31^th January 2022

Concern #6: High Cost of Outsourcing

At first glance, this concern might seem irrelevant because the very idea of outsourcing is to reduce the cost of services. With time, however, the cost of outsourcing has progressively increased due to the growth of economies at outsourcing destinations. At the same time, demand for outsourcing continues and even grows, due to the lack of local IT professionals and the constantly increasing amount of IT work.

Outsourcing may cost too much when deployed improperly. It is important to understand that outsourcing differs from the teamwork in your local office, and in order to benefit from it, you have to make certain adjustments to your software development process. Among the mistakes that can lead to losses are inefficient task management for your remote team, incomplete knowledge transfer process, unmanaged time zone difference problems, language communication barriers, and improper team setup.

It is a good idea to start with a small pilot project, especially if you are not experienced in project outsourcing. A small pilot will help to detect potential critical issues and fine-tune the process in order to eliminate or minimize them. Starting small will also allow you to build a core team, provide it with your product and project knowledge, and have it train its new members. Such a ramp-up scenario can give you the best savings.

In outsourcing, it’s very important to eliminate idle time, such as waiting for tasks and feedback. Always remember that your team is far from you, often in a different time zone, and it must always have something to do and know how to do it. In other words, your remote team shouldn’t be stalling due to lack of tasks, missing required info, access that is not granted, etc. If you have difficulties managing your team remotely, consider adding a management capability at your remote team’s location. This is especially helpful if your remote team is medium-size or bigger and is comprised of not only senior, but also of mid-level and junior staff.

It's a common situation when outsourcing providers work in the same IT labor market, use the same development processes, but quote different rates. In this case, perform a quick research, shortlist a few potential partners, and make a final decision. Make sure that you are buying the services you actually need and are not overpaying for unneeded accompanying services the outsourcing provider may offer.

The goal of Solead is to provide clients with competitive value and deliver high quality services for a reasonable price. To make the cost of our services attractive, we:

• Share with our clients best outsourcing practices based on our many years' outsourcing expertise
• Always suggest starting with a small pilot project to fine-tune our cooperation
• Provide local team management as part our DMT (Dedicated Managed Teams) service model
• Minimize our internal overheads by using a flat company structure with lean management
• Do not maintain expensive offices abroad solely for presentation purposes with no real value

In our next post we’ll discuss the problem of key project staff turnover. Please come back shortly.