Last updated: April 10, 2018
Read time: 12 minutes
The vendor relationship deteriorates, and the benefits expected from outsourcing go unrealized. It’s easy to blame the vendor, but often the root cause of struggle is a lack of internal readiness for software outsourcing. We can help.
The success or failure of your software outsourcing is predictable and manageable. Accelerance guides you and your team through a hands-on process that examines 15 risk areas across three dimensions of business readiness that derail software outsourcing success. Then, we’ll work together on a plan to overcome internal obstacles and risks.
Most tech leaders aren’t experts or even experienced when it comes to choosing the right global software team. On your own, you’re faced with thousands of confusing options, risky unknowns, and tepid qualifications. Due diligence in partner selection is critical. You don’t want to work with companies that operate with no hiring or training standards, no oversight or support, no guaranteed retention or continuity, no insurance or security and no easy way to scale or organize. How can you be sure you’re working with a great partner…and quickly?
Accelerance searches the world so you don’t have to. We’ve reviewed more than 8,000 global software companies to create the most trusted network of high-quality global software teams ever assembled. Our research team reviews top global software companies across more than 200 criteria in key areas of business and technical maturity.
If you search for a software outsourcing provider on your own -
Due diligence in partner selection makes the difference between success and struggle when working with onshore, nearshore or offshore software outsourcing providers. Learn how to conduct your due diligence from the leader in software outsourcing advisory services.
When looking for top outsourcing companies, you’ll want to leverage experienced leadership and past successes for your own gain. Ask for the resumes of prospective software development team members. Look for experience and work completed for other firms, as well as highly innovative accomplishments for senior developers. Engage software teams who can bring years of experience and understanding to your software requirements.
Ask for references and talk to past clients. Explore challenges faced and how they were overcome - by both the client and the provider. In many cases, a service provider brings valuable problem solving and strategic planning to an engagement. Ask past clients how the provider may have gone above and beyond software challenges to deliver real business solutions.
Rapid access to technologies, best practices and methodologies is a significant benefit of outsourcing software development. Our in-house research analysts verify the technical and industry expertise of every Accelerance Verified provider.
Take the time to find an outsourcing provider with the perfect technical expertise for your software. Determine the top 3 technical skills your software requires and set them as top priorities in your outsourcing criteria. Focus on technical expertise that makes the greatest positive impact on user experience and overall quality of your software. Then, do your due diligence and be sure your outsourcing provider can “walk the walk” and not just talk a good game.
Generalists are valuable for their broad knowledge base, but specialists increase the value of your software and your outsourcing investment. Insist on outsourcing companies with a high-level of expertise in specific, relevant technologies or industries.
Teams with a mix of junior, mid-level and senior developers perform best. A lower-cost team of all junior developers will lack the experience to be productive, while hiring only senior developers in an attempt to get a team filled exclusively with the most experienced developers will cost you more and may cause teamwork issues. Balanced teams are your best option.
Seek outsourced software development teams that prioritize innovation. Software developers want to be a part of a company that allows them to think and grow, and companies that encourage this end up growing, too. Favor partners that encourage innovation as part of their culture and reward software developers and others on the basis of their dedication to innovation, not their level of success. Developers may fail in their quest for an innovative solution, but it’s their dedication to the solution and to final engagement success that yields the highest value.
How an outsourcing company operates on a day-to-day basis defines its development culture and is an indicator of how well they’ll work with global clients like you. Look for healthy hiring, training, and retention practices. Ask a few questions: Does the provider actively seek to retain its employees? Does it offer them a clear career path? Is its employee turnover rate at or below the national average? Are its facilities attractive and well kept? Does it run its meetings with you in a way that is collaborative, creative, and encouraging of discussion?
Find the answers to these questions and compare them with your own company culture to prioritize and evaluate the right fit.
