Solutions for The Top-10 IT Outsourcing Challenges WHITE PAPER
Solutions for The Top-10 IT Outsourcing Challenges IT Outsourcing companies often face similar issues in daily collaboration with their business partners located nearshore and offshore. Distance causes all sorts of misunderstandings between the two sides. 10 most common problems have been highlighted in this whitepaper together with the ways to solve each of the issue. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Poor Communication... Product quality... Misunderstanding of the goals... Cultural difference... Reliability... Hidden agenda... Incurred costs exceed expected costs... Security... Strict contract obligations... Loss of managerial control over the project... 3 4 5 6 7 8 9 10 11 12 www.zfort.com contact@zfort.com phone UA: (+380) 93 921-60-59 2/14
1. Poor Communication With lack of well-established cooperation between 2 companies a project that is being developed can be at risk. Tuning up communication is essential for effective work on any project. Ideally it is a Project Managers job to be engaged in every phase of project development as well as project implementation. They should know every detail of their project lifecycle and let customers know about them. There is a whole bunch of tools that can be utilized for efficient communication: Skype/Gtalk or any other video/im chat, Emails, Phone conversations, Project Management systems, Desktop Sharing tools. Personal meetings should not be overlooked as well. They help not only improve understanding of the project goals for both parties, but also establish relationships with team members that is an essential factor when implementing the project. Pay attention to the travel convenience. International airports should be located in the city of the outsourcing destination. With big time difference between the partners it is a good practice to have flexible schedule inside the company who is a service vendor for regulating communication issues upon client s request. www.zfort.com contact@zfort.com phone UA: (+380) 93 921-60-59 3/14
2. Product quality There are everlasting debates between suppliers and customers over testing being a means to measure the quality of product. Clearly testing itself as in fixing a large amount of bugs within a certain period of time and budget doesn t always mean that the product quality ends up to be good. In fact, product quality can only be considered good when the software meets the business requirements of dependability and scalability in general, and a customer in particular. A product is good when the appropriate technology has been used, the right architecture is built and there is monitoring on the software implementation to ensure high maintainability, low risks of operations and low costs. When it comes to choosing the IT outsourcing service provider, pick those that provide QA service with defined standards, checklists and technical demands to the products being developed. Pay attention to those who possess tools for quality control execution. Generally QA should be present on all the stages of projects development starting from planning and up to the release. www.zfort.com contact@zfort.com phone UA: (+380) 93 921-60-59 4/14
3. Misunderstanding of the Goals Project goals, if not set clearly at a very start of outsourcing relationship, may cause wasting of valuable project development time. To avoid this case scenario it is highly desirable to establish a process of determining project goals with the help of systematic business analysis, communication, generation of project documentation and constant customer feedback. Pay attention to the importance of a planning phase with involvement of Business Analysts. Development process should be started only after the goals are clearly defined. For the situations when a client has an ambiguous understanding of certain processes and goals that best fit for their specific business project, a consultation of industry experts may be of good help. Project Managers and Business Analysts usually play such a role through advising alternative solutions to a customer. To fix the situation with wrong perception of the goals by one or both parties you need the following: Set up information exchange between a Project Manager from one side and a dedicated professional from the other through a one-to-one channel. Sharing knowledge is a commonly good practice. Sending over a couple of staff members to train development team onsite of a service provider may be a great idea. Project manager controls the outsourced project and normally has a very deep understanding of cultural distinctions and the reasons of people s behavior in various situations. Therefore it s highly advisable to know your PM. www.zfort.com contact@zfort.com phone UA: (+380) 93 921-60-59 5/14
