Apply today for a FREE subscription to CIO Magazine!
Mon, Feb 4, 2008 10:06 EST
31 Risk in Offshore IT Outsourcing Contracts: Or Buying Promises
|
Posted by: Henry Johns in Best Practices Topic: Partner/Vendor Management
Current Rating: |
No matter how much due diligence you attempt, making a decision on contracting with an onshore or offshore IT service provider is much like buying promises. To some extent you are going to have to trust in your selected partner to be committed to providing your company with the high quality services that they have promised. Your lawyers will surely not agree but offshore contracts are only worth the integrity of the company that you are contracting with. Dun & Bradstreet does not include this metric (integrity) in corporate profiles yet and it is not on a credit report either. One of my partners in Brazil would often tell me “Henry we are highly motivated for this opportunity”, but I did not fully understand the value of that statement until we got into the trenches together.
Here are a few of the promises you are accepting or questions you may have doubts about when signing that offshore IT staff augmentation or support contract:
1. Will I really get the hours I am paying for?
2. Is my intellectual property and information secure?
3. Am I really going to be provided with qualified professionals?
4. Will billing rates go up after I train the new team in my business?
5. Can I reach this vendor when I need immediate support?
6. Will this vendor work with me when the going gets rough?
7. Is this a stable country politically, socially, and economically?
8. Are currency exchange rates an issue?
9. Is this a safe country for business travel?
10. Is this vendor’s location in a safe part of town?
11. What is the cost of business travel to this location?
12. What is the cost for offshore professionals from there to travel to the U.S.?
13. Can professionals at this location get a U.S. passport and visa for U.S. visits?
14. Are U.S. contracts legally binding in this country?
15. How long does it take to get a visa and passport for team members to make training and onsite orientation trips to my location?
16. What will it cost for visas and passports for your offshore team?
17. Will the offshore team have someone full time who is experienced in managing offshore projects?
18. Is this a stable company, i.e. good credit and strong experienced management?
19. Does this vendor’s company have the interpersonal skills to work with my company?
20. Does this offshore vendor have executive management that speak English and will be responsive and share your since of urgency?
21. Are this vendor’s team management and executive management going to be available in your workday time zone on short notice when you need them?
22. Can this vendor grow with your companies needs?
23. Do they have commercial liability insurance, errors and omissions insurance?
24. Can they buy commercial liability insurance in their country?
25. Will they work in your workday time zone?
26. Does this company have a secure network infrastructure?
27. Is their network infrastructure professionally designed and firewall protected?
28. Is their facility physically secure?
29. Are extreme weather conditions a factor affecting travel, security, or work schedules in this country?
30. Does this location pose natural disaster risk to your business?
31. Is this vendor going to be flexible as your needs change?
No matter how much time on money you spend developing a clam tight contract with an offshore outsourcing provider you never want to have to consider international litigation or international arbitration for contract disputes. Unless your needs are well defined and static, which I have never seen, the requirements better be very general in that contract or they will need review and changes before the ink gets dry.
In any offshore project establishing good relationships are key to clear communications. I have been nurturing relationships with our offshore partner locations in Brazil and Panama for years. These business relationships in South and Central America
Henry,
Most of your questions are good ones and should be investigated by anyone considering outsourcing. However, you seem to imply that the outsourcing vendor is responsible for providing an acceptable answer to each of your questions for your situation. Many of the issues and their answers are for you to determine your comfort level and it is incumbent on you to steer away from outsourcing if you are not satisfied.
For example, the amount it costs to visit the outsourcer, required visas for those visits, whether the location is prone to natural disaster, etc. should all be considered but the vendor is powerless to influence. The vendor is not making you a promise about these things when you sign on with him. If you sign on and then regret that it is expensive to get to see the vendor, don't blame the vendor for your lack of foresight. Let's place the blame where it belongs and not cast the vendor as someone that sold you a bad bill of goods.
There are, of course, good vendors and bad ones. If you want to take advantage of the cost savings that can be gained, expect to do some work to make sure you select a vendor that will work for you.
Rating:
Every one of these questions are applicable to outsourcing inshore too. Contracting common sense.
Henry,
You make some very good points, and the questionnaire should probably be a part of a client’s toolkit but you also probably realize that successful sourcing is a two way street?! Here I agree with Greg that a corollary to these questions would apply to service firms too.
How Long Have You Been Looking for a Job?
Posted by Meridith Levinson in Questions | 4 comments
5 Myths of Data Center Power Usage Optimization
Posted by Michael Bullock in Best Practices | 1 comments
Microsoft Has Itself a Windows 7 Netbook Pricing Dilemma
Posted by Shane ONeill in News | 1 comments
What a CIO Says, and What He's Really Thinking
Posted by Thomas Wailgum in Soapbox | 11 comments
Android May Lose Netbook Battle to Windows, but Win the War
Posted by Shane ONeill in News | 2 comments
Got something to say? We want to hear it! Click the Post button to get started. GO»
Agile Techniques, Agile Hype and the Essence of Agile [in IT and Business]
5 Myths of Data Center Power Usage Optimization
How Long Have You Been Looking for a Job?
Microsoft Has Itself a Windows 7 Netbook Pricing Dilemma
iPhone 3G S: If You Can't Beat Apple, Join 'Em
A good time to wear more hats
How Do You Manage Information Overload?
iPhone 3G S: Blockbuster Weekend
Persevering in the face of Fear, Uncertainty and Doubt
Take Your Time Moving To Process Based Organizations.
Preparing for the Next Cyber Attack
Ensure you are up-to-speed on the latest security technologies available to keep your network safe in this Executive Guide. Get a thorough assessment of the corporate security threat landscape. Protect your network with data leakage protection, NAC and other technologies explained in this report.
Sponsored by Qwest
Read this Executive Guide »
Cloud Building: 8 Ingredients for Internal Clouds
Cloud computing: a fundamentally new way to deploy IT services and functions cost-effectively and quickly. Learn how the VMware vCloud initiative dramatically improves how consumers access their information and experience applications as well as the 8 ingredients to get you going.
Sponsored by VMWare
Read this White Paper »
Investing in Business Analytics Technology
You're thinking now is the time to take the plunge into business analytics, but you still have some unanswered questions. This research summary addresses the most common questions and concerns surrounding the successful launch of a business analytics initiative. It also includes real-world examples of organizations already getting return on their investment.
Sponsored by SAS
Read this White Paper »
Get instant email notifications by topic when white papers, webcasts, and case studies are added to our library.
Sign-up for the Blogs & Discussion Newsletter
