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Best practice in IT outsourcing: achieving real cost savings – part 2

date: 12 January 2011
reading time: 3 min

In my last post I talked about how what seem like fantastic cost savings can actually be a false economy.  Now I want to talk about another important part of IT outsourcing best practice, one that really

In my last post I talked about what seem like fantastic cost savings can actually be a false economy.  Now I want to talk about another important part of IT outsourcing best practice, one that really can save you money in the long term. The relationship between supplier and customer is the lynchpin of any outsourced project, whether it be software development or something else, and in my opinion is the single biggest influence in the success or failure of the project.

There are three fundamental elements to any customer-supplier relationship:
  • trust,
  • openness,
  • communication

and all three are inter-linked.  If you have an open relationship the outsourcer is more likely to tell the customer as soon as a problem occurs, rather than brushing it under the carpet. This engenders greater trust in one another. Equally, without regular communication the project cannot progress. Openness and trust both make communication much easier as there is no trepidation on either side. Indeed the most successful second- and third- generation outsourcing deals are based more on a joint-venture, equal relationship than a standard SLA-based contract. Evidently there are other factors that can help relationships succeed. Primary among these is the fit between outsourcer and customer.

An IT outsourcer needs to be compatible with its customer’s corporate culture communication and working style. Employees from both organisations will be working alongside each other and they need to fit in. Personal chemistry, while not necessary, can go a long way too. In short, companies that include cultural affinity in their outsourcer selection criteria have a head start over their rivals that do not.  It has been proven that their projects will be more likely to succeed.

The second is investment. Here I don’t mean money, but rather time, effort and perspective. Relationships rarely work well from the get-go, particularly when slight cultural differences are involved. Taking time to consider issues from your outsourcing partner’s perspective can help forge a long-lasting relationship. If you have a strong relationship, both outsourcer and customer are more likely to work harder, both at successes and at resolving any problems that occur simply because of the emotional investment on both sides.

The consequence is a better end product, which will in turn result in the partnership continuing. And this is where the real savings come in  on both sides– no time and money wasted trying to find a new software development outsourcer/customer, much less time required to brief the team, no steep learning curve, an understanding of how to work together from the outset and a willingness on all sides to produce a good end product.  As I said in my last post, this outweighs the cost savings you might make from beating someone purely on price. More on other aspects of best practice to come….

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