IT Outsourcing – Beware

Ok, so now I’ve been on both sides of the IT outsourcing equation. While I have had a few reasonably good experiences as a client (consumer of outsourcing), the majority of engagements have been disappointing. Now that I’m working for a large consulting and outsourcing firm, it’s much more clear why a large number of engagements run into problems. Here’s a quick list of issues. Let me know your thoughts.

  1. The size of the engagement or amount of business is key. If the client is not a large consumer of services, they will not consistently get good resources, whether onsite or offshore. A client looking to do a 9 month project under 1 million, will simply not get the star players. These stars will be working at other accounts where the business opportunity is greater. Outsourcing firms don’t keep stars on the bench. 
  2. The outsourcing model for most large, offshore consulting firms is to build a team with a few experienced or reasonably qualified resources with those that have little experience and in many cases are not qualified. It’s not uncommon to have 10 to 20% qualified resources with the rest being referred to as “rookies”. This is the model that these firms believe in most cases its the only one that they can deliver, as resources are scarce and turnover high.
  3. Most if not all large, offshore firms represent themselves as being CMM or CMMi certified at level 4 or 5, which indicates a very high level of maturity in terms of how they deliver technology projects. As a client and someone who has experience with CMM (Capability Maturity Model created and managed by the Software Engineering Institute), I have been perplexed by the claim that firms are CMM Level 4 or 5. Offshore teams that I worked with seemed to struggle with the most basic processes. Now that I’m working for an outsourcing firm, it’s clear that teams lack the ability to perform the most basic processes. While someone in the firm may be certified at CMMi Level 4 or 5, its clear that most teams have no experience at all with basic processes, let alone being certified at such a high level.
  4. Most outsourcing firms accept and even plan for the challenges of not having appropriate resources. As a client, I was surprised by the outsource’s team lack of risk management. It seemed as though project managers rarely reported a risk until it became a major issue. As someone responsible for the program, I wanted to hear of risks early, so that as a team we could address these. The problem is not that the team’s project managers don’t understand basic risk management. Instead, project managers simply can’t report most risks as they would be too damaging to the firm. For example, the PM will know that quality is at risk due to the fact that the team has too few and inexperienced quality assurance team members. He can’t report the risk without severely signaling to the client that the outsourcing firm simply doesn’t have the resources required. This would likely lead to the client severing all ties with the firm. Most risks and issues are the result of the firm simply not being able to provide the appropriate resources on a project.As a result, most risks and issue go unreported until its too late to address them.
  5. Many clients have very little experience with outsourcing delivery of technology projects. Or, they have had bad experiences and moved on to other firms believing they simply selected the wrong firm. Clients routinely select vendors based on a few key consultants with subject matter expertise. When hiring a team to deliver a technology solution or integration, the traditional approach is to interview and ensure every candidate is qualified. But for some odd reason, firms go into fixed price contracts with vendors, believing the vendor will provide qualified resources.
  6. Most vendors will take on the work even if they don’t feel prepared to succeed. They do this for several reasons. First, the sales and consulting teams operate without concern for whether the delivery teams are prepared and able to be successful. If the sales and consultants can sell it, they will. In addition, most account managers believe in the outsourcing model as they don’t have other experience to compare with. They believe that a few experienced resources can work with inexperienced team members and still be successful.
  7. Delivery teams, managed mostly offshore provide services to multiple accounts in multiple industries. In large outsourcing firms, there are lots of opportunities to place blame when projects don’t work out well and business is lost. Delivery teams are responsible for staffing projects for success. However, it’s recognized by the firms executives that experience resources simply cannot recruited and retained to the extent necessary. As a result, delivery teams are not held responsible.

To sum things up, clients should go into engagements with a realistic outlook. Outsourcing did not change how success is achieved. People and processes are still drivers for success. If you aren’t sure you are getting both with an outsourced project team, chances are you will have problems.

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