4. Cultural Difference In IT Outsourcing cultural differences between the partners is a very common problem especially relevant for offshore business models where managing remote and culturally diverse teams may be quite complicated. Such differences affect communication, comprehension, interaction, interpretation, productivity, commitment and comfort of the partnership. To help the situation there are two approaches that commonly work: cultural awareness and culturally compatible resource deployment. Cultural awareness usually covers sessions and workshops for offshore and onshore centers to create awareness of each other s cultural practices on both ends. Such sessions are often a free part of many outsourcing programs. As for culturally compatible resource deployment it usually involves management of onshore customer relationship by local native onsite employees and sometimes there is a need to hire a culturally compatible offshore workforce instead. Cultural awareness shows up in human behavior through conscious effort, patience and actual intention. In fact, there are two systems in people s minds: intuitive part and reflective part. The native cultural factors are covered by the first system, and whenever a person learns about a new culture, it falls under the second system. Therefore without practicing and thinking over the new culture, the intuitive side of our own culture will become the only determinant. www.zfort.com contact@zfort.com phone UA: (+380) 93 921-60-59 6/14
5. Reliability One of the vital factors in supporting a sustainable outsourcing partnership is dependability of the service provider. It is possibly one of the most important criteria that has to be kept in mind by business owners. A list of qualities defining reliability of an outsourcing service provider: Client testimonials are a good source to find out the credibility of a vendor and how they have previously performed; provides a clear picture of general reliability of the vendor for who this is the best possible self-advertising. Security measures should not be overlooked as well. A reliable outsourcing service provider should follow security measures like access control to data, servers protection, security audits, regular backups, etc. Company age and speed of growth are the measures that define experience and stability of the company. In case a company operates for 10+ years and the number of its employees and clients continually increases, you can consider it reliable. Well-established processes of project development, quality assurance, employment, etc. define the effectiveness of company operation as a whole. In case all the processes are well-built, there s no need to worry about the project implementation. All the stages of its development are defined in advance. Company infrastructure is not the least of the factors of company reliability. Communication systems, hardware and office premises overall give you the face of the vendor. In case the office premises have some space for new employees, this is the sign that the company s views are intended for the future growth and expansion. www.zfort.com contact@zfort.com phone UA: (+380) 93 921-60-59 7/14
6. Hidden Agenda IT Outsourcing companies are constantly blamed for having a hidden agenda, and in certain cases for a good reason. Lots of companies conceal their working approaches, basically leaving customers out of projects development. Lack of communication adds to misunderstandings and confusions. Respected IT outsourcing providers deliver transparent services on every level of project development. This suggests preliminary planning and constant feedback to a client, systematic reports on each phase of project development as well as coordination of all the deliverables provided. A client should be given regular project updates or even allowed to access project management system at all times to track every task and see the number of hours that developers log for their work. They should also be given a possibility to address Project Managers with any questions that they may have at any stage of a project implementation. www.zfort.com contact@zfort.com phone UA: (+380) 93 921-60-59 8/14
7. Incurred Costs Exceed Expected Costs Generally potential hidden costs in IT outsourcing are pretty much unexpected. Factors that lead to such costs are: Inaccurate estimates of required resources, Poor reporting of project statuses, Unmanaged risks, Use of immature technology, Poor project management. How to help the situation? For projects with 100% clear scope of work it is preferable to choose a fixed cost cooperation model. Under such conditions the scope of work remains the same, all the shifts or changes are vendor s responsibility. For projects with miscellaneous type of engagement it is necessary to request regular reports to predict the risks of the budget surplus. Also it is possible to set a budget range (e.g. from 1000 to 1500 hours time cap) for a particular project. It would help a customer to manage risks. Service vendors must provide their customers with accurate estimates from the start of the project planning till the release day. Project managers and business analysts should be well-familiar with risk management and in case there s something wrong a client must be noticed in advance about all types of risks. Lastly, a client should be provided with timely reports on every stage of project development and they should be aware of what they pay for. www.zfort.com contact@zfort.com phone UA: (+380) 93 921-60-59 9/14
