5 outsourcing risk and how to avoid them

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There is no doubt about it. There are risks

associated with outsourcing. Most of theserisks can be managed successfully if approached in the right manner. Anil Singh,in his article “Managing the Risks WhenOutsourcing Offshore” lists the top risksassociated with outsourcing any kind of work and ways to avoid them.

Risks

1. Misunderstanding the requirements --You may have heard managers at otherfirms complain about the poor qualitycode that they received whenoutsourcing overseas or that thedevelopers didn’t get it. But in mostcases, firms that are outsourced fail tomeet expectations not because of inferior ability, but because theymisunderstood the project

requirements. A study conducted by

the Software Engineering Institutediscovered that poorly defined orunclear project requirements are thenumber one reason why softwaredevelopment projects fail or aredelayed.

2. Quality of the work provided –- Amajor risk when outsourcing to anunknown vendor is whether they have

adequate Quality Assurance/TestingProcesses in place.

The three main reasons that qualityassurance is not done, or is doneinadequately, are:

o The outsourcing serviceprovider to does not have itsown QA/testing team, andassumed that the client




5 Outsourcing Risks & How to Avoid Them

would complete this in-house.

o The project had a very tightdeadline and so QA testingwas done rapidly or set aside

to give development a priorityo The vendor did not

understand fully the systemrequirements and testing didnot cover them.

3. Intellectual Property Protection -–Your intellectual property is one of your company’s greatest assets andwhen outsourcing, it’s critical to takesteps to protect it. Stories aboutunethical companies stealing clienttechnologies and data and thenmarketing them have brought doubt

and concern in the mind of severalexecutives.

4. Different Processes Clashes –- Eachvendor will have somewhat uniqueprocesses and methodologies that theyfollow when handling a client project.It's important to evaluate how thisdiffers from your in-house processesand how the two differing approachescan best be meshed instead of leadingto process classes.

5. Communication Barriers -– Almostevery significant study of outsourcing inthe past has brought up the issue of communication and the risks associatedwith it. Communication whenoutsourcing can be a concern forseveral reasons:

• English Fluency: Not alloverseas vendors have staff who are not native speakers of English.

• Time Zone Differences: Thiscan make it difficult to

communicate with overseasvendors, due to time zonedifferences, unless they have aproject manager onshore.

• Cultural Differences: Overseasvendors may operate in a verydifferent cultural context,which can lead tomisunderstandings.

Risk Management

As mentioned earlier, most of these riskscan be managed successfully if approachedin the right manner. By identifying where

these risks can occur and taking steps earlyto mitigate them, your firm can enjoy anoutsourcing relationship that is of highvalue to all the parties involved. Thefollowing are the specific ways to addressthem:

Risk 1: Misunderstanding therequirements

How to avoid this risk

• Spend extra time on the requirementgathering phase – impart as muchknowledge as you can so that thevendor should never be left guessingwhat you want.

• Both companies should have designatedcompany contacts throughout theproject for communication

• Provide vendors with specifics aboutthe users, load, business requirements,and technologies involved.

Risk 2: Quality of the work provided


• Always check that the vendor has itsown Quality Assurance/Testing Team.

• Carefully evaluate the vendor’s QualityAssurance processes, including trackingand documentation.

• Their standards are compatible withyour company’s.

• Check whether the software has beentested for load, performance,

integration, and the real world end-user experience.

Risk 3: Intellectual PropertyProtection


• Check that the vendor has adocumented, enforceable





information security managementpolicy in place.

• Share only necessary informationduring projects

• Clarify licensing and source code

ownership.

Risk 4: Different Processes Clashes


• Agree upon a consistentmethodology based upon industrybest Practices that your firm and thevendor will follow prior to startingthe project.

• Monitor compliance with the agreed-

upon standard

Risk 5: Communication Barrier


• Evaluate whether the vendor has inplace sufficient onshore staff tofacilitate project and relationshipmanagement. This includes Englishfluency and a strong companycommitment to bridge cultural

differences. • Ensure that your outsource provider

should has an establishedcommunication plan as part of eachproject. This will include thefollowing:

Regular staff meetingwith project managersand stake holders

A weekly project statusreport. This reportshould clarify any issues

or roadblocksencountered.

Ad hoc communicationsby email, chat, orphone with your

company’s designatedcontact for the projectto ask questions, clarifypoints, or notify thecontact of anyimportant milestones orissues that havedeveloped.

The minutes of anyteleconference meetingshould be recorded anddistributed to all theteam members.

Conclusion

When all the risks of outsourcing areconsidered, one wonders how anyone evermakes the decision to use a third party.However, there is plenty of evidence thatoutsourcing happens frequently and is oftensatisfactory from both the buyer’s and theseller’s perspectives.

The purpose of this paper is to make the

reader aware of the risks and pitfallsinvolved in the analysis and evaluation of third-party service providers. Once aware,the evaluator should be able to develop asatisfactory analysis and servicearrangement and, consequently, arrive at adecision that is justified through theconsideration of all factors. With carefulplanning and evaluation of vendors, youcan enjoy an outsourcing experience that issuperior and maximizes the benefits andreturns for your company.





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About InterGlobe Technologies

InterGlobe Technologies (IGT), is a leading pure-play Travel Technology organization, providing

integrated services and solutions to travel corporations worldwide in the areas of Business ProcessOutsourcing (BPO) and Application Development and Maintenance. IGT’s service offerings cover theentire technology spectrum of the travel and hospitality domain.

IGT is part of InterGlobe Enterprise, one of the world’s largest travel conglomerates operating formore than 4 decades in India. IGT’s affiliation with its parent company provides the opportunity forIGT to draw upon an even deeper domain of experience in the travel industry.

IGT employs travel industry experts from all over the world and maintains one of the largest TPFresource pools on the globe.

Given IGT’s industry expertise, it is uniquely qualified to provide any travel business with an efficient,value added information technology or business process outsourcing solution designed to fulfill thespecific requirements of the outsourcing business model. With some of the best thinkers, innovatorsand implementers in the travel and hospitality domain, IGT offers a tremendous value proposition in

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5 outsourcing risk and how to avoid them

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