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Outsourcing notes

Some notes about outsourcing IT services in a non-IT company; from an ex-outsourcee.

Outsourcing IT is getting more popular among suites - perhaps more unpopular among programmers. Since the IT budgets are shrinking these days, the decision makers might find outsourcing as a silver bullet that saves them. I worked for an outsourcee before. My experience there is that clients usually save lot of money, for IT services. They definitely get very good quality deliverables too. Here are some thoughts I've for clients considering outsourcing their IT needs, specifically for software maintenance. When I say clients, I mean clients whose core business is not IT.

Many industry reports give you information about what to look for, when planning to outsource. Most of these reports I've seen evaluate different outsourcing vendors. However, each organization needs to do a candid self-evaluation first, before evaluating vendors.

Pricing Models

Fixed Price, On Demand, Time & Materials.

Fixed Price is very attractive because it helps you plan your budget. If your IT shop has a planning record that looks like post-war Iraq, you definitely need to go for this option. For custom software development and customization of off-the-shelf software, this is the best option. If you plan it well, your outsourcee gets to plan well too. This means, you will probably have very fluid staffing at the outsourcee. If it is handled nicely - measure: how much time does it take a new person with appropriate skills to be productive on your systems - this is a win-win situation for both you and your vendor.

On Demand might look like a nice option. However, please keep in mind that keeping people available always to receive your requirements is expensive. For call centers, this might be a reasonably good option, because you may not need expensive, highly-skilled staff to be available. For software maintenance, it might look like an appropriate choice. But believe me - if your IT department cannot exercise control over internal demand, this will ruin your sleep.

Time & Materials is very cost effective if your IT department has good project managers who are efficient and empowered to prioritize. If they have to constantly re-prioritize, this pricing model will quickly sink yout IT department. Additionally, pricing of materials (software, hardware, hot skills) keep changing in IT world on an yearly basis.

Bottom line: You need to first figure out how you want to work before figuring out how your vendor needs to work.

Offshore Work

India, China, Russia etc. are coming up as popular destinations for offshoring. If you are hesitant about the culture and time difference, try outsourcing to a vendor close to your operations. There is going to be a significant economic advantage if you outsource to offshore firms. However, all outsourcing doesn't have to be offshore outsourcing.

Think of outsourcing IT projects like outsourcing your courier needs to FedEx or UPS.

That said, if you are prepared to work with offshore companies, you need to be prepared to work with timezone differences. If you plan this appropriately, you can get 24 hours IT service! If you can't/don't want to plan, you can get a project manager from your vendor to your location to do this for you. Might be little more expensive, but definitely worth the expense.

Language and accent is considered an issue in offshore outsourcing. This, in my opinion, is a plus, because it encourages much more written communication. If you have a decent mail-list server, you cut down on water-cooler conversations (that are not captured anywhere, hence less re-usable knowledge).

Bottom line: Ask your vendor how they solve these problems. Specifically, ask for case studies.


Whether you offshore or not, only way you can be a successful IT shop is by measuring and adjusting constantly. Golden rule, be candid. If you don't want to do measurement, your vendor will do that for you. However, that might be from the vendor's point of view, not necessarily from your company's point of view.

Your initial feeling might be to choose a big and financially stable vendor. If your IT needs are small or not well defined, I suggest you pick a smaller vendor - may be even a startup. These vendors with 1-3 clients will have much more enthusiasm and commitment to make you happy. More importantly, they are going to be flexible and agile.

Continue to Offshore outsourcing or domestic process fixes?

  1. I like outsourcing!

    Posted by: zopeboy on August 6, 2003 11:28 AM
  2. Outsourcing is increasingly being used as a tool for gaining a competitive edge. Understanding of where, when and how to successfully outsource , is proving to be one of the most difficult and important business skills needed for a company?s future.

    Outsourcing today covers a range from HR, real estate management, inventory control and most commonly ,the information systems (MIS) and related communications network management.

    /**Ed: An a**hole from this IP ( posted this comment for some google juice; S/he also made 8 other ad comments which are all removed. */

    Posted by: Manmohan on September 27, 2003 12:28 AM
  3. Hi,

    I like ur thoughts on OutSourcing.
    Its really great to go through ur notes or thoughts on outsourcing.
    Is it possible for u to shed more lights on ITES Sourcing from UK or US to INDIA.
    Would like to read ur thoughts on the above mentioned topic.


    Posted by: Raghuraj on June 23, 2004 02:43 AM