Minimizing the Top 10 Risks of Offshore Outsourcing

Sending applications and product development projects to offshore outsourcers creates numerous risks. These risks can jeopardize and delay expected benefits while threatening project success...or worse. While more due diligence to front-end planning processes helps alleviate risk, it is when the work is actually being performed and managed that real benefits are either won or lost. To minimize risk and maximize the gains of going offshore, you must strengthen governance of globally-sourced development via best practices and solutions that help you manage and execute more efficiently and effectively.

The following table summarizes the Top Ten Risks of Offshore Outsourcing, according to META Group, a leading industry research firm. It also highlights how VA Software's Global Development Platform™, SourceForge®, mitigates risk while providing more visibility and control, improved savings, and better results from your offshore offorts.

Top 10 Risks of Offshore Outsourcing SourceForge Solution

1. Cost Reduction Expectations

» Companies mistakenly assume savings will quickly approximate the simple difference in labor costs
» Hidden costs stemming from knowledge transfer, lost productivity, and additional management expenses decrease offshore savings. Companies must overcome hidden costs by modifying operations to align with a globally-distributed model
» Hidden costs from lost productivity are largely attributable to breakdowns in communication, collaboration, and coordination between the U.S. company's internal staff and offshore teams

» SourceForge reduces hidden costs by providing a secure, web-based workspace that improves management visibility and control as well as distributed team productivity
» SourceForge helps you keep projects on track and on budget with real-time dashboards and other management, monitoring, and reporting tools
» SourceForge improves operational efficiency by enabling you to more quickly align internal operations with offshore teams and to coordinate and streamline workflow and collaboration

2. IP Security and Protection

» The risk of security breaks or IP theft is inherently raised when working in international business
» Security requirements must be documented and the methods and integration with vendors defined. Ideally, security methods should be auditable

» SourceForge protects your IP by providing a secure, centralized repository for your IP behind your corporate firewall in your own data center, meeting strict internal corporate standards
» SourceForge allows you to control access to site, projects, tools, and IP (documents, code, communications, etc) on a per-user basis
» SourceForge increases visibility and control over company IP by allowing managers to know who is accessing and changing what IP and when, and to enable/disable access at their discretion
» SourceForge facilitates audits by automatically capturing and logging all changes to artifacts

3. Process Discipline (CMM)

» Offshore vendors are typically at SW-CMM levels 4 or 5 and require a standardized and repeatable model
» Potential offshore cost savings will be undermined by process maturity gaps between U.S. organizations and offshore vendors. These gaps slow projects and require additional on-site resources, reducing cost savings

» SourceForge provides a common, integrated workspace that fosters more mature processes, helping internal organizations close the process maturity gap with offshore vendors and reduce hidden costs
» SourceForge comes with a flexible, best practices guide for implementing standardized, definable, and repeatable processes, and including process improvement guidelines to help your own organization attain SW-CMM levels 2 and 3

4. Loss of Business Knowledge

» Many IT and R&D organizations have proprietary business and technical knowledge within their developers
» Companies must carefully assess if moving critical business knowledge outside their company will compromise company practices or competitive advantage
» High attrition rates among leading offshore service providers increase the risk that this knowledge may disappear suddenly, threatening projects and potentially weakening competitive advantage

» SourceForge helps preserve business and technical knowledge by providing a secure, centralized, searchable repository for your IP, including documented technical, project, and industry knowledge, code, and project communications
» SourceForge improves knowledge management by preserving the contextual history of projects and changes, as well as the source or original author for any stored IP, helping connect people with the expertise of others, whether they are still in the enterprise or not

5. Vendor Failure to Deliver

» Even with superb quality methodologies and good intentions, outsourced project failures sometimes occur
» Many organizations fail to have a contingency plan. Organizations should consider the implications of project failure, perform risk analysis, potentially shift outsourcing strategy (e.g. from single to multiple vendors), and have a documented contingency plan
» Projects may need to be rapidly transitioned between vendors and teams to minimize impact of problems