Unless you’re outsourcing to onshore companies, you’ll need to interact with people from different countries and backgrounds during your software engagement. For those interactions to go as smoothly and successfully as possible, each side must learn about how people on the other side think and behave. It's not necessary for one side to completely adapt to the other, but rather to recognize and embrace differences. Learn as much as you can about your outsourcing provider’s country, region, way of life - and even some of their language. Your investment in culture will never be wasted.
Outsourcing company too big? Too small? Ask about company size and what percent of business your engagement will represent. Unless you’re hiring a team of developers greater than 5% of the total number of developers at your outsourcing partner company you probably won’t get the attention you need to be successful.
It’s hopeless to try and get good results from a too-large company for custom software outsourcing work if you're small potatoes in their business base. All the large well-known IT outsourcing companies are over 10,000 developers - so unless you're hiring hundreds of developers, you’re better served by smaller companies where your business matters more.
Conversely, you don't want to be the only client your outsourcing partner is serving. The right size outsourcing company for a 80 developer team is in the range of 500 to 2,000 total developers.
Of course size is only one criteria for selecting a great software outsourcing company. Combine size with technical excellence and location to select a partner that best fits your needs.
Talk to Accelerance about the size of your engagement. We've reviewed more than 8,000 software companies of every size all over the world.
Software outsourcing rates are quoted as either Full-Time Equivalent (FTE), where you pay a percentage of the annual salary of each team member based on the length of your engagement, or as Blended Hourly, where you’re quoted an hourly rate based on an average wage of multiple team members. How your rate is quoted will vary by provider.
Compare the price you’re quoted to the average range in the region based on like-for-like software engagements. Be ready to recognize when a price is abnormally above or below the average and when something is off. Carefully review what your quote includes and put a high priority in getting world-class software for your investment. Saving money isn’t helpful if the result is an inferior product.
Separate from the quoted rate is the total cost of engagement (TCE) and is a cost you’ll have to factor in above the quoted rate. As an example, TCE for in-house teams can be astronomical, with taxes, benefits, and overhead all added onto the hourly rate you’re paying your developers. Outsourcing cuts the TCE down significantly, but it doesn’t vanish. It’s still important to consider the extra management costs and the potential travel costs for offshore and nearshore software outsourcing.
It’s important to choose the pricing model that works best for your company. Fixed Price Models theoretically have less risk to your budget by withholding payment until software development milestones are completed. The problem is the features and functions of new software applications are not well-defined and therefore a fixed-bid cannot be accurately estimated.
Most software outsourcing engagements use a dedicated team of developers and the outsourcing company is paid monthly for their work. This is fair because their work is usually performed in sprints using Agile methodology so you receive the highest priority features and functions first.
Finally, Incentive-based and Shared Risk-Reward models offer flat rates with increasing payments as goals are met. They may require greater oversight and higher risk, but can be beneficial to the quality of your software and your outsourcing partnership.
Often when outsourcing without a trusted representative, outsourcing companies will include a Risk Factor Charge which may increase your quote by up to 50%. Risk factor charges are eliminated when hiring a partner through Accelerance.
Negotiation is part of the outsourcing process and many providers will negotiate to win your business. Expect to negotiate price, engagement length, makeup of the development team, and other terms. Most outsourcing agreements have two parts—a main agreement and exhibits for each project or programming engagement.
The main agreement, usually called the Master Services Agreement or MSA, covers basic legal terms and definitions. It is the contract that governs the relationship between your company and the outsourcing vendor and includes: independent contractor relationship, intellectual property rights, assignment of copyright, non-disclosure obligations, term and termination, no conflict of interest, non-interference with business, force majeure, assignment, governing law, and other contractual clauses.
Define the type of team that will work best for your engagement and the amount of “hands on” you’re able to commit to. A dedicated team will integrate with your in-house development team, while a managed team functions independently with you as the product owner while the development occurs elsewhere.
Unlike do-it-yourself outsourcing which can be a hit-or-miss venture, Accelerance delivers a proven methodology for outsourcing that identifies and manages risk and optimizes results so that your company gains all the benefits of high performance global partnerships.