Success Factors for Outsourcing Companies

Two days ago, I wrote about the kind of adversarial relationship possibly implicit in using requirements. I have started looking for research on what that relationsship looks like and one of the first articles I came up with was a recent (April 2011) systematic literature review on success factors for companies hoping to win outsourcing contracts. Unfortunately, the article was published through a high cost publisher so I have only read the abstract. The authors (Khan et al.) identified three major factors and one minor for a successful contract winner:

  • Skilled human resource,
  • Appropriate infrastructure,
  • Quality of products and services and
  • Finally and perhaps not most importantly cost savings

Based on my own experience and on what is reported in the literature the actual of cost savings of outsourcing to a low cost country is often only slightly lower than keeping the development in house would have been. I have seen figures of around a 15% saving for a successful offshore. It is nice to know that we have reached the level of maturity where we realize that the lower hourly costs are offset by higher communication costs etc.

Finding and retaining highly qualified staff is a major bottleneck in the operation of many companies today (link, link). Outsourcing of course gives access to a larger pool of resources.

Most of what is said in the article is nicely summed up by the following quote from Meyer:

Successful outsourcing companies like to say that customers come for the price and stay for the quality.

References

  • [DOI] B. Meyer, “The unspoken revolution in software engineering,” Computer, vol. 39, iss. 1, p. 124, 121–123, 2006.
    [Bibtex]
    @article{citeulike:1182089,
    abstract = {In this article the author describes the outsourcing aspects of software engineering. The author finds outsourcing so fascinating partly because it serves as a magnifier and revelator of just about everything in software engineering. The development of offshoring also raises a new challenge for those of us entrusted with educating future software professionals in the industrialized world.},
    author = {Meyer, B.},
    citeulike-article-id = {1182089},
    citeulike-linkout-0 = {http://dx.doi.org/10.1109/mc.2006.37},
    citeulike-linkout-1 = {http://ieeexplore.ieee.org/xpls/abs_all.jsp?arnumber=1580399},
    doi = {10.1109/mc.2006.37},
    issn = {0018-9162},
    journal = {Computer},
    keywords = {20110817b},
    month = jan,
    number = {1},
    pages = {124, 121--123},
    posted-date = {2011-08-17 13:24:38},
    priority = {2},
    publisher = {IEEE},
    title = {The unspoken revolution in software engineering},
    url = {http://dx.doi.org/10.1109/mc.2006.37},
    volume = {39},
    year = {2006}
    }
  • [DOI] S. U. Khan, M. Niazi, and R. Ahmad, “Factors influencing clients in the selection of offshore software outsourcing vendors: an exploratory study using a systematic literature review,” Journal of systems and software, vol. 84, iss. 4, pp. 686-699, 2011.
    [Bibtex]
    @article{citeulike:8615812,
    abstract = {Offshore software development outsourcing is a modern business strategy for developing high quality software at low cost. The objective of this research paper is to identify and analyse factors that are important in terms of the competitiveness of vendor organisations in attracting outsourcing projects. We performed a systematic literature review ({SLR}) by applying our customised search strings which were derived from our research questions. We performed all the {SLR} steps, such as the protocol development, initial selection, final selection, quality assessment, data extraction and data synthesis. We have identified factors such as cost-saving, skilled human resource, appropriate infrastructure, quality of product and services, efficient outsourcing relationships management, and an organisation's track record of successful projects which are generally considered important by the outsourcing clients. Our results indicate that appropriate infrastructure, cost-saving, and skilled human resource are common in three continents, namely Asia, North America and Europe. We identified appropriate infrastructure, cost-saving, and quality of products and services as being common in three types of organisations (small, medium and large). We have also identified four factors-appropriate infrastructure, cost-saving, quality of products and services, and skilled human resource as being common in the two decades (1990–1999 and 2000–mid 2008). Cost-saving should not be considered as the driving factor in the selection process of software development outsourcing vendors. Vendors should rather address other factors in order to compete in the {OSDO} business, such as skilled human resource, appropriate infrastructure and quality of products and services.},
    author = {Khan, Siffat U. and Niazi, Mahmood and Ahmad, Rashid},
    citeulike-article-id = {8615812},
    citeulike-linkout-0 = {http://dx.doi.org/10.1016/j.jss.2010.12.010},
    day = {21},
    doi = {10.1016/j.jss.2010.12.010},
    issn = {01641212},
    journal = {Journal of Systems and Software},
    keywords = {20110817b},
    month = apr,
    number = {4},
    pages = {686--699},
    posted-date = {2011-08-17 12:35:51},
    priority = {2},
    title = {Factors influencing clients in the selection of offshore software outsourcing vendors: An exploratory study using a systematic literature review},
    url = {http://dx.doi.org/10.1016/j.jss.2010.12.010},
    volume = {84},
    year = {2011}
    }

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