» SourceForge helps ensure project success by giving managers real-time visibility and control of projects-regardless of location-plus automated escalation and notification features to give them the earliest possible warning of potential issues. SourceForge makes it easier to spot and manage issues before they become problems, decreasing the chances of project failure
» SourceForge helps contingency plans succeed by making it much easier to transition work to from one vendor or team to another with minimal time-to-productivity

6. Scope Creep / Project Scope Changes

» The scope of most projects changes by 10-15% during the development cycle
» Outsourcing contracts typically require the client to pay the difference in cost if actual work varies from baseline assumptions and estimates

» While some changes may be necessary, SourceForge helps control scope creep and unexpected costs by monitoring and automatically notifying accountable team members of changes (or attempted changes) to project documents or unauthorized change requests
» Managers can keep projects on track by monitoring changes and workflow status of key artifacts, documents, tasks, and milestones

7. Gov't Oversight / Regulation

» Financial services, healthcare, utilities and other industries face stringent regulatory compliance requirements (e.g. Sarbanes-Oxley, HIPAA, etc.) and must ensure that offshore service providers comply with regulations and have sufficient "transparency" and traceability to comply with audits

» SourceForge helps you meet regulatory requirements by providing full traceability for regulatory compliance audits, such as those required by Sarbanes-Oxley or SAS70
» SourceForge automatically tracks and logs work performed by both in-house staff and offshore service providers, creating an auditable trail of project activities, document versions, change requests and histories, approvals, and more
» Because SourceForge is hosted at your corporate location, you retain full control over site and data access, document retention actions, back-up and data recovery policies, and degrees of "transparency"

8. Cultural Differences

» Even in offshore countries where English is widely spoken (e.g. India) strong accents, pronunciation differences, and cultural norms of interpretation compromise the effectiveness of verbal communication. Time zone differences further exacerbate communication difficulties
» Issues around verbal communication can persist even when offshore vendors have cultural training programs. These issues reduce productivity and can lead to misunderstandings that contribute to poor service delivery, rework, and extra costs

» SourceForge helps multi-cultural teams overcome communication barriers by encouraging communication and collaboration in written form. Communications can be reread, studied, associated with related information for added clarity, and automatically stored for future reference
» SourceForge helps geographically-distributed teams be more productive via robust support of asynchronous communication methods such as email and forums. Team members can collaborate via email, participate in or catch up on news and discussion forums, get the latest information pushed to them through mailing lists, and more. These features help overcome cultural and language barriers, just as it has done in the open-source community, by giving people time to understand issues and frame responses, ask clarifying questions, and collaborate on design challenges. SourceForge focuses teams on results through better communication and clarity

9. Turnover of Key Personnel

» Rapid growth in offshore outsourcing has created a dynamic labor market in India, with high turnover of key personnel
» Common turnover rates of 15-20% create liability and risk to your projects
» Turnover also increases time spent on ongoing knowledge transfer for incoming project team members

» SourceForge mitigates the impact of turnover by capturing the work of project team members-both internal and offshore-including historical context (what's been done or changed, by whom, when, for what reason), complete with dependencies. New team members can view logs of all work done by the previous member (tasks, issues, changes, notes, comments, and more), minimizing the time-to-productivity

10. Knowledge Transfer

» Companies rarely account for cost and time required for initial knowledge transfer to outsource service providers
» Transfer of technical and business knowledge to outsourcing firms reduces the productivity of most IT organizations by 20% during the first year of an outsourcing agreement

» SourceForge facilitates knowledge transfer by providing a secure, centralized repository for all documented technical and business knowledge. This helps during the initial knowledge transfer phase as well as with ongoing knowledge transfer as projects proceed. This can reduce the duration and costs of on-site service provider resources while helping to maintain productivity in IT organizations during the knowledge transfer process

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