The Distinction Between Outsourcing & Offshore IT Services

The Distinction Between Outsourcing & Offshore IT Services | Offshore and outsourcing have very ambiguous definitions.

So let's examine how they differ from one another. When a business outsources, it uses labour or materials from outside the organisation. Examples include temp services, off-site storage of a company's records, etc.

When a service or product is expressly from outside the US, it is considered offshore. For instance, telemarketers that employ Indian services do so because the cost of labour there is lower than in the United States. Another fantastic outsourcing method that is being employed today is offshore development. These days, a lot of people use offshore developers since IT companies are charging more for development.

Offshore IT Outsourcing is now quite successful on the global market due to this disadvantage. India is the ideal source for IT because there are now many IT centres growing there.

The growth of businesses brought about competition, and as a result of this competition, the cost of development was steadily declining. India is the ideal country for offshore IT outsourcing since it provides additional resources at extremely low costs to the large IT organisations.

The Distinction Between Outsourcing & Offshore IT Services

In recent years, businesses and individuals have come to believe that hiring contract offshore IT developers and programmers to complete their work is a great way to complete the task at hand without having to commit to the salary, benefits, and numerous other responsibilities that come with hiring a full-time in-house employee.

When compared to the traditional in-house personnel recruiting and hourly basis development expense, you can save up to 60%.

These businesses that offer offshore IT outsourcing hire web development teams, SEO developers, and many more programmers. There will be a quick increase in Our offshore website developers are the best in the business and are skilled in using a variety of tools that will give your sites more life.

Managing Offshore Outsourcing Risks

More companies are preferring to outsource their development to other countries, either for short-term, well-defined projects or through a long-term outsourcing partnership model. In an increasingly competitive market, the need to boost business productivity and efficiency while cutting operational expenses is one of the key justifications for outsourcing.

But whether outsourcing is done locally or abroad, dangers are involved. In recent years, the following five main dangers of outsourcing have been identified:

• Cultural and communication hurdles

• A failure to comprehend the criteria

• Quality control

• Concerns regarding the security of intellectual property

• Variations in business infrastructure and procedures

I'll go over each danger in turn in this essay, along with ways to reduce them when outsourcing overseas.

Three factors—people, procedures, and policies—are associated to risks during the development of an outsourced project.

Your business can benefit from an outsourcing arrangement that is very valuable to both parties by identifying potential risk areas and taking proactive measures to mitigate them. We will outline these hazards in the following section, along with practical actions you may take to mitigate them.

The Distinction Between Outsourcing & Offshore IT Services

The Most Regular Risks Associated with Outsourcing

You are not alone if you are worried about outsourcing. Recently, a poll of the management of several hundred American businesses revealed that their top worries were:

• Issues with communication. This constantly ranked as the main worry.

• The level of the development's quality

• Distant location from the development teams

• Concerns regarding intellectual property protection

In order to provide a realistic picture of what the outsourcing partnership would be like, managing the risks frequently entails managing the expectations on both sides.

You need to be certain that the company you're outsourcing to well comprehends your requirements, from the deliverables that are anticipated to the techniques utilised to develop source code.

This is why the first risk is crucial: Any project that suffers from poor requirements communication will fail.

Risk No. 1: Failure to Understand the Requirements

It's possible that managers at other companies have voiced complaints about the "low quality code" they received from foreign contractors or that the developers "didn't get it."

However, most of the time, service providers fall short of expectations because they misunderstood the project's requirements rather than because they had the necessary skills.

The Distinction Between Outsourcing & Offshore IT Services

When outsourcing abroad, poorly defined project requirements provide the biggest risk. If the deadline for completion is short, your company's project manager might be tempted to put together a "rapid project overview" or request that an overseas development team construct a project "on the fly."

But skimping on the project requirements' documentation is a recipe for future issues - and countless, frequently expensive, change controls.

For good reason, a development team is frequently only as good as the project specifications they are provided. There are countless, countless different approaches to application development, with countless different goals in mind.

Any of these may be appropriate, but if you leave it to chance, the developers might take a direction you didn't want them to, which would force the project to "return to the drawing board."

There is a difference between developing a one-page, wholly inadequate "project concept" and a large, excessively comprehensive project specification that takes months to complete.

But in general, the vendor project managers will be able to comprehend what you want done, how you want it done, and how it should be implemented the better your project specifications are stated from the start.

How crucial is this phase? According to a survey by the Software Engineering Institute, the most common cause of software development projects failing or being delayed is poorly stated or unclear project requirements.

How Can We Lower This Risk?

