| Outsourcing has become not only one of the most | | | | The situation with outsourcing is completely different. |
| widely discussed business phenomena, but also one of | | | | The vendors, due to their mature processes and |
| the most poorly understood. Although it is the most | | | | metrics collection, are capable of providing clear |
| rapidly growing business sector in India and is fast | | | | quantitative visibility on a regular basis in the project. |
| becoming India's fastest growing export industry, there | | | | This is generally done by providing regular analysis of |
| has been little coherent explanation in the academic | | | | the project on schedule, cost, features, risks, etc. With |
| press for why the industry is growing now; the industry | | | | on-line tools, now customers can even get real-time |
| began to surge without any favorable change in labor | | | | visibility in the projects. |
| rates, labor availability, or exchange rates to explain the | | | | Clear on-going visibility provides the managers the |
| industry's growth. Without an explanation for the | | | | basic information to act in a timely manner, when |
| sudden growth in outsourcing, the most important of | | | | needed. By this reporting, not only the project manager |
| recent past trends, it is difficult to make predictions for | | | | can take action to correct the course of action, but the |
| future developments. | | | | sponsor organization can also plan suitably. In other |
| The benefits in terms of costs of outsourcing IT work | | | | words, the metrics based visibility that vendors provide, |
| to other organizations. The cost benefits accrue as | | | | which is otherwise hard to get, increases the chances |
| work gets done in cheaper locations, and also due to | | | | of success, reduce risks, and provides a level of |
| the fact that work is done by organizations whose | | | | comfort not possible otherwise. |
| core competency is to execute these projects and | | | | A side effect of this quantitative visibility is that it allows |
| are hence better at it. | | | | the sponsoring company to set some measurable |
| The first benefit is in the area of requirements. It is | | | | service level agreements (SLAs) for activities like |
| known that lack of clarity and incompleteness of | | | | maintenance, request handling, etc. Furthermore, the |
| requirements are a major cause of projects failing. | | | | customers can even demand from vendors some |
| When outsourcing is used, the vendor is going to insist | | | | improvement in the SLAs over time. And as the |
| on a proper requirements document and will have the | | | | vendors mature organization is capable of innovating |
| necessary tools and capability to analyze, document, | | | | and changing processes when needed, sponsoring |
| and validate them. | | | | organizations can ask for specific process changes to |
| The contractual aspects of outsourcing which often | | | | suit their work. This level of process improvement and |
| require sponsor organization to "sign off" on | | | | project and process monitoring is simply not possible to |
| requirements also force a careful internal analysis | | | | achieve in an in-house situation. And the third hidden |
| before commitment. The net result is that there is a | | | | benefit is in terms of improvement of the sponsor's |
| certain difficult in the requirements process at both | | | | own processes for IT. Even when outsourcing, most |
| ends leading to better analysis and requirements. | | | | companies will have an IT department that is |
| Theoretically this can be done with in-house teams | | | | responsible for providing the IT solutions, but which out |
| also. However, doing proper requirements takes time | | | | sources portions of its work. i.e. outsourcing and |
| and effort and they often appear as "delaying" the | | | | in-house development co-exist in most large |
| start of the development. These disastrous attractions | | | | organizations. |
| tend to short circuit the requirements process to move | | | | As vendors typically have highly mature processes, |
| towards development. | | | | the sponsor's IT department learnsabout these mature |
| Plus the thought that "you can always correct is later", | | | | practices and in time some of the practices get |
| which is Present when dealing with in-house teams, | | | | transferred. In other words, improvement of internal IT |
| also comes in the way. In addition to better initial | | | | processes is a side benefit that accrues when |
| analysis, requirements changes are also better | | | | engaging with these vendors. In summary, besides the |
| controlled and managed. Requirements sometimes | | | | obvious cost advantages of outsourcing, there are |
| change due to changing business scenario and needs | | | | some hiddenbenefits that outsourcing to a mature |
| Evolving with time. Changes, however, cause havoc to | | | | vendor provides to the sponsoring organization. These |
| the project and increase the chance of cost and | | | | primarily come due to the discipline and processes that |
| schedule overruns and quality degradation. Changes | | | | are utilized when outsourcing is done and are |
| have been known to cost up to 40% of the total | | | | independent of where the outsourced work is done. |
| development cost. In outsourcing, there will necessarily | | | | There are also more benefits listed below: |
| be a formal change management process which at | | | | 1. Reduce overheads, free up resources |
| vendor end requires impact analysis of a change | | | | 2. Minimize capital expenditure |
| request to be done and presented for approval before | | | | 3. Eliminate investment in fixed infrastructure |
| the change is actually undertaken. | | | | 4. Focus scarce resources on mission-critical projects |
| This input about the impact of change allows the | | | | 5. Get access to specialized skills |
| customer to do a proper and serious cost benefit | | | | 6. Reduce need for internal commitment of specialists |
| analysis of the change. This will help ensure that only | | | | 7. Save on manpower and training costs |
| the necessary changes are made and low priority | | | | 8. Control operating costs |
| "wish list" items are deferred. | | | | 9. Improve efficiencies through economies of scale |
| This not only helps in getting the project of higher | | | | 10. Improve speed and service |
| quality done in time, but also keeps the software lean, | | | | 11. Provide the best quality services, products and |
| which means lower IT asset inventory and lower | | | | people |
| maintenance cost in future. It should be added, that | | | | 12. Be reliable and innovative |
| over the years, the maintenance cost of software | | | | 13. Provide value-added services |
| often exceeds the initial development cost. Hence, any | | | | 14. Increase customer satisfaction |
| impact on lowering of maintenance costs pays hugely | | | | 15. Obtain needed project management and |
| over the long run. | | | | implementation consulting expertise |
| The second hidden benefit is in the area of visibility into | | | | 16. Acquire access to best practices and proven |
| projects. Software projects have been notorious for | | | | methodologies |
| lack of visibility to the sponsors and managers as | | | | 17. Spread your risks |
| progress cannot be shown in physical terms. Hence, | | | | 18. Avoid the cost of chasing technology |
| often sponsors and managers are forced to rely on | | | | 19. Leverage the provider's extensive investments in |
| the project managers word about progress, and many | | | | technology, methodologies and people |
| a times get burnt by having excessive cost and | | | | 20. Reduce the risk of technological obsolescence. |
| schedule overruns. | | | | |