off-shore and near-shore outsourcing of custom software development
Anyone having questions on the off-shore and near-shore outsourcing issues will find this repository of information useful as a guide. Since the section is constantly expanding, we invite you to visit it repeatedly.
Question: What is the meaning of offshore outsourcing?
Answer: According to Wikipedia.org, "Offshore outsourcing is the practice of hiring an external organization to perform some or all business functions in a country other than the one where the product or service will be sold or consumed. It can be contrasted with offshoring, in which the functions are performed in a foreign country, whether by the foreign subsidiary of the same company or a third-party. Opponents point out that this sends work overseas, thereby reducing domestic employment and domestic investment. Many jobs in the infotech sectors - such as data entry, and customer support - have been or are potentially affected.
The general criteria for a job to be offshore-able are:
- The job does not require direct customer interaction;
- The job can be telework;
- The work has a high information content;
- The work can be transmitted over the internet;
- The work is easy to set up;
- There is a high wage difference between the original and offshore countries;
- The work is repeatable."
Due to the high costs with software applications, personnel and equipment, Software development projects are among the best candidates for offshore outsourcing.
Off-shore and near-shore software outsourcing and custom software development questions
Question: What does the term near-shore outsourcing signify?
Answer: According to whatis.com, "nearshore outsourcing is the practice of getting work done or services performed by people in neighboring countries rather than in your own country. Many companies in the United States, for example, outsource work to Canada and Mexico. Geographic proximity means that travel and communications are easier and less expensive, there are likely to be at least some commonalities between the cultures, and people are more likely to speak the same language." For West European countries nearshore outsourcing arrangements would be made with countries from the former communist block, such as Romania, Bulgaria, Latvia, Estonia, Hungary, the Czech Republic or Russia.
Unlike off-shore software outsourcing, its nearshore counterpart spares you the hassles of travelling long distances, having to deal with significant time zone differences, with cultures you cannot understand, with extreme climates and with higly virulent bacteria your body has no defenses against.
Near-shore and off-shore software outsourcing and custom software development questions
Question: Where can I find relevant and up to date information on software outsourcing?
Answer: There are numerous unbiased online resources on this topic. We suggest you to start with any of the following sites:
- ComputerWorld Outsourcing Knowledge Center, where you can find outsourcing background info, latest news on software outsourcing, outsourcing research links, outsourcing special report, white papers on outsourcing, outsourcing buyer's guide
- Firmbuilder.com contains more than ten years of information and insights on outsourcing compiled by the International Association of Outsourcing Professionals (IAOP). This is a subscription based service which is worth paying for.
- The International Association of Outsourcing Professionals, a global membership-based organization shaping the future of outsourcing as a management practice, as a profession, and as an industry. Membership provides access to the a series of programs, such as The Outsourcing World Summit – The World’s Premier Executive Forum on Outsourcing, IAOP’s Global Chapter Network – Special-interest Groups for Outsourcing Professionals Organized By Location, Industry, and Topic, or The Global Outsourcing 100 – Ranking of the World’s Top Outsourcing Service Providers
- The Outsourcing Journal - an excellnt repository of articles for anyone interested in software outsourcing or in any other kind of outsourcing arrangements
Off-shore and near-shore software outsourcing and custom software development questions
Question: What can make outsourcing relationships unsuccessful?
Answer: Successful outsourcing relationships depend on having the fundamental principles of outsourcing followed throughout the partnership. If the agreement is not based on those principles, the result will be an unsatisfactory relationship and, probably, an early termination of the contract. The main outsourcing principle states that the buyer determine the scope of services and the metrics (for the performance levels) it expects from the supplier. By applying this basic rule, the customer ensures accountability from the supplier. Failure in an outsourcing relationship can also stem from incomplete description of the service scope and boundaries of its components.
Near-shore and off-shore software outsourcing and custom software development questions
Question: How long should an outsourcing relationship last?
Aswer: Issues such as flexibility, planning, adding/restructuring the incentives over time, business/technology life time, the high cost of getting into and out of an outsourcing relationship, and amortization are taken into account when deciding the length of the outsourcing relationship. Specialists seem to favor three to five year contracts versus ten year contracts. With a three-year contract, costs can usually be amortized, and there is enough time to take advantage from the services.
Off-shore and near-shore software outsourcing and custom software development questions
Question: How can I assess the outsourcer’s commitment to quality?
Answer: To evaluate the provider’s commitment to quality you must thoroughly analyze its service track record. A multitude of questions would help you achieve this goal. How has the provider of custom software development services been regarded in its industry? Does the provider of software outsourcing services keep track of its customer satisfaction with the service levels? Has the level of satisfaction with the provider of custom software development services improved over time? What kinds of opinions regarding service quality have you got from existing customers of the software outsourcing firm? Does the provider of custom software development services offer service level agreements (SLAs) backed by financial guarantees? SLAs cover customer service yardsticks (e.g., response time) and operational metrics (e.g., reliability). Is the provider willing to negotiate the terms of the SLA to meet your requirements? Is the software outsourcing firm offering you full access to help desk support?