Never make a software provider "guess" what you want them to build. Engineers are frequently gifted people, but they cannot read minds. While there are various ways to develop a product, not all of them might be suitable for you.

Clearly state your needs to prevent disappointment. It's crucial to view the requirements development phase of a project as the most critical to finish, prior to starting development, in order to minimise the risk connected to misunderstanding the project requirements. 

The Distinction Between Outsourcing & Offshore IT Services

Once construction has started, it is already too late because that "wrong path" might be chosen. Examine the procedures a company uses to obtain project requirements and convert them into system specifications that developers can use when contemplating using them as a source of outsourcing.

The better providers will make things as simple as feasible for you (or the designated contact for your firm). They will have an English-speaking project manager who will spend time learning about your needs and recording them for the international development team.

They'll know the right questions to ask and, thanks to their experience, can quickly assimilate project specifics and requirements. 

Several conversations will frequently be required, either in person (for bigger projects) or over phone/teleconference. But the time spent was totally worthwhile.The vendor project manager will gather data for use in the three stages of project requirement creation.

1. Getting the First User Requirements

The vendor project manager will spend time speaking with potential users to learn more about their expectations for the features and capabilities of the system being constructed before developing the system use cases. Inquiring from your company about the high-level system needs and user interfaces the system will have, as well as knowing about the business requirements for the finished system, are all part of this process.

1. The main reason for failure

The main cause of failed outsourced software projects is unclear specifications.

• Giving the requirements gathering phase extra time always pays off.

• Throughout the project, both firms should have designated company contacts for communication.

• Describe in detail to suppliers the users, load, business needs, and technology involved.

In order to make sure that the needs are correctly understood, vendor engineers frequently use these initial requirements to develop an initial "mock-up" that will be built upon later. The vendor project manager will record the system requirements and specifications, together with any key project milestones and performance parameters, throughout this initial phase.

It's crucial that the vendor records data on the number of users the software will handle, the speed at which tasks must be completed, and how users will actually utilise the product.

The Distinction Between Outsourcing & Offshore IT Services

2. Examining system requirements

This entails evaluating the proposed system's acceptability, practicability, and testability.

3. Inspection Standards

This entails a thorough examination of the proposed requirements with the aim of locating any problems or mistakes associated with ambiguities or contradictions found in the specifications.

A plan for tracking issues and how they will be handled during project development will be included in this paper. Even if the aforementioned steps take some time and work, it is impossible to overstate how crucial they are to success. 

A thorough early study will drastically cut down on unforeseen project expenditures. You'll have a comprehensive requirements document after this phase is finished, which you and the service provider will examine and sign off on together.

This serves as the development's guiding principle and offers precisely defined guidelines for project development.

Risk No. 2: Quality Control

Quality assurance (QA), whether work is finished onshore or offshore, is crucial since even the greatest development teams occasionally produce code that contains "bugs."

Whether a vendor has proper QA/testing methods in place is a significant risk when outsourcing to an unidentified provider. 

It is not ideal to wait for a product release to learn what bugs are present. By taking the time to investigate the QA procedures a vendor employs, you can lower this risk.

There are three basic reasons why QA is either not performed or performed insufficiently:

• The service provider does not have a QA/testing team of its own and relies on the client to handle this internally.

• Due to the project's impending deadline, development is given precedence over QA testing, which is completed quickly or put on hold.

• Because the vendor doesn't fully comprehend the system requirements, such needs aren't covered in testing.

Ways to Lower the Risk

What QA procedures a potential software vendor has in place is one of the first things to consider. Better suppliers have in-house QA teams that collaborate with the programmers to implement a test strategy for your software. Items to look for include:

• Is a system in place for monitoring problems, bugs, and system modifications?

• How are bug-fixing procedures implemented?

• What quality compliance and monitoring requirements are in place?

• Does each build undergo testing using industry-standard unit tests and regression tests?

• Is the programme undergoing load, performance, integration, and end-user experience testing? (This final point is crucial.)

The Distinction Between Outsourcing & Offshore IT Services

QA is Important

• Verify whether the vendor employs a QA/testing staff.

• Thoroughly assess the vendor's quality assurance procedures, including their tracking and documentation.

• Do their standards align with those of your business?

• Test thoroughly before beta release, regardless of how "hurried" a project is.

For any software system developed, it's critical to construct test cases based on the meticulously defined system requirements outlined in the preceding section. This may indicate the difference between an "excellent beta" and a version with numerous bugs. 

Following development, the quality assurance team will confirm that all functionality, scalability, and security concerns have been handled in accordance with the initial test plan created from the acquired system requirements.

