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Recession may lead to misplaced cost over quality outsourcing decisions

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Recession may lead to misplaced cost over quality outsourcing decisions

Written by Toby Brown
Thursday, 11 September 2008
Luxoft identifies the tough questions to ask an IT service provider prior to engaging their services London; September 11, 2008 – As budgets tighten in response to the slowing economy, IT decision makers may be tempted to choose outsourcing partners on the basis of price point alone. This critical misstep can lead to problems, and unforeseen costs, down the road. While price is certainly an important factor in the outsourcing equation, it should not be the deciding one. Smart companies realise that saving money upfront is meaningless if the IT project does not achieve success. Failure at a lower price is still failure. Clive Longbottom, Service Director at Quocirca commented: "Balancing the process needs of the business along with its financial capabilities is an ongoing problem. Many organisations have just chased labour arbitrage in the pursuit of cost savings - and have then found that outsourcing has not worked for them. Finding the happy medium - a combination of quality at a cost effective price - has to be the target." To ensure your company reaps the full benefits from its outsourcing endeavors, look past the price tag. Find a partner that understands the intricacies of your business and possesses the technical and business acumen to provide a competitive edge. Here is a short list of tough questions IT decision makers should ask prospective outsourcing vendors before engaging their services: Will You Respect the Baseline? In order to understand how a software development partner’s work impacts your business, you must have a clear picture of your current IT department’s strengths and weaknesses. Many companies initiate relationships with outsourcing providers without first establishing a clear baseline against which outside work can be measured. Establish an internal baseline for productivity and make certain that your partner understands that their work will be evaluated within those parameters. Are You Willing and Able to Share Risks Contractually? Is your prospective software development partner willing to share project risks with you? If a project goes off-schedule, fails to meet its launch date, or otherwise does not meet your organisation’s standards, will your partner accept responsibility for their role in the project’s shortcomings? Many development and engineering companies are open to structuring agreements to account for the major risks a project may face on the road to launch. Have an honest conversation regarding how to distribute risks in order to make sure that both companies understand the stakes involved. Are You Aware of Our Business Drivers?The best software development and engineering companies look beyond the immediate project at hand. Make sure your outsourcing provider understands what actually ‘drives’ your business forward. Does your prospective partner understand how your company generates revenue and profit? What are the concerns of corporate stakeholders, beyond the IT department? The right partner will be keenly aware of how the project you collaborate on will affect these business drivers. Is Your Team Composed of Subject Matter Experts?Has the software development company under consideration completed projects in your industry vertical? How often? How long ago? Often, outsourcing providers are quizzed on their technical acumen, familiarity with certain programming languages and other IT-centric specifications. However, it is equally important to vet your prospective partner’s comfort level with the nuances of your particular industry. Whether you are jointly developing a Web publishing platform, or a highly sophisticated aviation application, it pays to know your partner understands the jargon, quirks, and potential pitfalls of the project’s subject matter. Bill Wood, Vice President of Engineering at Ping Identity, a secure Internet single sign-on software and services provider, said, “Finding a software development partner that is willing to accept their share of risk is key. Our policy is to communicate early, and often, about how to distribute the risks associated with any new project. Your outsourcing provider should be willing to take accountability for the quality of their work before you even engage their services.” Albert C. Lee, Executive Director of Information Technology for New York Media, commented, “Any software development and engineering company worth their weight should be able to see beyond the confines of the project they’re working on. Find an outsourcing provider that understands how their work moves the needle for your business.” As the high-end application outsourcing provider of choice and a trusted technology advisor to Global 2000 and medium-sized growth companies, Luxoft helps clients apply compelling technologies to obtain leadership positions in their respective markets. To learn more about how choosing an evolved outsourcing partner that possesses a higher degree of responsibility and accountability that ultimately results in higher business value visit www.luxoft.com. About LuxoftLuxoft, a member of the IBS Group, is an emerging global leader in application and product engineering outsourcing services for enterprise IT organisations and software vendors. Luxoft builds lasting partnerships with its clients, such as Boeing, Deutsche Bank, UBS, Dell, IBM, Sabre and other global leaders, based on the culture of engineering excellence, innovation, and deep domain expertise. Luxoft offers global delivery capability through its network of state-of-the-art delivery centers in North America, Central & Eastern Europe, and Asia. Luxoft’s customers benefit from the right mix of technology skills, industry knowledge, best-of-breed processes and methodologies, and a choice of engagement models. Luxoft is the recipient of the 2007 Frost & Sullivan Global Outsourcing Growth Excellence & Customer Value Leadership Award, as well as the Applied Innovation Award from the IAOP and Wipro, ITAA and Forbes (together with Deutsche Bank). For more information visit: www.luxoft.com. Bookmark with: Delicious Digg reddit Facebook StumbleUpon What are these?

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