Outsourcing Tuneup

Changing needs can make last year's outsourcing strategy obsolete. Ask these 10 questions to keep it on the mark.

By Mary Brandel

November 1, 2004 12:00 PM ET

Computerworld - Many companies that sign on for outsourcing services file away the contract and pull it out only when the three-, five- or 10-year term comes to an end. But it's important to regularly review not only whether the original contract is still meeting your needs but also whether last year's outsourcing plan is still relevant to this year's business strategy.
"Outsourcing has become an integral part of our IT governance strategy," says Pavan Nigam, CEO of Cendura Corp., a Mountain View, Calif.-based application management firm. "Once you accept that, you realize it needs to be reviewed not on an annual but on a quarterly basis."
"Too often, [an outsourcing contract] becomes shelfware," says Lorrie Scardino, research director at Stamford, Conn.-based Gartner Inc. "I tell clients they should get into the habit of reviewing [their outsourcing strategy] every six months."
Mergers, acquisitions, divestitures, changes in the trading community or governmental regulations -- all of these circumstances should trigger an outsourcing strategy review. With that in mind, here are 10 questions you should ask when updating your company's IT outsourcing strategy.

1. Is the business trying to expand overseas or enhance its global image? If your company has no previous experience overseas, this is a particularly good time to consider partnering with an offshore technology provider. "If you are looking to do business in, say, Asia, you might very well want to outsource to a provider that could help you do business in that part of the world," says Wendell Jones, a senior consultant at Cutter Consortium in Arlington, Mass.
A global company should also consider using a combination of its own staff and offshore resources when trying to polish its global image. But be wary of exceeding a 70-30 ratio of offshore to internal staff for software development projects, he says. Letting more than 75% of the development work go offshore can lead to serious difficulties, since off-site programmers may not be as skilled as on-site staff. Also, off-site workers might not be as sensitive to issues such as integration with existing systems or changing user requirements.

Image Credit: Dave Wheeler

Cost cutting alone is not enough reason to look offshore, warns Nigam, who says Cendura plans to expand into Asia and Europe in the next 12 months. "I've seen so many companies get excited about hiring someone for $25 an hour, but chances are high that they'll need four bodies to complete the work of one of their own workers," he explains. "If you make the investment right, you might get

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