Evaluating an Offshore Vendor
What to look for in an offshore vendor
Outsourced Software Product Development has become a motto of almost every company that is providing offshore/outsourced software development services. Due to a rapid increase in the outsourced activities and also the number of service providers, it has become difficult to find the right partner with right set of qualities that will suite one’s business offshoring needs.
The aim of this white paper is to educate clients on the capabilities to look for in an offshore vendor and the key elements those result in a long and fruitful partnership. A well-studied investment will yield returns those are more than just cost savings.
Domain Expertise
The key to a long lasting and beneficial offshore association is to partner with a vendor who has complimentary skill sets and has domain expertise in your primary area of work. If the expertise is hard to find, look for the vendor who has done projects in related domains.
Understand the vision, mission and the focus of the vendor:
- Is the vendor ready to work on anything that comes their way? Or
- Are they focused only on certain domains?
- Have they built a niche in the respective domain?
Make sure your projects are handled by the domain experts who understand importance and value of your IP.
Location
Selecting the location for offshore development center is a very important criterion and should not be overlooked. The right location gives you following advantages:
- Availability of relevant talent pool for remote software development team.
- Retention of your team if the environment is conducive
Take an example of India, some of good domain expertise is concentrated in certain locations; Say Pune, is good for data storage companies related software development.
Human Resources
Attrition and Retention
Attrition is a fact of business life, so look for vendors who have a lower average attrition rate in IT industry. A vendor with less than 15% attrition can be considered to be doing something special for the employees to stay longer.
A high retention rate and high average employee longevity (duration of employment) is another good indicator of having the resources contributing to the project for longer period.
| Good Employment Indicators | |
|---|---|
| Attrition | Less than 15% |
| Retention | More than 90% |
| Average Longevity | More than 3 years |
Many good vendors provision for shadow resources those work on the project in non-critical path and can be utilized to replace position in case of attrition and aid growth.
Employee Friendly Policies
Low attrition and high retention is attained due to the organization’s strong and employee friendly policies. The job markets are too volatile for smooth long term projects hence it helps when the vendor is paying attention to the employee benefits.
Check the company’s willingness to listen to employees as well; having a policy of conducting regular Employee Satisfaction Surveys is a very good indication that the company is always striving to improve. The details could be confidential, but it doesn’t harm to ask.
Company’s churn rate, or employee churn rate need to be monitored because it impacts productivity, business performance and growth.
It is important to compare churn rate to other companies in IT Industry. When churn rate increases employers need to take measures such as using a structured onboarding process, making the company’s benefits package competitive, improving management practices, flexible schedules and supporting employee work/life balance, determine why employees are quitting through exit interviews, and providing professional development programs for better career path in the organization. To improve employee retention a Human Resource Management HRMS software helps track employee churn and effective implementation of HR programs results in motivated and productive employee.
Support Organizations
Having strong support departments contributes to success of a company. As the name suggests, these functions really support the engineering teams working on your projects and products. Any disruption due to understaffed or non-existent support teams directly hampers your product.
IT Support
HR/Recruitment
Accounts and Finance
Administration, Legal
Management
Should be able and have proven experience in the industry and of leading the company. Check the profitability of the company.
Ask for company’s Vision and Mission statements. It would be good to know the exit strategy of the company/management.
Infrastructure
Facilities
Check how much workspace the vendor has that can be deployed immediately to your projects. Workspaces with world-class infrastructure, fostering open communication and collaboration, coupled with uninterrupted and seamless project operations are today’s Offshore Development Centers requirement. Factor in the future growth and make sure that the increased capacity can be accommodated at the same location.
Communication
- Internet Links : Make sure that the vendor has a fast and reliable Internet connection. Dual internet leased lines and commercial fiber failover can be considered a must.
- Phone Lines/VoIP : Due to the offshore nature and a small time overlap (if at all any), the number of simultaneous phone calls can be high. The vendor should have sufficient number of phone lines that allows your project team to have a communication without unnecessary delays. It is highly desirable to have a direct phone connection for every developer. Check the company’s view on VoIP deployment.
- Video Conferencing : It’s good to have occasional video conference calls as it attaches a face to the name. Visual interaction builds a sense of togetherness in the teams. For small teams, a webcam may be good enough but it would be useful if the vendor has Video Conferencing facility.
- High Availability : High Availability for communication mechanisms should be expected. Check what measures are in place to have redundant Internet Links and Phone Lines.
Power
Good and stable utility power availability at the vendor location should be an important point to consider. But it is just a start; the vendor must have UPS (Un-Interrupted Power Supply) for all the development systems, servers and other communication equipment. This should provide adequate backup time and provision for future growth.
An UPS is good for avoiding brown outs but to handle longer power outages, the facilities should be backed up by Generator Sets.
Regulatory Aspects/Compliances
Many countries promote special schemes and packages for outsourcing vendors. The companies thus can enjoy several export/import concessions, tax holidays, etc. But in order to avail the same, several regulatory compliances have to be followed.
Make sure that the vendor has necessary licenses and permissions to conduct business. It’s not a good situation to know that your vendor can not import in time the specialized equipment you are sending to be used for the project.
Flexibility in Project Management and Control
Staffing
- Dedicated Resources
Planning and Execution
Governance
- Regular Business Review Meetings
- Management status reports
- Scorecards
IP Protection
The prime concern for any outsourced software product development is about the protection of the Intellectual Property. There is definitely some apprehension about this aspect. Make sure that you do the best in understanding the processes and policies about the vendor that better protects the IP.
Following are some of the ways to address the same:
- Avoid sharing the developers from other customers’ projects
- Policy of cooling off periods between critical customers (your competition mostly)
- Policies that allow developers signing NDAs, Non-Compete and Non-Confidentiality agreements with you directly
- Awareness and Implementation of several Security Policies and Best Practices
- Security Certifications (like ISO 27001) are highly desirable
- The networks should allow partitioning
- Access Controlled/Isolated work areas
- Company emails hosted inside the company network and not at an external site of the Internet Service Provides
Business Continuity and Disaster Recovery
- Daily local backups
- Frequent Offsite backups
- Alternate disaster recovery site/facility
Caution
Verify the Capabilities
Make sure the capabilities are well understood and verified.
Cost cutting/avoidance
The IT organization is usually under-invested. This is a prime area for expense avoidance in both the network/equipment as well as the resources.
- Firewalls, Data Backup systems, Managed L2/L3 switches.
- Anti-virus
Summary
Look beyond the web sites and marketing presentations. Most of the presentations would have the same content. Almost all will claim to be unique and the best in doing what they do. Question on above aspects and get those verified.
If you need more information or assistance in your services, please feel free to contact info@qualexsystems.com
QualEx Systems can offer you guidance in your offshore needs. Visit www.qualexsystems.com for more
