Reduce Your Risk:  Use Multiple Software Outsourcing Companies

February 9, 2016

By Steve Mezak

multiple-partners.pngOutsourcing to numerous international software developmen companies has become increasingly common for contracting IT and development services. Clients often want to increase and diversify the number of software development providers used in order to maximize the effectiveness of software development initiatives. They do this by guaranteeing that different tasks are handed out to the best possible outsourcing companies, permitting the hiring company to sustain focus on its main capabilities.

When thinking about using multiple offshore software development partners it is important to understand the benefits as well as the risks involved and how to mitigate them to guarantee your team crosses the finish line to success.

When done properly, selecting vendors for a plethora of workday overlaps can be very beneficial for your organization. Margaret Rouse, director for WhatIs.com, says that using multiple vendors can also aid risk management programs by diversifying the risk in your vendor’s operations. Other benefits include:

  • Encouraging competition among several vendors;
  • Cutting costs associated with repetitive agreements;
  • Cultivating innovation and teamwork amid a group of IT vendors.

There are known cost-saving benefits of software development outsourcing, but also adding to your list of geographies and skills may help you to better your operational efficiency and to further reduce costs. Sourcing to offshore or nearshore outsourcing companies that are culturally compatible and in line with your organization’s goals will induce more productivity.

But what happens when things go wrong? Just as there are risks and costs to be aware of before you even sign the contract with your first outsourcing company— risks increase as you create more outsourcing relationships. 

Be clear about accountability.  CIO.com reporter Stephanie Overby explains that using multiple vendors is substantially more complicated since services are seldom produced separate from one another. Overby says that vendors often use special terminology to protect themselves from being held accountable for service failures. Spend the extra time and energy to ensure everybody agrees on terminology and measurable benchmarks. 

Ideally,  multi-vendor service environments shouldn’t bring  added complications in terms of liability. If created properly,  contracts should indicate liabilities between you and your software outsourcing company as clearly as possible. However, as with accountability, the liability lines are often blurred. When things don’t go as planned with multiple outsourcing arrangements, it may not be easy to find the one provider at fault.

Nonetheless, there are ways to diminish these risks and come out of your multi-company outsourcing contracts unscathed.

To begin with, it's important to establish an environment that nurtures and encourages collaboration for your outsourcing partners to work with each other effectively.  Regular communication and loads of collaboration will help to ensure there's clear dependencies, workflow and execution of commitments. Without such an environment, walls between service providers go up, and, consequently, services may fall to the wayside. It is also a good starting point to choose outsourcing partners with a similar company culture.

Overby states how important it is to define roles within the relationship and each party’s responsibilities. In particular, when one provider's job performance is reliant on another’s, problems can come about when accountability is lacking. The biggest risk is loss or cost to the client without any clear lines of responsibility. Some uncertainties are inevitable, so it's in your best interest to require vendor coordination and problem resolve, perhaps with a shared risk.  

Delegate a single management point of contact for each outsourcing company. Often, multiple outsourced sites from one vendor and with one manager will translate to more management time and work on your plate.  Ask your outsourcing partner to offer a single point of contact to control all the account management and arrangements with all outsourcing locations.

Finally, ongoing risk management is another essential strategy for effectively mitigating your outsourcing risks. Proactive and effective risk management will predict and prevent major implementation issues.  It may also do you well to consider an outsourcing agreement focused on cooperation to formally require your vendors to work with each other at an operative level. They can be structured so that the accountability is placed on your vendors for any service failures as a whole.  

Accelerance has decades of experience working with multiple vendors in multiple locations across the globe. We know how to match you with the best outsourcing company suited for your software needs. When multi-sourcing, we make sure these companies are capable of working together for your  advantage.

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