On June 24th 2003 I was quoted in a Computer Weekly article saying that when it comes to the offshoring of software development and support, “UK companies have no choice”. I said that for UK IT companies in particular it was “a matter of life or death”. At the time it seemed like pretty bold stuff. However, between 2003-2008 Indian outsourcing industry revenues grew 210% from $10Bn to $31Bn and as predicted the offshoring of software development and support activities has become commonplace. The European proportion of this has grown very fast and now represents about 25% of the overall figure. This is expected to surge once again as recovery from the financial crisis becomes increasingly dependent on global sourcing to accelerate business development activity in a way that derives greater cost value.
There is no such thing as a free lunch!
Trust me, in the area of global sourcing this is more true than ever. I should know. I've eaten, slept and breathed this subject since the mid-nineties, initially as an IT Director sitting on your side of the fence and latterly as founder of Arrk. As with most other walks of life, when it comes to offshoring software development and support there’s no such thing as a free lunch. At Arrk, we know that offshoring can work. However, all too often we find ourselves sitting in front of a Customer who tells us with great solemnity that they are going to conduct a pilot project involving 3 people for 2 months so that they can determine whether or not offshore works! The problem is that a test like this won't allow for the benefits to be realised. Offshoring is complex and for the uninitiated there are countless pitfalls and problems which, using the free lunch analogy, usually leaves a great deal of egg on ones face.
So how do you make global sourcing work for your business?
I recently wrote a paper that outlined the key mistakes that people make when considering an offshore project for the first time. '13 Great Ways to make your Offshore Project Fail' provided the reader with an array of 'what not to do's' that would ensure plans for project offshoring didn't go the way that so many high profiles initiatives have gone in the past. We thought that this information would be good to send you as a limited, quick-read communication over the next few weeks in the hope that it might help you in any iniatives you are considering now or may do in the future. What I tell you will give you an insight into what makes offshoring fail - and by implication what makes it work. By passing on some of our experience we hope that you will be able to avoid ending up with one of those unpleasant hangovers that can cause so much embarrassment at the boardroom table.
So, without further ado, here's this weeks installment!
1. STARTING WITH THE WRONG END IN MIND |
Although it doesn’t happen that often nowadays, we still come across Customers who set totally unrealistic goals and objectives for offshoring projects - usually based upon little or no direct experience - and as a result their approach is totally insensitive to the challenges of offshoring. The following is typical of the sort of statement that makes our blood run cold . . . “Our CEO has decided, in his great wisdom, that we must start offshoring before the end of this quarter. He wants to save 65% of development costs this year so we are sacking all UK contractors across all projects and replacing them with a team based in Mumbai who will report directly to our project managers in Birmingham and London. They will work as a virtual team using our standard processes. Can you please send us some CVs by close of play. Problems include:
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2. IT'S ALL ABOUT THE MONEY! |
It is clear that the primary driver for offshoring has been access to lower cost resource in developing countries. However, a great many of our Customers tell us that problems such as a lack of availability of qualified staff in their locality, limited flexibility to ramp-up/down resources combined with a need for access to a wider skill base are at least as important when it comes to drivers for engaging with a company like Arrk, if not more. Done properly, offshoring will result in cost savings – perhaps not the 40-50% some people claim, at least not in the early stages or on small-scale initiatives – but there are real savings to be had. However, if you are focused only on aggressive short-term cost saving and as a result try to save too much too soon, then you will starve the new offshore capability of investment which will sooner or later cause it to fail. It is essential that companies embarking on offshoring have a balanced set of objectives that consider a much broader horizon than the current financial year. It is also very important to discuss your goals with your potential suppliers. Canvass them for input and make your own judgements about their ability to understand your goals and constraints, to give you constructive feedback and to adapt their proposals to help you achieve your objectives. But don’t just assume that the ones that just nod and say yes are the best ones to work with!
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Want to view more Great Ways?
View more Great Ways: 1 & 2 | 3 & 4 | 5 & 6 | 7 & 8 | 9 & 10 | 11 & 12 | 13
Learn how to avoid all the mistakes of those that have tried and failed...
There is no doubt that in spite of all the potential difficulties noted above outsourcing, and offshoring in particular, has and will continue to offer many organisations very real and tangible benefits. What I've tried to do in the paper is to underline some of the issues that you might face, the ‘gotchas’ that often trip people up. Some of these may be obvious to you, particularly those of you with some experience of offshoring. But I hope at least to give you some food for thought.
The tips above are taken from my paper '13 Great Ways to make your Offshore Project Fail'. Rather than waiting until next time, if you'd like to receive all 13 Great Ways in full now then please just complete the free enquiry form on our web site by clicking here or call 08 456 210 278 and we'll send you a copy of the paper free of charge (perhaps there is a free lunch of sorts after all!)
Arrk Group is a UK headquartered, award winning global IT services company specialising in the design, build and ongoing operational management of complex and secure web and mobile applications for both Independent Software Vendors and end user organisations. Established in 1998, our unique position and experience provides us with a deep understanding of the offshore services market. We recognise not only the benefits but also the pitfalls and limitations of the offshore phenomenon. This sensitises us to the difficulties often faced by organisations that are relatively new to offshoring and enables us to offer Customers prudent advice on a global service delivery strategy that delivers the best balance between risk and reward.
(C) 2009 Arrk Group Manchester Science Park Manchester M15 6JJ |
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