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According to The Computer Economics IT Outsourcing Statistics 2011/2012 study the amount of organizations that outsource IT work is increasing every year. The percentage of their total IT spending going to service providers rose from 6.1% in 2009 to 7.1% in 2010 and then leveled out, showing no year-over-year growth in 2011 and expected to go up in 2012 (Figure 1).
IT Outsourcing has become a multibillion industry worldwide during the last ten years. The most common reasons why companies decide to outsource include: cost reduction and cost savings, the ability to focus its core business, access to more knowledge, talent and experience, and increased profits.
However outsourcing couldn’t be the “panacea” like it’s expected by some of organizations. Over the last few years there were numerous reports in the media about the problems that organizations got with outsourcing their IT processes. That’s why so important to understand the main principles of IT outsourcing.
To make IT outsourcing process successful there are 10 simple principles to develop “win-to-win” strategy:
1. Establish clear goals. Make sure the outsourcing service provider understands the project goals and specifications. All details are important.
2. Clearly define the scope and schedule for your project. This might seem evident, but any successful outsourced project always starts with a clear statement of what you are wanted to reach. Give as much information as you can about what you need delivered and be clear and realistic about your schedule requirements – project schedules can have a huge impact on project costs.
3. Don’t choose provider based only on price and Brand Name. Often even small IT outsourcing companies could generate really worthwhile product. Experienced Managers who have outsourced many successful projects recommend discarding the highest-priced and lowest-priced bid. You should try to find balance of good value and quality results.
4. Review portfolios and samples. Check the outsourcing company’s previous work (“portfolio”) and make sure that their previous work meets your expectations for quality and way of doing. Additionally you could ask them to provide a basic draft of a work plan. But never cross the line between asking for a basic draft and insisting that a contractor provide you with full done work. No qualified professional expects to work for free.
5. Work with a compatible provider. IT outsourcing company’s staff needs to be compatible with your company’s culture and business objectives, with the right experience, communications skills, and working style. Because they will become part of your Company.
6. Communicating openly from the 1st day. Sometimes customer-outsourcer relationships break down simply due to lack of communication. When you distribute IT functions outside your organization, you need a great deal of coordination and back-and-forth communications – even more than when you distribute across your internal organization.
7. Take a Test Drive. Before signing a long-term cooperation agreement for it services, you can order a small paid test project to ensure the quality of provided services.
8. Primary feedback. Organization of regular meetings (by phone or Skype), constant communication for clarification of current issues through chat (Skype, Gtalk, MSN, Yahoo Messenger etc.) or by e-mail, reporting about executed work and reached progress (usually weekly).
9. Retain responsibility. Outsourcing shouldn’t mean that you are abdicating responsibility. You still own the overall results, so you need to be actively involved in working with and managing the outsourcer.
10. Ask for more. There is a model of cooperation in IT outsourcing service called Dedicated Development Center (DDC), accordingly with which you have your own IT-team located outside your office but working for you. These people are not your employees and you don’t need to pay any taxes, insurance or retirement benefits. But they work for you 8 hours a day, 5 days a week. They are perfectly aware of your corporate culture, work under your business processes and you weekly get reports from them.
It can be greatly effective if you have a continuous need for software development as there’s no need to look for software provider every time you need to upgrade your system and to develop a new one. DDC is effectively used by many companies to save expenses, lower business risks and accelerate project start-ups.
Finally, while following these ten steps will set the right course for your IT outsourcing relationship, for it to truly succeed it must be based on mutual trust and respect. In any case you shouldn’t undervalue communications tool to achieve “win-to-win” results in IT outsourcing. Poor communication is second only to poor planning as a cause of outsourcing relationship failure. Communication on all aspects of the project must be frequent and two-way. A high level of integrity will ensure a high level of service and great results.