere, leaving their customers holding the bag. When considering team-based vendors, you should be mindful of their financial stability. Many service companies have cash-flow issues that can impact their customers. The last thing you want is to have your project slip because the vendor can t make payroll. Ask prospective vendors for proof of their financial stability. Another aspect of stability is turnover rate. On any given project, the team members that you work with should rarely change. Ramping up a new resource costs time and money, so turnover is very important. When you talk to the vendor s references, ask questions about turnover. A final aspect of stability is abandoned projects. Ask the prospective vendor about any projects that have ended badly or that were abandoned. Sometimes they will be forthcoming with information. If they tell you that it has never happened, do some research on it when you call their references. You want to make sure that this vendor doesn t have a history of walking out on projects. Consideration Eight reminds you to think about the stability of the vendor you select, because you are better off with a longterm partner. Consideration 9: Will Your Company Own the Source Code? Here s an interesting story. In 1998, The Vickers Corporation decided to sell the Rolls-Royce automobile business. Although Volkswagen Group also made offers for the company, the leading contender seemed to be BMW, who already supplied engines and other components for Rolls-Royce and Bentley cars. However, in the end, Volkswagen won the bid to buy the company, or so they thought. It turns out that the Vickers Corporation sold everything to Volkswagen except for the trademark and logo for Rolls-Royce. This valuable little asset was sold to BMW as a side deal. Can you say oops? So, Volkswagen got the factories and employees, etc., etc., but they didn t have the right to actually sell a car branded as a Rolls-Royce. They could build the exact same car; they just couldn t put the brand on it. I m going to bet that the legal team at Volkswagen got an earful from the CEO, but I don t know that for sure. Like the Rolls-Royce example, I have witnessed many companies who bought a software solution from a vendor only to find out that they didn t own the source code. So, whenever they needed to make changes or upgrades to the software, they were trapped. The vendor sold them the initial solution for a low cost, but then gouged them on the maintenance. They were left with only two options: 1. Continue to pay excessive rates for maintenance 2. Pay another vendor to write new software from scratch This is a difficult decision because the costs of starting over are very high, both in dollars and time. It is not a situation that you want to find yourself in. Luckily, there is an easy solution: Discuss the issues of source code and maintenance up front. The best situation is for your company to own the source code as a Work-For-Hire. However, this is not always possible, and, it is usually more expensive. If you can t own the source code outright, make sure that your contract with the vendor details the rates of maintenance and software upgrades. Labviewexpert: The 10 Things to Consider When Choosing an Outsourced Vendor page 4

5 When dealing with LabVIEWexpert, you can rest assured of two things: 1. We rarely do projects where our customers don t own the source code 2. We have a standard rate policy ensuring that customers don t pay higher rates for maintenance than for the initial integration So, Consideration Nine reminds you to discuss the ownership of source code with all prospective vendors. Consideration 10: What is the Vendor s Overall Reputation? A wise man once said, If you ever sell out your reputation, get a really good price, because you can only do it once. There are many vendors out there who have destroyed their reputations by making bad decisions for short term gain. We are not of that lot. At LabVIEWexpert, we make decisions based on how they affect our long-term reputation. This is evident in our 99%+ customer satisfaction rating. It is evident when viewing the long list of testimonials on our website. It is evident by the strong repeat business that we get from current customers. And, it is evident by the referral business that we receive. In summary, we have a great reputation, and we work hard every single day to live up to it. When you are managing a high stakes project, one of the best ways to lower your risk is to find outsourced partners with great reputations. These can be found through referrals, checking references, web searches, etc. The key point is that every vendor s reputation can be assessed, and this assessment should be an important consideration in your selection. A Final Word When choosing to outsource, there are many things to consider. We hope that this list of ten considerations has been informative. As a final summary before ending the article, let us review each of the ten. Consideration 1: Understanding the Power of Team Consideration 2: What is the Vendor s Core Competency? Consideration 3: Do You Know the Total Cost? Consideration 4: Are You Really Hiring Experts? Consideration 5: Does the Vendor Have Sufficient Project Management Experience? Consideration 6: How Does the Vendor Ensure Scalability? Consideration 7: Can the Vendor Commit to a Schedule? Consideration 8: How Stable is the Vendor? Consideration 9: Will Your Company Own the Source Code? Consideration 10: What is the Vendor s Overall Reputation? When you find a vendor that successfully meets all ten of these criteria, you can have confidence going forward with the project. You have done more research than is typically done, and you have greatly increased your chance of success. Congratulations. Labviewexpert: The 10 Things to Consider When Choosing an Outsourced Vendor page 5