Software Outsourcing in the Times of Economic Downturn

When it comes to software outsourcing the most common argument in favor of this choice is development cost reduction. Well, it definitely is a right idea. However, as it often happens with the truth, it has different shades and needs to be thoughtfully examined.

“Added Value” of Outsourcing

Once you decide to entrust your IT-project to a partner with development center in a popular outsourcing location you’ll probably be able to tighten your IT budget. It’s a pleasure to see the reduced expenses in your calculations, especially at the moment when financial question is so sensitive, isn’t it? The good thing is that it’s far not the only plus of outsourcing. What’s more?

First, you get access to skills of technology professionals. You don’t have to hire people, don’t have to take risks before you make sure they’re qualified enough, don’t have to manage them and solve all types of problems inevitable in any team. You simply get skills that can be applied in the favor of your business. Everything else was done for you before.

Second, skills commonly go in tandem with experience. Being focused on your business and having your own idea of how it should work, you can leave some good ideas out of eyeshot. It’s most likely that IT-specialists with wider experience and knowledge of the cutting-edge technologies will give you a valuable advice. So, leveraging from outsourcing company human capital does not only mean that they know how to do. They also know what to do to make your project a success.

Most of outsourcing companies that keep up with the times base their processes on RUP, Agile/Scrum, Waterflow and other methodologies that ensure flexibility and prompt adjustments to your business model. No excessive efforts are required from your side. A good outsourcing provider’s business process covers both technological and communication issues: they do their job right and provide effective feedback.

And, well, people do make mistakes – let’s just admit it. Partnering with an experienced company you can be almost sure that they’ve done them before. And looking backward on prior experience they’ll be able to foresee the situation and avoid possible ineffective steps within your project.

Finally, relying on outsourcing and delegating certain non-core obligations and responsibilities to independent contractors you can focus on your core business, invent new strategies of innovation, modernization or even transformation. Meanwhile your outsourcing partner will independently drive your IT project/operation.

Hidden Dangers of Excessive Cost Reduction

Looks optimistic, doesn’t it? Well, but there still exist some drawbacks of undue cost reduction. Gartner analysts warn that solely pursuing a cost-focused approach can be dangerous. According to Gartner forecasts, through 2012 “inflexibility caused by an excessive cost reduction focus results in business disruption in 30 per cent of outsourcing deals, including the inability of the buyer to compete effectively”.

The analysts warn that some inexperienced companies driven by idea of rapid cost optimization can make too hasteful and sudden decisions. Making a choice of an outsourcing provider on a pure price basis can lead to a failure and signing contracts that have little chance to deliver real business advantage.

Common fears associated with outsourcing – breaking deadlines, hidden costs, data insecurity, cultural mismatch, lack of transparency and poor communication – can become a disconsolate reality for those who fail to analyze potential outsourcing partners’ reputation before making final decision.

Gartner reminds of an analogous situation that happened during 2001-2002 economic downturn, and advices companies planning to outsource to avoid these risks.

“A cheapskate pays twice”, people say. In the terms today’s business climate and economic situation this might sound – planning to outsource, think well of a right balance between optimized costs and improved performance. Let’s start it now.

Leave a Reply

Your email address will not be published. Required fields are marked *