8. Security Certain matters are supposed to be confidential. For instance, outsourcing vendors who deal with salaries, bank accounts and generally all kinds of financial matters must maintain the highest level of discretion. Any leak in the security can result in irreparable damage to the service vendor s reputation. Therefore both an outsourcer and the service vendor should stay on guard against all kinds of frauds. Detailed view of the provider s IT infrastructure will help to make sure that their security is sufficiently strong. There also must be document expectations relating to sensitive client data and which protect against any breach with contractual provisions. The following security measures are obligatory for any IT outsourcing service provider: Maintaining data security and data integrity by a special technical department or a separate professional who works for the vendor, Firewalls and antivirus software installed, Stable and reliable 24/7 Internet connection, NDA restrictions for employees, Servers and infrastructure protection, Regular backups. Applied security measures may vary from company to company, we just listed the basic ones. Don t overlook such an important factor when choosing a vendor for your project implementation. www.zfort.com contact@zfort.com phone UA: (+380) 93 921-60-59 10/14
9. Strict Contract Obligations Some companies have strict rules for signing contracts, and they are described in initial proposals, or discussed verbally when all the sales are done. However, in IT outsourcing a lot of companies prefer to work on a more flexible scale without any particular commitments for long-term engagements or payment terms. There may be cases when a client was assigned with a dedicated team of software developers for a period of 12-24 months but their plans have changed on the go. Often IT service providers choose not to use any contract obligations against a customer like that. A lot of IT outsourcing providers in such a situation do not follow a single pattern of payments obligations. And when there is a demand to adjust payment terms or payment periods of time IT providers are there to negotiate. Such vendors are easy to work with and they are more likely to build a successful business relationship with. www.zfort.com contact@zfort.com phone UA: (+380) 93 921-60-59 11/14
10. Loss of Managerial Control over the Project It is not a rare case when outsourcing key processes result in the loss of straight managerial control of the process. A lot of managers believe that managing an outsourcing vendor is more complicated than running employees on similar positions in-house. Even though the processes are usually customized to meet particular requirements of a customer, disagreements may take place early in the business relationship between the customer and an IT outsourcing service provider. There is an effective tool to avoid such a case scenario developing an ongoing communications plan and making sure there is a powerful management model in place. Certain companies prefer to allocate an employee onsite (with an outsourcer in the management role) to control all the processes on a day-to-day basis. Such an approach is especially productive at an early stage of the outsourcing partnership. It is also important to remember that with signing a contract, you are basically giving up the control and management to a company which has their own standards and missions that are most likely not the same as yours. However, that doesn t suggest being a total disadvantage. Closer communication and selection of the corresponding engagement model will help you out and make your collaboration effective and worthwhile. www.zfort.com contact@zfort.com phone UA: (+380) 93 921-60-59 12/14
Conclusion There are some other challenges that are common to businesses that want to outsource their projects: Lack of vendor s resources Technical expertise Negative IT outsourcing experience in the past Too small project to outsource Inaccurate estimates Poor reporting of project statuses Unmanaged risks Use of immature technology Inability to manage the project complexity Sloppy development practices Poor project management All these issues are predictable and solvable. A small investigation on the company you re going to work with can help you to cover all questions with its reputability. IT outsourcing is a proven and effective business model. It already helped thousands of businesses to succeed. It can help you as well. The whitepaper is prepared by Zfort Group, an experienced IT outsourcing service provider. www.zfort.com contact@zfort.com phone UA: (+380) 93 921-60-59 13/14
Contact Information HQ and Delivery Center Geroev Stalingrada Ave 45, left wing, Kharkiv, Ukraine, 61105 Tel: (+380) 93 921-60-59 Representative in London 6 Hepworth Court, 30 Gatliff Road, London, SW1W 8QN, UK. Tel: +44 (0) 207 043 581 Website www.zfort.com E-mail contact@zfort.com Social Profiles www.facebook.com/zfortgroup www.linkedin.com/company/zfort-group Representative in Germany 04315, Atriumstr. 4, Leipzig, Germany Tel: +49 341 699 5511 ZFORT GROUP 2000-2014