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Software outsourcing
though in huge demand & profitable proposition,
if not handled properly can become a pain also. But
professional organizations outsourcing software or hardware
functions are very cautious these days & do they
due diligence before selecting the right software outsourcing
partner. Mentioned below are the risk management techniques
used by successful organizarions who have outsourced
software functions offshore.
Complete understanding of the project requirement
Companies that choose to outsource
software applications must have a high degree of
understanding of the project they are undertaking, including
its requirements, the method of its implementation and
the source of expected economic benefits. This is crucial
to providing reasonable incentives for meaningful measures
of performance. Understanding project objectives also
helps to reduce the risks of poaching, since it is then
possible to specify and control access to elements that
may be critical to the client's future competitive positioning.
The risks of outsourcing product distribution-as airlines
did with computer reservation systems in the 1970s,
for example-can clearly shift too much power to the
distribution system. Using a third-party information
processor to manage client relationships can allow another
party to have access to your customer history and pick
off your best accounts.
Split projects & place pilot projects
Split mega software outsourcing projects between
multiple vendors. Beware of granting one vendor the
exclusive right to understand your business in depth.
That will make it harder for you to walk away from the
deal. Dividing a large project into smaller, more
manageable pieces will greatly reduce programmatic risk.
In principle, completion of each independent chunk creates
the possibility that subsequent development work will
be handed off to a different developer. Each chunk should
have specific objectives and quality metrics, and each
piece should be independent, in the sense that companies
would have to absorb only tolerable increases in development
costs should they choose to switch vendors after one
or more chunks has been completed. Although this will
increase development costs, it reduces or eliminates
the risk of vendor holdup. If the vendor attempts to
overcharge for continuation, the self-contained nature
of the work completed to date will permit a more or
less painless handoff to another vendor for continuation
of development. Moreover, by assessing checkpoints at
the completion of each chunk, the company can detect
quality problems and reduce the risk of shirking or
underperformance. Thus, when deciding on the milestones
for such a project, it is important to have a viable
exit strategy if any chunk fails.
Deploy personnel in-house to perform overall
surveillance on outsourced project
The skills you need to provide IT services internally
are different from those you need to govern outsourcing
agreements. Just as you have to build contract and vendor
management skills to govern a new deal, you may also
have to bring on hordes of project managers, programmers
and system administrators if you decide to bring services
back inside at the end of the deal. In the meantime,
any technical employees you retained while services
were outsourced have likely experienced some deterioration
of their skills since the vendor did most of the digging
into new technology.
Performance based schemes
The best bet in increasing the quality & quantity
of work executed by offshore outsourcing vendors is
to have a incentive based scheme. Such performance enhancing
scheme holds in all software outsourcing, and it suggests
that you get what you pay for: If you pay for lines
of code, for example, you will get many lines of code;
if you pay for testing, you will get lengthy test logs.
Incentives can bring vendor behavior in line with a
client's expectations, thereby improving performance.
When in two minds, of whether to outsource or not to,
the former is the better option because it would be
anytime less costlier than building in-house capabilities
in your own country.
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