IT project outsourcing helps cut project costs when implemented properly. Here are our tips!
The COVID-19 pandemic is a challenge for many companies, for whom the cost of a project, including IT projects, has often become the most important determinant of decisions.
The above is confirmed by a study conducted by Deloitte, which showed that companies outsource many of their IT projects during the pandemic, and the main reason for such decisions was the reduction of expenses [1]. A similar trend was also shown by the EC2 and TECH MED HOUSE study on the impact of coronavirus on the digital development of companies (we surveyed companies from the medical industry as we are experts in med-tech), according to which as many as 86% of companies use services of external suppliers and technology partners (full report available in Polish for free download here).
In addition to cost cutting, outsourcing in the IT sector brings many benefits. It saves time on the recruitment process (instead of hiring an employee, you pay for their work as a service, and the whole recruitment process is passed to the IT provider), ensure high quality of project implementation by engaging proven specialists (again, IT provider is responsible for verifying their actual skills) and thus increase the efficiency of the project.
However, IT project outsourcing is not always implemented properly. Based on our years of experience, we present four steps which implementation will help you achieve success in outsourcing your IT project.
Step 1. Set your goals properly
Start by analyzing your needs. A thorough understanding of what your company wants to achieve will allow you to determine what kind of support you need. A common cause of project failure are unclear requirements, which additionally very often change over time.
Remember to base your outsourcing decision on an assessment of the actual condition of the company. Identify areas of core competencies as well as auxiliary activities. Consider whether you want to outsource the entire project or just individual tasks.
This task is usually handled by IT analysts.
Step 2. Choose properly what IT supplier you want to work with
The choice of an IT service supplier is crucial, as it largely determines the success of the outsourcing process and the entire project. It involves the choice of a business partner who becomes to some extent a part of your company as long as the projects is underway. Ultimately, it has a direct impact on the final outcome of the project.
The relationship with your IT partner should be characterized by honesty and trust. The choice of a supplier, preceded by a thorough search and evaluation, will guarantee a well-considered decision. It is important that the final choice does not take into account only one factor, such as low price, but is based on an in-depth assessment of the service provider in terms of meeting the expectations of the client, including previous experience in similar projects and specializations.
The selection criteria must correspond to the predefined needs, reflect the expected benefits and show potential risks. When considering a potential collaboration, it is good to request for proposal, which does not commit to signing a contract or even further talks, but will give you an idea of how your potential supplier approaches the IT project. Learn more about choosing the right IT supplier from this article.
Step 3. Sign a contract
The next step is to negotiate conditions with the selected technology partner and agree on the details of the outsourcing process.
The IT outsourcing contract should include basic guidelines for the IT project and the rules of cooperation, as well as describe in detail the principles of measuring work efficiency.
The scope of the contract must be specified in detail – the more accurate information, the better. In case of any problems, both parties will be able to refer to the contractual agreements, which is why we list the contract among the four steps to success in outsourcing an IT project.
Step 4. Start the project!
After signing the contract, the supplier begins team building, which consists of several stages. The first one is called forming. Team members get to know each other, find out what is the purpose of the project, and relationships between team members are formed. Therefore, it is a good idea to choose a software house that has developers on board who have already had the opportunity to work together – this will allow you to speed up the first phase of forming a team for your project as much as possible.
The next phase is the so-called storming, which begins when the project slowly starts and there is pressure of time, responsibility, as well as conflicting expectations of team members. In order to avoid disputes, it is important to come to an agreement as soon as possible – to work out rules together and solve minor conflicts.
All activities that strive for unanimity, openness and improvement of actions are elements of norming phase.
Once all team dysfunctions have been eliminated, you can move into the phase of fully and efficiently executing the IT project for the customer (performing phase).
The progress of the project team and possible modifications should be monitored and irregularities captured and explained on an ongoing basis. The final moment comes when all the project goals are completed.
The future of IT projects outsourcing
A report from Avastant found that – at least in the U.S., which sets global trends – mid-sized technology companies were the biggest contributors to the IT outsourcing industry in 2020, with their number of outsourced projects increasing from 9.1% to 11.8% on average [2].
The future of outsourcing is therefore bright all over the world. The economic aspects outweigh the reluctance and fear of using this form of cooperation and it is starting to be used in increasingly large-scale projects. Technology partners with extensive experience, adequate resources and good financial standing are becoming an opportunity to build a significant competitive advantage for companies in many sectors.
Sources:
- [1] Deloitte, Deloitte Global Outsourcing Survey 2020
- [2] Avasant, IT Outsourcing Statistics 2020-2021