The test strategy includes detailed performance criteria for each user acceptability test, load and volume testing, and system regression testing.

Inspection of the work products is another technique to raise the standard of the final deliverable. Inspections are in-depth, technical peer examinations of software implementations or designs. 

According to estimates, a company can save between three and ten hours in costs in the downstream phase for every hour invested in QA activities like design reviews.

Every step of the development or maintenance process should include inspections, which you should request from your offshore provider.

The Distinction Between Outsourcing & Offshore IT Services

The vendor will be able to quickly identify and fix flaws in upstream work products by carrying out routine peer review inspections. By doing this, they may better manage the project's costs and avoid schedule delays.

For instance, a requirement flaw discovered during construction or maintenance will cost 50 to 200 times as much to rectify as it would have at the initial development of the system needs.

Risk No 3: Protection of Intellectual Property

One of your company's most valuable assets is your intellectual property, thus it's crucial to secure it while outsourcing. Many unethical businesses have been accused of stealing technologies or data and selling them, but in most cases, these issues could have been avoided with cautious vendor selection and the implementation of safeguards for your business's intellectual property.

Start by only giving any vendor the minimal amount of secret information or technology required to accomplish the project, and carefully assess the confidentiality safeguards your chosen vendor has in place.

Make sure to carefully assess these policies for both your company and the vendor corporation. For instance, you'll want to make sure that your own staff members are aware of what company information is appropriate to disclose with an outside vendor and what is not. These cover the internal guidelines for approving access to corporate information.

Check to see if the vendor you're outsourcing to has enforceable, transparent procedures in place for safeguarding the data you provide with them.

This entails, at the very least, agreeing to nondisclosure, noncompete, and no solicitation clauses as well as rules that forbid the vendor from making unauthorised copies of your technology or software.

While this might sound simple, there are situations when it can get a little more complicated, like when a service provider creates a new product using their own proprietary technology or an open source solution that will be used by your new application.

It's crucial to specify in advance which source code belongs to the vendor and which to you, the client, as well as to make any lingering questions about licensing clear.

Safeguard Your IP

• Verify the vendor's information security management policy is in writing and is applicable.

• During projects, only provide information that is necessary.

• Specify source code ownership and licensing.

Always demand thorough documentation of every piece of source code written for your software project. This becomes the property of your business and is safeguarded by the law.

You should ask any prospective suppliers what procedures they have in place to safeguard your private information, including financial data, proprietary market research data, employee and customer information, and other data.

If a vendor doesn't have a written information security management policy, you should look for another one that does.

The Distinction Between Outsourcing & Offshore IT Services

The more reliable providers will give development on a separate project and data server, with audit control access for each project server. Among the things to look for are:

How secure is the vendor's facility physically? Are smart cards used to safeguard it and regulate physical access?

Has your company received a confidentiality agreement from each member of the development team? You will make significant progress in securing your company's intellectual property by determining the answers to the questions above.

Risk No 4: Variable Internal Procedures

Each vendor will use slightly different methods and methodologies while creating a project. It's critical to consider how this differs from your internal procedures and how the two divergent viewpoints might be "meshed" in the most effective way during a development project.

A well-established, widely used methodology for software development and project management should be used to lead development projects.

The best suppliers adhere to industry norms like CMMI and ISO 9001 QMS. Libraries, tools, version control, quality assurance procedures, as well as security metrics for each project, should all be covered by this standard framework.

Put monitoring in place once the procedure has been decided upon and developed to guarantee that it is being adhered to correctly. Each project milestone should be made apparent to the client, along with the deliverables that are anticipated for each phase and the deadlines for completion of each.

The requirements documentation, the system design, the test cases, and any test-related difficulties should all be clearly understood by the customer as part of its responsibility to review and approve each given product.

The Distinction Between Outsourcing & Offshore IT Services

In general, the project will proceed more smoothly the more involved your organisation is. This is why it's crucial to have a specific person inside your company assigned the responsibility of liaising with the vendor project manager and/or development teams.

This individual, along with other important project participants, should be accessible to evaluate deliverables that have been completed, progress reports, and phone conferences.

Your authorised company contact is in charge of setting up the appropriate technical resources to provide responses if the vendor has inquiries about the products and applications of your company that need to be addressed in order to continue development.

Painless Methodology Fusion

• Prior to the project beginning, decide on a consistent methodology that your company and the vendor would adhere to based on industry "best practices."

• Keep an eye on adherence to the accepted norm.

• Schedule specific times to address issues and provide clarification, particularly at the beginning of any project or outsourcing arrangement.

