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Ten criteria for offshore outsourcing, part 2

Roy Garrad, special to SearchCIO.com

Roy Garrad, a seasoned application maintenance consultant, has offered up a checklist of ten criteria you need to consider before you take your outsourcing needs across the ocean. Click here for

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the first five. The next five are listed below.

The top ten reasons companies outsource
  1. Reduce and control operating costs
  2. Improve company focus
  3. Access world-class capabilities
  4. Free up internal resources for other purposes
  5. Resources are not available internally
  6. Accelerate re-engineering benefits
  7. Function difficult to manage or out of control
  8. Make capital funds available
  9. Share risks
  10. Cash infusion

Source: The Outsourcing Institute

  1. Does the vendor have good processes? Being SEI or ISO rated is often used as a selection criterion. However, both these quality measures have been changing. In the last four years, the SEI Capability Maturity Models (CMM) have been upgraded, and the new CMMI models (I=integrated) improve upon the best practices of previous CMM models in many important ways.

    Look at this rating, but also beyond it. SEI requires specific processes for software service providers, but does not require regular re-assessments. So ask when and how the company was assessed and by whom.

  2. What project support will the vendor provide on-site? The ratio of off-site to on-site people will range anywhere from 2:1 to 10:1, depending on the project type or phase. Even though the bulk of the work may be done offshore, it's likely that some component will need to remain onshore.

    The onshore contingent will be the people you see at your site every day, so they will be the more senior team-members. Some of the offshore team may need to visit your site initially, incurring travel and expense costs. Overall, a good rule of thumb is to expect an average of one person onshore (on-site) for every four people offshore.

  3. What reporting mechanism applies? Appointing a single manager or contact to manage the vendor relationship is a good step. Likewise, your offshore partner should also provide a single point of contact as your project's go-to representative. Both sides will have higher-level contacts in place for regular meetings, escalation of issues, and change control.

    You will need to agree what measurements will be used to track progress. In all cases, keep it simple, at least at first. Ideally, measurement will be a by-product of the process, rather than an end-of-week activity that might consume significant time and effort.

  4. What sort of exit clause do you have? If it all goes bad, or if you just want to bring it back in-house, how do you escape? How much will it cost you to take your system back? Simple arithmetic tells you the painful answer. If you were lucky enough to save 60% in costs on a past project, it would be difficult to accept any increases for the same function in the future.

    This could be very significant when a large IT function -- like a Help Desk -- is involved. Even worse, if it's a project with a critical deadline, it could affect cost and schedule. You need to have contract language that protects you.

  5. Should you choose company or country first? Choosing a country first helps you remove one more variable from the equation and may help you make your decision sooner. On the other hand, working with a contact you know should go a long way towards leveling the country playing field.

    If you already have identified companies that you're comfortable with, the local representatives will usually be directly accountable to you and will have a vested interest in your mutual success. If your needs are large enough, perhaps you should look at outsourcing to more than one country in order to mitigate risk –- as several companies have done over the last year.

Offshore outsourcing can be a powerful force if the selection is done correctly. You may get 60% savings on an offshore technical conversion with little on-site support, but you won't get it on a badly defined project that requires a lot of user interaction, or when your internal processes cramp the style of the vendor and make them 50% less efficient.

In all cases, do your homework. Give the vendor a trial run on a low-risk project and measure the results.

ABOUT THE AUTHOR:

Roy Garrad is an application maintenance consultant with more than 25 years of IT and management experience. Garrad is a National Director of Solutions for RCG Information Technology, a global IT professional services firm based in Edison, N.J., specializing in IT strategy and design, application development, integration and project management. He can be reached via e-mail at rgarrad@rcgit.com.


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