Near-shore and off-shore software outsourcing and custom software development questions
Question: What is the provider's approach to account management?
Answer: In software outsourcing as well as in any kind of custom software development project, customer relationship management is crucial. Before signing the contract you should find out as much as possible about the account management procedures applied by your chosen provider of software outsourcing services. Pay attention especially to details such as the standard frequency of interactions with the account manager, the response time to your calls/emails, the linguistic abilities of the account manager, the possibility to meet him/her in person. The contract you prepare should describe in detail the type of relationship you expect with the account manager.
Off-shore and near-shore software outsourcing and custom software development questions
Question: How does the provider of software outsourcing services set up his rates?
Answer: You are definitely shopping for the best value/price rate and therefore paying attention to both price and quality. As custom software development is a complex field, the pricing models used by service providers can sometimes confuse you. Make sure all costs are clearly delineated, so that you know exactly what you are paying. For innovative solutions providing accurate project durations can prove impossible, but even under such circumstances the pricing practices should be transparent enough for you to understand it. You must also ask how pricing will change over time or as your needs scale up or down. Is the provider of custom software development willing to waive fees should he fail to comply with the promissed service level? While assessing the total price do not forget to weigh it against your own total cost of ownership.
Near-shore and off-shore software outsourcing and custom software development questions
Question: What is the provider's track record for service quality?
Answer: To find out what customers believe about your potential partner's service quality you should request a comprehensive list of the custom software development projects the provider has undertaken and randomly select a few projects from it. Having the software outsourcing company select a customer sample might not be the wisest approach. Have prospective providers send you their entire customer list then speak to at least five customers with needs and/or industry profiles similar to yours. It is important for you to find at least the following: the duration of the relationship between the customer and the provider, the reasons for which the provider of customer software development services was preferred to other vendors, the level of satisfaction with the software outsourcing company's service levels, the nature and seriousness of any problems that have occured during the partnership, the way the provider handled those problems, the reasons for which (s)he would (not) recommend the provider. Always try to identify former customers of the provider and find out what caused the end of the business relationship.
Off-shore and near-shore software outsourcing and custom software development questions
Question: Is the provider's infrastructure modern and efficient?
Answer: Since a good infrastructure is a prerequisite for success in any custom software development project, make sure you verify your prospective provider's infrastructure. It is worth investing time in finding out as much as possible about the Internet provider used by the software outsourcing company as well as any details about his technology partnerships. The overall quality of the network environment at the provider's site is another key aspect you should have in mind. What key metrics describe the infrastructure of the provider of software outsourcing services (e.g. reliability, availability and scalability)? To assess the provider's physical infrastructure and its management expertise you must visit its premises and meet with the provider's data center manager(s). Ask about their experience and tenure with the provider. The quality assurance procedures, processes and methodologies in place at the software outsourcing company are also of the highest importance. Finally, request details on the provider's current and planned investments in infrastructure.
Near-shore and off-shore software outsourcing and custom software development questions
Question: Does the provider have well defined migration procedures in place?
Answer: Migration of operational responsibility to a provider's center represents the backbone of a software outsourcing project. It is therefore mandatory for you to ask the provider about the methodology used for migration. Is the migration plan flexible enough to meet your changing needs? Does the provider agree to work with your staff to get an understanding of your business, methodologies and procedures?
Off-shore and near-shore software outsourcing and custom software development questions
Question: How does the provider of software outsourcing services handle security?
Answer: In custom software development projects sensitive data and proprietary information is exchanged between customer and provider, making security a major concern. Finding out how the provider of custom software development services handles security is therefore a mandatory step for you. Procedures and programs for data protection and firewall usage are areas which you should cover in detail. Talk to former and current customers of the provider to find out if they have experienced security problems during their relationships with the custom software development firm. Ask the provider about the alert and recovery plans meant to deal with security violations. Inquire into the qualifications, experience and dedication of the provider's data center staff.
Near-shore and off-shore software outsourcing and custom software development questions
Question: How broad is the provider's expertise?
Answer: In custom software development both the breadth and the depth of experience matter. The broader the provider's area of expertise the better his chances to solve unexpected problems. At the same time, a broad expertise may suggest a lack of depth. This is why you have to weigh the need for breadth with the one for depth. Software outsourcing firms which have always focused on their current lines of business are more likely to provide quality services than those that have a history of switching between unrelated areas.
Off-shore and near-shore software outsourcing and custom software development questions
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