How To Successfully Outsource Software Development
The 3 C’s – Keys to Successful Software Outsourcing
We are often asked to define why we are successful. Frequently the conversation ends up talking about the small details we embroider into how we deliver a project.
However, before we start discussing success, the conversation has usually passed through varying degrees and scenarios our customers have previously encountered. Situations where at best, outsourcing software simply hasn’t worked for them, and at worst has been an unmitigated, costly disaster.
Therefore let’s look at the sector as a whole. After all, the global spend on technology outsourcing in 2018 exceeded $62 billion.
According to a recent survey the top 3 reasons for outsourcing are:
- Reduce or control costs
- Focus on core business
- Solving capacity issues
Judging success could be said to measure based on fulfilling these 3 criteria, let’s examine this in more detail.
Demand continues to drive up salaries in the tech sector. This inevitably causes challenges to the purse string holders. Software talent demand and supply does not discriminate between the cash strapped start-up or the wealthy corporation.
You either have the budget or not. If you don’t, you need to find a way to work the numbers.
Even with funding to hire the required software resources, can you compete with those who have deeper pockets?
Looking further afield to markets where labour is less expensive is of course a common and accepted strategy.
One key type of customer Vigil has benefited from is the company “returning closer to home.”
Having tried to secure a more cost effective outsourcing solution in some far flung location. It soon becomes apparent, that the headline “low day rate” isn’t actually the final price. Flights, management overhead, miscommunication, poor execution, different management styles and cultural barriers all contribute to a growing set of associated costs. Pushing the price higher than originally expected.
Add in a missed deadline or a misunderstanding on scope and all those headline savings went up in smoke.
It isn’t the best option to look for alternative locations to develop software solely based on the price tag.
Possibly Vigil’s greatest success story has been based on this very driver.
For five years one of our existing customers attempted to run their own technology (for all the right reasons).
Owning your own technology keeps you in control of your own destiny. Investors like it when the team is employed by the company. The sense of building your own product with your own employees, engenders a strong sense of ownership and commitment.
Our customer has market leading domain knowledge. They have fantastic reach into their sector. They simply couldn’t bring together all of the facets of building, operating and supporting their technology. So they turned to Vigil.
Now we see a fantastic growth curve. They are able to focus on their core business. Meanwhile we focus on what we do best for them.
The beauty of this outsourcing model is that whilst employed by Vigil, the team still feel a part of the customer. They wear the customer T-shirt. They speak enthusiastically as any employee at events on behalf. Avoiding being a technical employee in an organisation unable to understand how to keep technologists engaged and motivated.
That is a key factor of success.
By 2020 there will be 800,000 unfilled IT job vacancies in the UK and 900,000 in mainland Europe.
The challenge for some is not simply having the budget or the lack of internal skills to deliver technology. Rather it is the sheer scale of demand on talent. The rate of talent acquisition falls behind the number of required hires. Consequently teams do not grow and projects sit in the ever growing backlog without being started.
We know of a number of companies who have the budget to hire. They also have the willingness to grow their teams. Such is the scarcity of talent, they simply cannot. The backlog of projects leads to prioritisation decisions. Ultimately leading to sacrificing key projects or features. Business growth slows.
Step up the offshore development partner for outsourced Capacity Augmentation!
In spite of the proliferation of outsourcing companies, it is no surprise they make little impact on the combined 1.7M vacancies. The Ukraine, Europe’s largest outsourcing destination, has over 200,000 staff in outsourcing.
Some companies run starry eyed towards Asia and the larger populations of India and the Far East to fulfil demand. They do this in spite of the old saying: “3 women can’t have a baby 3 times quicker.” Throwing extra resources at the problem isn’t the answer we are seeking. Having 3500 software engineers in Mumbai simply “because we can” is never a good idea.
The successful outcome is based on much more than filling the “Capacity Tom-bola!” Building your company’s technology solutions is certainly not best served by spinning the drum and taking multiple lucky dips.
Apply the same care and attention to selecting your outsourced teams as if you were hiring internally. (Unless of course your internal hiring processes and standards are also failing).
Engage on cultural fit. Don’t sacrifice cultural fit based on the location of your outsourcing partner. It is a constant investment of ours to hire smart and continue to train in this area.
Insist on communication. Don’t believe it is somehow acceptable, to throw the work over the fence to the overseas workforce. Expecting to receive back what you thought you’d explained and defined clearly.
Get face to face! Make the effort to invest the time. Make sure the outsourcing partner is also willing to do the same to the required level.
Never push for scale until you have strong foundations set in both the team culture and the communication flow. Get it right first on a smaller scale and then grow by transplanting the experienced team members into new teams.
Good outcomes in software engineering and success in outsourcing your technology should not be mutually exclusive. By looking solely at the reasons you need to consider outsourcing and ticking check-boxes on a list will not suffice.
Nobody ever won this game by claiming:
“We’ve got the cheapest deal!” (We had to sacrifice on quality and accuracy. In fact we ended up spending more
“We were able to focus on their core competence,!” (But we ended up without any control over our technology platform)
“We’ve hired everyone we needed to fulfil our objectives!” (We have no idea what they are all working on and a list of failing projects.)
Cost, Core and Capacity will never unlock the gate to success!
Focus instead on who you choose as your outsourcing partner. How you communicate together. How you select the appropriate skills and manage the development cycles. How you promote the right cultural fit and how together you grow at the right pace.
And that is key in successful software outsourcing!