Outsourcing Development - Reducing Risk

One aspect of outsourcing that is often overlooked is risk reduction. Much has been written about how outsourcing manufacturing transfers the risks to the supplier, yet little has been written quantifying the risk reduction benefits of outsourcing software development.

The common misconception that many people have is that outsourcing their development is a risky thing to do. They believe they will lose control over the development process and lose flexibility. In fact, outsourcing development can be the most practical and prudent approach. Let's explore how the right outsourcing company can reduce your costs and improve results through reduced risk.

1) The risk of limited vision and awareness of what is technologically possible. While an organization's culture and history provides stability, it can also limit vision when it comes to implementing new technologies. A capable outsourcing company will be able to explain what options are available to you, pointing out things you may not have considered or even known were possible. The result? A better solution with better features, functions and performance.
2) The hiring risk. Hiring the right people, whether a permanent employee, or a contractor, is time-consuming and costly. Hiring the wrong person translates into lost time and money. Recovering from a poor hiring decision is more time, effort and money. Outsourcing can provide you a pool of talented individuals that are right for the job and available when you need them. No hiring costs, no delays, no risk.
3) Preservation of capital and minimizing long term fiscal commitments. Hiring permanent employees is a long-term commitment that includes salaries, benefits, space, equipment, and infrastructure. All have an impact on the bottom line, cash flow, and available working capital. Outsourcing development can eliminate long-term financial commitments and the risks associated with them.
4) Minimizing the risk of change. Contrary to popular belief, oftentimes outsourcing development provides greater flexibility and adaptation to change than internal development. Good development firms will have a pool of developers with expertise in a wide variety of technologies. It is contingent on their success to stay current with the latest and greatest. Say mid-project you suddenly discover that your application needs to be adapted to allow access from PDAs or cell phones. How likely is it that the developer you hired will have the experience to accomplish that? Not very.
5) The risk of failure is greatest when development projects are brought in house without experienced management and engineering staff on board. It's always best to take the work to the experts, those with the specific education and experience required from project management to development to testing and quality assurance.

Before you decide whether to do your development in house, or to outsource it, consider the risks. It is very likely that the most cost effective and risk-averse approach is to outsource.

7/11/2007 - Software Systems and Services International Inc.

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