We’ve all read the headlines about IT outsourcing projects gone wrong.
Some of the biggest and best-known brand names, from J.P. Morgan and the US Navy to Virgin Airlines and the Royal Bank of Scotland, have found themselves cleaning up after an outsourced project went south.
Buggy software and missed launch dates can cause a public relations and customer relationship nightmare. But the financial cost also can be huge. We know this well at Accelerance because we are often asked to help pick up the pieces.
Recently a client came to us for help after a breakdown in their relationship with an offshore outsourcing partner. An engineering project was plagued with delays, and when the product was finally delivered, it was missing crucial features.
The wasted time and effort had cost the client more than $1 million by the time they came to us. Even worse, a dispute with the outsource partner saw the code held hostage until the contract was paid in full, even though the software delivered didn’t meet specifications.
We’ve Seen It All
After 20 years of helping clients large and small find and work with outsourcing partners, often in the wake of failed projects, we’ve seen it all when it comes to the factors that can cause an outsourcing relationship to go off the rails. The truth is that many of these projects were doomed from the start because there wasn’t the right “fit” between the client and the outsourcing partner.
There are many obvious factors people look to immediately to determine what a good fit is. What are the respective capability sets of the two organizations? Is a language barrier going to be a problem? Have I actually worked with remote teams before? Have the software developers built a product like mine in the past?
All of these things are important. But in truth, achieving the right fit in an outsourcing relationship is a complex task. Software development platforms and tools have advanced greatly in the last 20 years, as have our ways of working, particularly in the shadow of Covid-19.
But the art of successful outsourcing requires as much attention to detail as ever.
We have developed a framework to help guide us that includes 15 potential risk areas for outsourced software development. Often our clients feel that they have one or two or even as many as five areas covered and think that will be enough. That’s where the problem starts. There are 10 other areas where the fit may not be good enough.
Too often, the outsourcing partner gets the blame when a project fails. In our experience, it is just as often a case of the client failing to establish clear processes, having unrealistic expectations or neglecting to put in place the right project management or governance.
So how do you approach an outsourcing relationship in a way that maximizes its chances of success? Over thousands of client engagements, we’ve come to the conclusion that it boils down to two critical actions.
Finding the right partner fit
Cultural and language barriers, a lack of accountability, mismatched capabilities and a misfit in the size of an organization that is contracting out work and its outsourcing partner are several issues that can derail an outsourcing engagement early on.
After studying the progress of a handful of companies that had engaged outsourcing partners, researchers found that a lack of shared intellectual capital was the culprit in outsourcing relationships gone bad, according to the international journal, Empirical Software Engineering.
Intellectual capital is the domain and technical knowledge of a team as well as its social skills. This is the sum of an organization’s capability and experience. If you are unclear about exactly what an outsourcing partner can bring to the project, the relationship could start on shaky foundations.
Our Rapid Referral service is designed to find you the perfect outsourcing partner by looking for the aspects of intellectual capital that will ensure your project thrives. It’s a structured yet highly customized process that considers over 500 criteria across areas including team size, cultural fit, company track record and relevant industry experience.
Rapid Referral can reduce your due diligence process seeking the right outsourcing partner from months to just 10 days. We will present you with a shortlist of carefully vetted outsourcing partners chosen from the top 1% of global software firms.
Getting your teams working together seamlessly
Once a partner is in place, the hard work really begins. Establishing the right relationship, maintaining it and adapting it as needed is the key to success.
In an outsourcing partnership, intellectual capital will be created that is common to the client and outsourcing partner. This is the shared understanding and capability that will keep the project on track.
Those companies that experienced outsourcing failures didn’t develop and maintain sufficient intellectual capital with their outsourcing partners, according to Empirical Software Engineering.
“We found that insufficient levels of domain and technical knowledge (human capital) affected the necessity to develop high-quality software,” the researchers of the outsourcing study noted. “Furthermore, a lack of commitment and pride among remote developers, communication problems and cultural clashes reduced the social capital.”
