Successful Outsourcing Is 80% Prep Work - InformationWeek

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IT Leadership // IT Strategy
Commentary
8/1/2005
02:14 PM
Patricia Keefe
Patricia Keefe
Commentary
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Successful Outsourcing Is 80% Prep Work

Outsourcing isn't just an option for large companies, but it sure can seem that way to smaller businesses that have neither the staff nor budget to navigate what can be very treacherous waters for the unwary or the unwise.

Outsourcing isn't just an option for large companies, but it sure can seem that way to smaller businesses that have neither the staff nor budget to navigate what can be very treacherous waters for the unwary or the unwise.And yet that's no reason to think small, or to stay local. Among the smaller fish pioneering successfully in the outsourcing pool are software companies, which presumably know something about building applications. One generally accepted statistic holds that offshore outsourcing runs 40% to 60% less than domestic projects. Offshoring is also said to provide smaller businesses with access to big business concepts, such as time-to-market, agile platforms, and high-velocity turnaround.

How to get started? Finding a reputable contractor is critical, obviously. While smaller businesses lack the budget and staff to devote to outsourcing, creative IT departments can find resources, if they're willing to look and to stretch a little. Informal networking is free, and more valuable than you think. For example, Gartner advises these companies to participate in user groups and to mine word of mouth aggressively via small-business associations.

Resources are not the only hurdle facing small and midsize businesses interested in outsourcing. Let's face it, a poorly executed contract or a deal with an unscrupulous outsourcer thousands of miles away can do a lot more damage to a smaller company than a bigger one. The Fortune 1,000 has legal departments, bigger budgets, and more IT resources at their disposal. They are better equipped to recover from an offshore debacle.

But this doesn't mean smaller businesses shouldn't venture into the outsourcing pool. It just means they have to do so much more carefully, and with a lot more forethought going in. An outsourcing prenup agreement is an especially good idea--especially since it can help ensure an exit strategy. Background checks matter even more when your business partner and employees are overseas. But it's the not so obvious issues--like cultural differences and customs that can really undermine your contract, and your success, in ways you might never have considered.

The upshot? Offshoring can definitely pay off for smaller companies, particularly in terms of helping to stretch limited budgets and personnel. So jump in, the water will be fine--as long as you pack your sunscreen, bring a life jacket, and check the shark reports. Stay alert, be prepared, and savings could be yours.

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