Top 10 Best Outsourcing Practices

The IT outsourcing industry is growing.

In 2018 almost 30% of companies outsourced IT services, and 78% are satisfied with their outsourcing arrangements. Due to challenging market competition, modern outsourcing vendors are ready to provide a client with much more than just a cost-effective solution.

Outsourcing is no more about the budget. The choice of outsourcing and outstaffing providers gives businesses an opportunity to launch a win-win professional partnership with effective and transparent management and top-qualified development services.  

What are examples of outsourcing

Outsourcing can be beneficial not only for software development. Common outsourcing activities include human resource management, facilities management, supply chain management, accounting, customer support and service, marketing, computer-aided design, research, design, content writing, engineering, diagnostic services, and legal documentation.

The challenges and risks of outsourcing

As it was mentioned, the choice of vendor is the key to avoid the possible omissions.

The vulnerable points of outsourcing collaboration could be:

• slower turnaround time.
• lack of vendor's business or domain knowledge.
• language and cultural barriers.
• time zone differences.
• lack of control.

Outsourcing best practices

1. Build relations between key managers

The usefulness of the relationship between the key management personnel of both teams depends on good understanding and strong working ties between them. Studies on outsourcing success stories have demonstrated that working chemistry in management and peer friendships among employees have proved to be important determinants in forming long-term relationships that yield real value.

2. Define clear project scope and schedule

Define your project requirements up front. Service providers require accurate, complete information to present you with realistic proposals and to quote you a good fixed price deal. Give vendors as much information as you can about what you need to be delivered and the way in which you need the work done.

Be clear and realistic about your schedule requirements - project schedules can have a huge impact on project costs.

3. Choose the industry and domain experts

Make sure your service provider has the specific experience your project requires. This is especially crucial when outsourcing complex software development projects. 

4. Don't be ruled only by price

Experienced outsource buyers who evaluate hundreds of proposals almost always recommend discarding the highest-priced and lowest-priced bid. Buyers report that their most successful projects are the ones where they felt the vendor offered a balance of good value and quality results.

5. Take the portfolio seriously

Examine the vendor's previous work and make sure that it meets your expectations for quality and style. If you've evaluated a vendor's portfolio, references and previous experience and are still unsure of their capabilities, consider asking them to do a quick mock-up or provide a basic outline of a work plan.

A service provider who really wants to win your business might be able to give you a rough concept so you can better understand their approach to solving your problem. But never cross the line between asking for a mock-up and insisting that a vendor provides you with finished work "on spec." No qualified professional expect to work for free.

6. Start with small and simple

When engaging with a service provider for the first time, start with a project that is relatively small and simple in scope. This will give you a better idea of the provider's style and capabilities before you entrust a "mission critical" project to them.

7. Tie payment to clearly defined project milestones

Just as you should be clear about the project scope, make sure that you define a work plan for your outsourced project with clearly defined milestones. Having scheduled checkpoints where you review the status of the project as it works toward completion - is an easy way to ensure that you meet your final deadline and that the final product meets your standards. Tie the vendor's payment to these milestones.

A good guideline for IT and software development projects is to pay no more than 20% to 30% of the total project price up front, with the rest of the payments awarded based on the completion of 3 or 4 milestones.

8. Negotiate your ownership in advance

For any type of outsourced project, make sure that you are clear about who owns the resulting work product and any important components of that product. Make sure the service provider understands how you intend to use the deliverables that they are agreeing to provide. For example, the custom software application for your personal use would be substantially different from the development of an application that you intend to package and resell.

9. Care about after-release support

For technology projects, it's a good idea to specify a warranty or support clause so that you are assured of some amount of continuing support from the vendor after the project is complete. It's much easier to negotiate a support clause before the service provider begins work, rather than after the completion of the project.

10. Be ready to face cultural differences

The parties involved in an outsourcing relationship belong to distinct cultures, these differences have to be accepted and bridged. The cultural understanding between the two organizations can be enhanced by organizing social events, educating about company background, participating in each others' quality programs, etc.

It may be helpful to send a loyal employee to the BPO site for a few months to facilitate understanding in the implementation phase.

Outsourcing checklist

Before requesting a quote from an outsourcing provider, check if you are ready with the answers to the following questions

• Are you clear about the task or project to be outsourced?
• Do you have an outline, manual or at the very least, clear instructions about the task or project to be outsourced?

• Specific task/project description
• Expected performance
• Cost/budget of the project (is it billed by the hour or by the project?)
• Clear deadline/due date
• Skills required
• Resources required
• Who in your organization will be interfacing with and managing the outsource contractor or outsource firm?
• If this is a task that is likely to be repeated over and over, can the initial outsource contractor prepare a step-by-step “manual” or outline of how to complete this task?  Then you have a resource you can use again in the future, either as part of an operations manual or as a time-saving resource to pass on to another outsource contractor in the event your initial contractor does not work out.

Author: Daria Rolina