The project manager or designated contact from your firm will need to regularly connect with the vendor project manager and monitor the status of any deliverables and testing completed. The majority of project issues are brought on by insufficient or inadequate client-vendor communication.

However, the adage "no news is good news" is rarely accurate; in most cases, the opposite will happen. Frequent communication with regular periods designated for project reviews is one of the simplest strategies to limit this risk and discover issues early on.

If one company prefers a strategy based on the Rational Unified Process with strict specifications while another firm supports Agile, there may be differences in the development methodology.

One company might already have a chosen tool in place for testing builds, coding standards, or source code control. By explaining the rationale behind each strategy and selecting a unified approach, these problems are frequently resolved.

The Distinction Between Outsourcing & Offshore IT Services

Most often, you'll ask the offshore team to follow your in-house processes, but if they have a lot of experience with a particular technology, you might be shocked to learn that they have methodologies or tools that are just as good as yours.

Collaboration and communication between the project and development team managers are crucial at this point.

Evaluating the service provider's response to unforeseen requests for huge numbers or quick delivery is related to methods. Verify your vendor's flexibility and scalability and whether it has procedures in place for employing more people as needed for bigger projects.

This involves having enough project management personnel to provide proper oversight and coordination with your company. Ask, "Which of your past projects was the smallest? largest project? "to assess their capacity to grow to your requirements. Additionally, you should look up references for projects similar to yours.

Risk No Five: Communication Problems

In the past ten years, almost all relevant studies on outsourcing risks have discussed the problem of communication and the dangers it poses.

For a number of reasons, communication during outsourcing can be problematic.

• English fluency: Not all foreign sellers employ native English speakers.

• Time zone differences: In India, it is 9:30 p.m. when it is 11 a.m. regular time in New York City. Due to time zone differences, communicating with vendors in other time zones may be challenging unless they employ an on-site project manager. Of course, this might also work in your favour. When coordinated with internal personnel, "round-the-clock" coding is possible when your organisation is sleeping thanks to the ability of an overseas developer to work on your project.

• Cultural differences: Americans have a propensity to be "ethnocentric," assuming that our management and working methods are followed by people all across the world. In fact, foreign suppliers could function in a very different cultural environment, which can cause miscommunication.

How Can We Lower This Risk?

It's critical to consider whether the vendor has enough onshore people in place to support project and relationship management when choosing a vendor for outsourcing. This involves having a strong organisational commitment to bridging cultural gaps and speaking English well.

A "best shore" model, or one that blends a local presence with access to international talent, is used by the better overseas suppliers to deliver services. 

This provides the best of both worlds: local clear communication from a person committed to understanding your requirements and the capacity to discuss these with the "back and forth" that is only possible through face-to-face communication, with the financial benefits provided by using offshore talent.

This technique is the most effective at resolving many of the issues that outsourcing is prone to. This domestic office offers a local point of contact for quicker communication and issue resolution, and it shows a greater level of dedication to a personalised working connection with clients.

Thanks to modern technologies like VoIP or web conferencing that make international calls free or inexpensive, speaking via phone or participating in a teleconference with an overseas development team is now much simpler.

Once more, the designated contacts for your organisation should schedule frequent meetings with the project managers and other important members of the development team.

By doing so, you can create a foundation for understanding and make it clearer what you intend to achieve through project development. Additionally, it gives the developers a chance to clarify things and ask questions.

The Distinction Between Outsourcing & Offshore IT Services

Any teleconference meeting should be documented, and following the meeting, all team members should receive the minutes. The vendor you decide to outsource ought to have a communication strategy in place for each project. This will include the following:

• Regular staff meetings with important project managers and stakeholders (at least biweekly).

• A weekly project update (by phone, supplemented by email documentation of the project status). Any problems or obstacles encountered should be specifically stated in this report, along with the actions taken. The report should also address any issues or queries that the development team needs to clarify.

• Ad hoc communications via email, chat, or phone with your company's project contact to ask questions, clarify details, or alert the contact to any crucial milestones or emerging problems.

You can come up with a strategy for dealing with potential issues by having open, regular communication to identify and discuss the project's risks. Establishing an outsourcing partnership that is successful over the long term requires constant monitoring of these risks.

Summary

Businesses that opt for offshore outsourcing get a variety of advantages, including increased production and lower expenses. But there are dangers in every outsourcing arrangement.

The best course of action is to recognise the dangers and talk freely about them in order to develop a strategy to reduce them. You can have a superior outsourcing experience with thorough planning and vendor research, maximising the advantages and return for your business.