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Developing applications offshore, what should you be aware of?

You have decided that you are going to outsource the development and management of your applications. But which teams should you outsource (offshore) and how do you ensure this will be a success?

Outsourcing is as popular as ever. The majority of organisations are planning to outsource at least as much in the coming year as in the previous year. That is one of the conclusions of the 2020 Dutch IT Sourcing Study, carried out by Whitelane in collaboration with Quint.

Figure: What are your organisation’s plans for the next 2 years with respect to outsourcing?

What are the reasons that your organisation is going to outsource more?

Organisations primarily outsource IT services to reduce costs, and to be able to better focus on their core activities.

Figure: What are the reasons that your organisation is going to outsource more?

What are your organisation’s plans for the next 2 years with respect to outsourcing?

Collaboration at a distance

Offshore outsourcing is not new, but a trend that has been increasing over the past years is that the activities of clients and suppliers are becoming more intertwined. There is no longer a clear line that can be drawn between activities to outsource and activities to keep in-house. Infrastructure and applications are becoming more and more interdependent. Teams are more interdisciplinary, working in an Agile manner, and the distinction between applications and infrastructure is disappearing.

This trend requires that application management and development teams change their way of working to adjust to the fact that infrastructure design, development and management may no longer occur in their physical proximity. This is not impossible, but requires mitigation strategies in order to prevent inefficiencies and frustration from occurring within team.

Where does the application team belong?

Deciding to outsource is merely the first step in the process. In order to avoid disappointments resulting from the outsourcing process, and to maximise the benefits of the outsourcing decision, it is necessary to implement the decision effectively. The most important factors to keep in mind are the defining characteristics of your organisation, and of your teams.

As far as the organisation goes, it is sensible to first decide how important each application is in servicing your customers and distinguishing yourself from your competitors. If an application is crucial to your organisation, it will be closely intertwined with the organisation itself, either from a client perspective, or from a service perspective. In outsourcing such an application, it is important to choose a supplier who not only has industry-specific knowledge, but is also capable of thoroughly understanding your organisation. Subsequently, it is important to make a careful inventory of which application teams can indeed effectively be offshored.

Using Quint’s methodology, it is possible to visually represent the challenges each individual team will face in offshoring, by analysing a few essential specific characteristics.

Figure: Visualisation of core characteristics of application teams

Visualisation of core characteristics of application teams

In this way, it is possible to draw up a roadmap per team, and to identify what needs to be done per team in order to achieve the benefits of offshoring and to minimise the risks.

Figure: Visualisation of degree of difficulty of transition to offshore per team

Visualisation of degree of difficulty of transition to offshore per team

Risks

In a situation where more industry knowledge is necessary to effectively develop an application, a team must also be capable of effectively documenting the work. A factor that cannot be underestimated is the degree in which the team measures the quality of the processes. Think of the rule of thumb: if you cannot measure it, you cannot outsource it. Although this rule is not necessarily always acted on, it certainly makes it more difficult to make effective agreements with the supplier. There are aspects which are easy to measure, such as the amount of code delivered by a team, and the number of bugs in code. A challenge in this is that the composition of offshore teams often changes rapidly due to employees changing jobs and companies. This is a factor which will need to be taken into account.

There are a few more risks to be mitigated. It is possible that the supplier stops investing in the training of employees in the field that is relevant to the client, or that employees who are less qualified than initially presented are put on the project. How to ensure that the contract remains attractive to the supplier is something that needs to be considered.

Finally, it is important to be aware that as the contract progresses, the power balance shifts towards the supplier, potentially resulting in vendor lock-in, where the client is too dependent on a single supplier.

Summary & Conclusion

Offshoring a team can present many advantages. As an organisation you gain access to a large source of specialised technology knowledge, you can utilise economies of scale and focus more on your own core business, without sacrificing on technological advances. Additionally, you can utilise more resources for lower unit prices.

Despite these advantages, offshoring can often result in disappointment, because the risks and limitations have insufficiently been mitigated. By identifying the most important characteristics of your application teams, it is possible to maximise the benefits of offshoring, while avoiding the disadvantages and risks.

Quint has over 20 years of experience with outsourcing and offshoring. This experience allows us to help your organisation to ask the right questions, to take into account team capacities, and to advise organisations on their sourcing strategy.

Author: Prarthana Ramdas, p.ramdas@quintgroup.com


Never waste a good crisis – Covid 19

As a result of the coronacrisis, working from home has become the norm. While offshore teams are used to collaborating at a distance, this is not the case for many Dutch teams. Clients offshoring for the first time can face both practical and emotional challenges. This could be friction between the Dutch team and offshore supplier, or simply reduced efficiency in working due to distance and cultural differences.

Although many Dutch employees are not used to working from home, many employees do appear to experience it as a surprisingly efficient way of working. Research carried out among primarily Dutch employees shows that of the employees who changed their mind on working from home during the Covid-crisis (36% of those interviewed), 60% find working from home more efficient than working from the office.

Employees who did not change their mind (45%) remain primarily (70%) dissatisfied with working from home. 20% are undecided, out of which 42% are cautiously optimistic.

Figure: Has your opinion regarding teleworking changed since the Covid-19 crisis?

Has your opinion regarding teleworking changed since the Covid-19 crisis?

 

This crisis could have a positive effect on the collaboration with suppliers who are at a distance, if the lessons learned from this period of working from home are effectively applied. This situation could increase possibilities for companies with respect to manage suppliers from a distance, and could contribute to reducing employee dissatisfaction with teleworking.