Outsourcing: Rationale, Criteria, Concerns, Challenges, Lessons Learned
Diamondcluster did a study on the Global IT Outsourcing, here are the highlights:
Top 3 Outsourcing Rationale
1. Reduce or Control Cost
2. Better Manage Variable Capacity Needs
3. Free Up Internal Resources for more Critical Purposes
Top 3 Key Selection Criteria
1. Technology Expertise
2. Cost
3. Flexibility in Structuring Operating Model (offshore, onshore, ...)
Top 3 Outsourcing Areas
1. Application Maintenance and Support (rising)
2. Application Development (declining)
3. Help Desk (flat evolution)
Top 3 Primary Concerns
1. More Management Complexity
2. Reduced Effectiviness (communication overhead)
3. Lower Quality of Output
Top 5 Challenges with Providers
1. Delays in Issue Resolution
2. Slippage of Project Deadlines
3. Inadequate Work Estimate Capabilities
4. Inadequate Skill Proficiency and Experience
5. Conflicting Communication Styles
10 Lessons learned
1. Cost savings alone is not a good reason to outsource.
2. Leverage resources with experience and skills in outsourcing to help
you develop your own sourcing strategies and execution roadmaps.
3. Clearly define your goals, measurement metrics and exit strategies up front.
4. Well-defined governance structures and proactive management and
communication are the keys to success.
5. Structure your vendor relationships as win/win propositions.
6. Outsourcing your problems won’t solve them. You should fix potential
problems first before you hand over the process to someone else.
7. Establishing very specific and measurable SLAs is crucial for evaluating performance.
8. Give providers a chance to be successful. Transitions take time.
9. Due diligence on providers is essential if you want to avoid surprises.
10. Internal resistance to outsourcing can be managed but you have to
foster proactive and candid communications to succeed.
Outsourcing is always harder than you originally thought.
For the complete report see 2005 Global IT Outsourcing Study.
Top 3 Outsourcing Rationale
1. Reduce or Control Cost
2. Better Manage Variable Capacity Needs
3. Free Up Internal Resources for more Critical Purposes
Top 3 Key Selection Criteria
1. Technology Expertise
2. Cost
3. Flexibility in Structuring Operating Model (offshore, onshore, ...)
Top 3 Outsourcing Areas
1. Application Maintenance and Support (rising)
2. Application Development (declining)
3. Help Desk (flat evolution)
Top 3 Primary Concerns
1. More Management Complexity
2. Reduced Effectiviness (communication overhead)
3. Lower Quality of Output
Top 5 Challenges with Providers
1. Delays in Issue Resolution
2. Slippage of Project Deadlines
3. Inadequate Work Estimate Capabilities
4. Inadequate Skill Proficiency and Experience
5. Conflicting Communication Styles
10 Lessons learned
1. Cost savings alone is not a good reason to outsource.
2. Leverage resources with experience and skills in outsourcing to help
you develop your own sourcing strategies and execution roadmaps.
3. Clearly define your goals, measurement metrics and exit strategies up front.
4. Well-defined governance structures and proactive management and
communication are the keys to success.
5. Structure your vendor relationships as win/win propositions.
6. Outsourcing your problems won’t solve them. You should fix potential
problems first before you hand over the process to someone else.
7. Establishing very specific and measurable SLAs is crucial for evaluating performance.
8. Give providers a chance to be successful. Transitions take time.
9. Due diligence on providers is essential if you want to avoid surprises.
10. Internal resistance to outsourcing can be managed but you have to
foster proactive and candid communications to succeed.
Outsourcing is always harder than you originally thought.
For the complete report see 2005 Global IT Outsourcing Study.
posted by Ronny De Winter at Thursday, May 11, 2006
16 Comments:
Hi,
I came across your blog recently as I was doing some research on software outsourcing. I had
a few questions and was wondering what would be the best way to get in contact with you to discuss a few of them?
Thanks!
Bobby
bpham@bnrsearch.com
Quite lucrative blog...many outsoursing terms have been mentioned in it...i would like to see more posts explaning these from you...hope to read from you soon.
outsourcing software development has been instrumental in the bridging of the distances between the IT worlds of the different countries and bringing them together in the platform of the global IT world.
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Nice post on Outsourcing.
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it's good to see this information in your post, i was looking the same but there was not any proper resource, thanx now i have the link which i was looking for my research.
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Ronny, that's a very extensive discussion of the goods and harms of outsourcing. Although it is a trend in the global market, I agree that companies should be cautious in selecting the functions that they would transfer to an outsource provider. Proper discernment can help them in putting the company on track.
Strategically, auxiliary functions like book keeping and tax concerns are the ones that are passed to a payroll service company. Such functions, often takes time and manpower. So the best way to efficiently resolve this problem is to partner with another company that already has the expertise for fiscal concerns.
Very informative post. Thanks!
nice post!
Outsourcing is a crucial strategy for the business, but with great planning a company can outdo their competition. Outsourcing comes with high technology that makes the matters flow swiftly and effectively for small business. Payroll service as part of the system softwares are safely kept from dishonest behaviors. With this system payroll Nevada has accurate accounting records as a reference for tax payments.
It is a very good scheme learning to outsourcing and i this will be help full also, thanks for sharing this post.
really like your article.. i must say u have wonderful skills
Its good to see such a great blog on your site.I really enjoyed reading your blog.
I love this post..We're providing the best outsourcing services in India..
We are into this outsourcing business for the past 7 years with approved 1350 plus LIVE sites from our development centre for our clients all over the world. We challenge, every 1 of 2 outsourcing clients will return back to us for more business with more gain. We have 125 developers who have constantly worked and having 7 years experience in the field of Joomla,drupal,wordpress and Magento.
Outsourcing is the act of one company contracting with another company to provide services that might otherwise be performed by in-house employees. Often the tasks that are outsourced could be performed by the company itself, but in many cases there are financial advantages that come from outsourcing.
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