Businesses now have many options for servicing new IT projects. Insourcing, outsourcing, nearshoring, staff augmentation and freelancers are just some of the options out there.
However making the right decision can be tough, time consuming and even risky. In this article, I would like to cover the current best practice, the questions that need to be asked, as well as how to get the most out of any supplier's agreement.
At the very minimum, you need to clearly know what you want for your businesses, and devise a strategy to deliver this. While addressing the long-term business plan would be ideal, in reality it is hard to plan for more than two years in advance. These days even a five-year plan is virtually impossible, thus three years is defined as "long term." From this you can determine if this can be delivered in total, in part, or not at all by the internal resources. Then you can scope out a brief to suppliers capable of delivering the service with the right people within your deadline and budget. Before you commit to anything, consult with a number of suppliers and independent advisors.
Ideally you want a supplier that has the capability to grow with you. This means that whatever organisation you select, it needs to demonstrate progress, growth and strong R&D on top of the obvious skills and track record. For big, complex projects, bigger suppliers are typically a better option. A proven track record of growth is important, because stagnation in the IT sector is never a good sign. Do the due diligence: looking at current and previous customers, financial track record, growth, case studies. Kick the tyres by going to their offices to meet as many people possible, and check out their key staff on Linkedin and Google too.
Then there are the services provided. It goes without saying that any supplier needs to be flexible in order to provide the services of your choice. We know that the "hybrid" suppliers offer the best short-term flexibility in the service they offer, typically including staff augmentation through to fully-managed services. As the services become more complex, the better they are for measuring success through KPI, cost savings and other efficiency benchmarks.
The days of locked in contracts with unreasonable terms are truly over. IT lawyers have made great strides in creating contractual best practice, reflecting some of the bigger outsourcing contract disasters of yesteryear. As mentioned, "short term" is now defined as one to two years, so no business should commit to any service which in fact may not be needed in the longer term. Scalable and flexible contracts are the norm, but in order to lock down the best price, it is good to fully commit to the services you know are essential. It you need three engineers for three years, you can get a better price, but if you are vague, this is when things get woolly, unstructured and could cost you in the long term. While it is a double-edged sword, there are ways of controlling this.
Successful outsourcing partnerships strive on strong lines of communications. Meet with the individuals who will be managing and doing the work. Understand their business and how they operate. Then as the work progresses, the earlier they are alerted to new changes and expectations, the better they will perform. Good suppliers offer open and transparent relationships.
Making tough decisions.
Sometimes hard decisions have to be made, and inevitably they are driven by cost. This typically manifests itself in the form of a corporate restructure, once the realisation that there are too many staff, not enough regular work, and high wage bills.
When going through this process, there is a real benefit to use an external organisation to get the best deal, not just in relation to cost, but also for skill base, flexibility and experience. Many organisations think of a contractor for this type of work, typically bringing in one or two people to perform specific functions. While this also comes at a higher monetary cost, it also sacrifices flexibility, scalability and could lead to increasing risk. If more than two contractors are required, you need a proper strategy in place, which also includes a statement of work (SOW) which details the costs, work, anticipated results and KPIs which gives you both control and leverage if things don't go to plan. While contracts are now highly-sophisticated in IT outsourcing, it is the SOW which gives you the ability to change things if you are not satisfied. We also recommend 30 day notice terms to manage the project.
In terms of price, in the past, many companies have gone for the "cheapest", but with so many fingers burned, most businesses now go for the most sensible to their requirements. We call it the "mid range affordable," with the prerequisite for suppliers to have a strong and relevant track record, good references and case studies.
Like the property market, outsourcing is all about "location, location, location." The Indian outsourcing market paved the way for outsourcing, and good quality and diverse suppliers are found around the world now. From a Western European perspective, the CEE (Central and Eastern Europe) has been well documented by many analyst groups, Gartner included, as offering the best mix of skill, price and cultural alignment. With EU-based countries such as Bulgaria, Slovakia, Poland and the Czech Republic requiring the highest standards of data compliance (DPA and GDPR), as well as having excellent English and other major language skills, many European businesses are keeping it closer to home now.
In terms of contracts, the sophistication of outsourcing has actually made contracts simpler and more flexible. This means that typical terms such as 30-day notice periods, flexible terms, monthly 360-degree review reports are now commonplace. Managing the relationships between client and supplier are now closer and more aligned than ever. Never engage in a contract without a properly defined SLA and pre-agreed KPIs.
The GDPR drain.
With GDPR coming into play next year, businesses are frantically trying to get compliant, and this is taking up a lot of resources and draining the industry of its talent. Businesses need to plan as ahead as much as possible, considering that many skilled people are in high demand and tied up on these sort of projects. Outsourcing is the first choice solution, but planning is essential to get the best suppliers and people.
Daniel Olsson, Director at Soitron UK
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