In the first post of our “Outsourcing 101 Series,” we discussed why you’re outsourcing. Today we share best practices for how to start engaging with and choosing the right outsourcing vendor for your project.
We recommend first identifying the Engagement Model that fits your organizational needs in reference to the level of control you want. Then decide on the location of your outsourced team.
According to IT industry expert Vaughan Merlyn:
“The IT engagement model is defined as the system of governance mechanisms that brings together key stakeholders to ensure that projects achieve both local and company-wide objectives.”
In other words, the model determines who sets project requirements, who is responsible for which tasks, who monitors attainment of project objectives, who pays for installed capacity sub-utilization, and who establishes and is responsible for quality assurance and control.
The levels of the IT Engagement Model depend on how mature your internal IT and software development processes are.
In my last post Outsourcing 101: Why Are You Outsourcing?, I discussed maturity levels for IT and software development.
“Does your organization follow a software development life cycle? How stringently do your developers follow it? Do you follow ITIL processes for infrastructure, and how mature are these processes? Finally, do you document your processes?”
Once you identify how mature your IT processes are you can then choose which engagement model is appropriate for you.
Engagement models in today’s dynamic business world are constantly evolving, and are now taking the shape of business joint ventures, where both parties have vested interests.
What are these engagement models?
1) Managed staffing, pure staff augmentation where you are responsible for the day- to-day activities of the vendor resources.
2) Managed team, in which your outsourcing provider offers and governs a team with a mix of resources and skills.
3) Incremental development is ideal for when you want to develop a new application or create a new version of an already existing application, but you haven’t defined the scope.
4) Baselined project stage is when you’re creating a new application, or when you are executing several functional or technical changes to one or several applications.
5) The component factory is a managed service for the construction of catalog-based components and products.
6) Finally, project portfolio outsourcing provides a managed service for the execution of your application development project portfolio.
As you can see, each type of engagement with an IT outsourcing vendor adds increasing responsibility and control to your outsourcing vendor.
Once you’ve identified the level of engagement that’s appropriate for your organization, then it’s time to decide which geographical region you’d like your outsourced team to be based.
For example, if you’ve identified that your project fits anywhere between the baselined project stage through to the portfolio outsourcing stage, then you’d want access to mature resources and specific skills. The US and/or Canada might be the best place to find an appropriate outsourcing vendor.
However, if cost is a factor then look to offshore or nearshore resources. Offshore is recommended when you need to scale your development.
But if you’ve identified that managed staffing through to incremental development is more appropriate, you’ll need daily communication and engagement with your outsourcing provider. Nearshore resources are best in this scenario.
Additionally, to ensure a smooth working relationship you should consider cultural compatibility, time zone differences, low attrition and the ability to work in an agile way, which again points to a nearshore solution.
Once you’ve narrowed down your delivery location, your next decision criteria are a little more subjective.
Does your short list of vendors fit your personality and working style? Do you connect with the outsourcing vendor? Is there cultural compatibility? These subjective criteria are very important to finding the right fit with what will hopefully be a long-term partner.
When choosing your outsourcing provider, you must first identify where you are in the IT engagement model matrix. Do you just need extra head count on a temporary basis while you manage the project from beginning to end? Or do you need to outsource the whole package - project planning, management and execution?
Next, determine the delivery location that fits your chosen engagement level and your organizational requirements. Look at your budget, and assess whether you need mature resources that can scale, or flexible resources in your time zone that can collaborate with you on a daily basis.
Finally, from your short list choose which vendor is the best fit for your organization.
In our next Outsourcing 101 post, (Part 3: Performance Managemenet or Evaluating the Outsourcing Engagement), we’ll discuss the importance of having performance measurements criteria in place with the chosen partner, and how to choose the most appropriate criteria to ensure project success.