Top outsourcing risks
Putting development of your product or any other aspect of technology in the hands of a third party is certainly a risky proposition. To properly mitigate the risks of outsourcing one needs to understand the outsourcing landscape quite well. The top offshore outsourcing risks fall in several main categories. There is much to be said about each of the categories; I am planning to add more substance / clarifications /examples to each of the bullets below, as well as some ideas on risk mitigation. For now, here is the high level list:
Geopolitical
- Government regulations, on the both sides of the equation
- Political stability
- Legal maturity
Security
Internal – Organization
- Cost-reduction expectations
- Organizational commitment
- Organizational maturity – multiple aspect of being ready to outsource
- Loss of team support / respect / relationships with the team
- Loss of team spirit / internal unease
- Loss of key personnel / technology and business knowledge loss
- Decrease in team’s productivity / commitment
- Career impact
- Lifestyle impact
Vendor capabilities
- Financial Stability
- Organizational maturity
- Organizational commitment
- Infrastructure (macro / micro view)
- Technical capabilities
- Ability to deliver
- Personnel turnover
Joint responsibilities
- Process confluence
- Scope management
- Geographical dispersion
- Cultural differences
- Knowledge transfer
- Communications
My reasons to outsource
I mentioned already the top reasons for offshore outsourcing typical for many organizations; let me list some of my own:
- Diversity. Diversity in terms of bringing individual contributor with different background into the team often means a tremendous increase in productivity. A healthy portion of resources with different education, practical background, and way of operating could bring a fresh breath of air in stagnating organization. Also “diversifying” your portfolio of resources might help a great deal to deal with micro factors affecting employment / recruitment landscape of a specific geography.
- Education. In countries such as India, Russia, China you find many people who value education to much higher degree than we do in the states. On one of my teams from St. Petersburg a majority of developers had at least MS and over 40% had Ph.D. That including QA engineers! Needless to say the brain power of the team was absolutely amazing.
- Work Ethics. That doesn’t go across all geographies and companies, but fortunately you still can find outsourcing organizations with resources who’s work ethics are far superior to what you find for example in corporate America.
- Talent Pool. Some outsourcing organizations instead of typical “selling mediocrity in bulk” build their team with top notch experts and people with exceptionally high IQ. Building such a team, no matter in which area of the world takes very long time.
- Processes. Getting process right is time consuming and costly. When ISO or CMM processes are a requirement it’s often much easier to build relationship with a subcontractor who already has those in place.
- Project Management. Project and program management is often something that a small software organization can not afford (or more often VPE can’t sell his execs / team on the need for it). Many, especially Indian vendors have that in perfect shape.
- Cost. While I do not believe that offshore guarantees cost savings I do believe that there is a huge potential there especially with careful execution of multi-sourcing or/and micro-sourcing strategies.
eBook
The Pragmatic Outsourcer series consists of 5 volumes, each covering a different phase of the outsourcing process. Volume 1: Making the Decision is available today for your free download. Volumes 2 through 5 will be available during 2010.
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