Waverley Blog

Outsourcing of work to other companies has caused a seismic shift in how companies around the world do business. It started with routine and administrative processes like server hosting for IT groups and distribution logistics for manufacturers. But as companies have gotten more experience, they have outsourced more complex projects and processes.An important area of outsourcing for companies in Silicon Valley has been to outsource software product development projects. Outsourcing these projects not only permits these companies to hire fewer permanent employees, it also enables them to gain access to quality engineers and project managers, to work around the clock with engineering teams in other parts of the world, and to reduce their costs.Some companies have been more successful with this model than others. The successful companies have learned some hard lessons along the way. Wondering what those lessons are? Here are characteristics we’ve seen of companies that are successful with their outsourced application development ventures:

Teams at experienced companies see the competitive advantage of hiring an outside company to perform projects

Teams that perceive a benefit from getting access to world-class vendors are more willing to give up control of some of their work. These internal teams know that top engineering firms continuously make investments in technology and methods. These outsourcing firms develop expertise from their exposure to many projects and clients. They are likely to develop deep specialties in areas that would be very expensive for an internal team to acquire. Getting access to these capabilities gives the internal team a competitive advantage and it saves technology and training investment costs.

Experienced outsourcers are willing to be a partner with the outside company

Working with a company that is developing a critical software application for you is more complex than hiring a company to ship your packages. Experienced outsourcers of software development know that a successful project is built on the ability for both companies to work as partners. What does it mean to be a partner? Primarily it’s a recognition that “we’re in this together” and the success of both parties is dependent on the other. It requires careful planning before the project starts, clear communication throughout the project, a willingness to spot problems early and to work together to solve them.

Experienced outsourcers take a hands-on approach to selecting and managing the relationship with the outside company

Selecting another company requires a series of decisions in a sequence of events from initial consideration of strategy to final vendor choices. And then the hard work begins, managing the project! Companies that are willing to work closely with the outsourcer are more likely to succeed. They put their best project managers on these projects because it’s a very leveraged cost. These project managers are guiding projects that would require starting whole project teams if they were done internally.

Experienced companies are transparent in their communication

Clear communication can prevent or reduce many common problems with outsourcing projects. Early communication helps to set clear expectations for both parties. It smoothes the transition of business and technical knowledge to the outsourcing company, and clear communication makes it more likely that any problems surface early and are handled quickly. Experienced companies involve the staff of both parties early in the planning stages to build trust and gain support for the project.

Seasoned teams account for geographical and cultural differences in their relationships

Many outsourced engineering projects are awarded to companies with offshore facilities. No matter where the two companies are located, there are likely to be cultural differences. An Accenture survey found that 67% of company executives cite cultural miscommunication as a primary cause of outsourcing problems. Companies that are successful with their outsourcing projects have learned to address these differences. They cultivate personal relationships between members of the outsourcing team and their internal staff. They consider differences in how meetings are run, how problems are solved, and attitudes towards time. These companies develop a variety of ways of communicating, using not only e-mail but also the telephone and in-person meetings.