Some of the companies brought their software projects back in-house as a result or started again with a new partner. Our job at Accelerance is to make sure you avoid having to do that.
In Search of Alignment
The Accelerance Align service makes sure you have the framework and processes in place to work seamlessly with your outsourcing partner.
Align is a three-day professionally facilitated workshop that brings together your team and your new outsourcing partner to learn what it takes to operate seamlessly as “One Team”. Our experience monitoring the progress of thousands of outsourced software projects has given us a deep understanding of the issues that can strain a partnership.
For instance, clients often come to the relationship thinking they will need a certain number of engineers, without considering exactly how they will use them. Sometimes they assume that a software development company will have all the necessary processes already in place.
They may have well-established processes, but what if their preferred approach is not well-suited to your needs? Investment in gaining buy-in for practices and process steps is essential. That’s where intellectual capital that will power the project to its conclusion is generated.
Getting each of the players in the game on the same page can reduce friction and speed progress significantly.
Case in Point: How Wrong It Can Go
Consider the case of Jeff Shules (name changed to protect the unfortunate): He was a vice president of engineering who had spent five painstaking months (at about $15K per month – his salary at the time) accomplishing nine site visits in three countries, to select an offshore outsourcing vendor.
He investigated India, China and South America. Ultimately, he selected a U.S.-owned outsourcing vendor with an operation in China. This vendor was in the process of acquiring a second team of programmers who were perfect for Jeff’s needs.
When the vendor’s acquisition of the second Chinese team fell through, a junior team from another operation was assigned to Jeff’s project. The junior programmers’ English skills were limited, making communication difficult and inefficient. Their programming skills were worse. Because of the 16-hour time difference with China, managers in the U.S. spent many late nights emailing detailed instructions (even pseudo code) and answering questions by phone when it was daytime in China.
Severe morale problems emerged in the U.S. staff. Missed deadlines and extreme employee frustration eventually elevated the issue to the board level.
Finally, after a long six-month learning curve, the Chinese team became more efficient. But the damage was done. Despite Jeff’s careful research and painstaking attention to detail, he had made a critical outsourcing mistake and found himself resigning from the company.
The Drivers of Outsourcing Mismatches
Knowing the problem is critical to finding a solution. What are the root causes of outsourcing issues? In our experience, the biggest causes of partner mismatches are:
Hiring a team that told you they were solely dedicated to your project, only to find out they’ve over-extended themselves to multiple clients.
Hiring a “body shop”: a vendor that charges you for a room full of programmers without “adult supervision.” In this situation, you end up managing and directing them yourself.
Putting off developing and communicating IP protection policies and procedures until it’s too late, thereby jeopardizing your trade secrets.
Failing to provide adequate specs, resulting in unusable software.
Neglecting to choose a team with a full-time, English-speaking liaison who can communicate effectively with you and the outsourced team.
Choosing a vendor with a great price and solid skills but with too many cultural barriers to be able to deliver a proper user interface.
Finding the “perfect” team, only to discover that they regularly lose engineers because of high attrition rates, dramatically delaying the completion of your project.
Having to work long, odd hours because you’ve chosen a vendor whose time zone directly conflicts with your preferred working hours.
Failing to use a bug tracking system to keep track of defects, issues and enhancement requests.
Disagreeing about measurements of success. There needs to be a commitment from client and partner to an agreed-upon, realistic plan that demonstrates value delivery as perceived by the business stakeholders. Often work will progress and code is shipped, but the business doesn't realize value fast enough and that puts the entire project at risk.
Ultimately, a successful outsourcing partnership is about fostering a mutually trusting, productive relationship. At Accelerance, we work with high-quality, vetted software development teams all over the world.
We know whether they are likely to be a good fit with your organization and its software development needs.
Get in touch with us to see how we can help you start your software outsourcing journey on a solid foundation and partner for success.