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A lot of companies make a decision to delegate their IT-related tasks to “outsourced partners” for the latter to do the work and meet the desired objectives. Software development accounts are responsible for the biggest share of this market, as the size of the application development segment is projected to reach a whopping nearly $109 billion in 2021.
The popularity of outsourcing is a function of the convenience it brings to companies and also how lucrative and fruitful its results are. However, in spite of how wonderful the end benefits are, maintaining a successful partnership with a third-party vendor is art your company needs to master if it hasn’t done so already. Moreover, even then, there is always a chance that cooperation may lead to unsatisfactory results, your outsourced project may take more time and money than you’ve planned, or the communication with a vendor may overcomplicate the whole development process.
The solution is outsourcing vendor management — the practice of structuring and managing a company’s relationship with suppliers, also known as vendors. It includes the activities of vendor selection, negotiations, cost control, vendor risk management, and monitoring and evaluating vendor performance.
Embracing vendor management principles and implementing relevant operations/best practices optimizes the collaboration with the outsourced dedicated teams and helps bring the maximum value out of it.
Altamira has wide experience working as an IT vendor for mid-sized companies and enterprises. In this article, we gathered and presented tips on IT outsourcing vendor management. We address the best practices our clients and us use in the partnership and highlight procedures that typically guarantee satisfaction with the project course of action and, more importantly, results.
Predominant reasons why companies choose to cooperate with Outsourced IT Vendors
The IT outsourcing development market has seen rapid, unwavering growth year after year. However, this fact should not come as a surprise: hiring a third-party vendor for development brings about a great deal of benefits to the company. According to the Deloitte survey, the main reason for outsourcing is cost reduction, and this indicator is as relevant as ever today.
Source: Deloitte
Moreover, cooperating with IT outsourcing vendors is much quicker than hiring a developer or the whole IT department. Looking for a new employee is a complicated, and often protracted task, especially when it comes to onboarding long-term hires. But even when it comes to short-term contractors, there are some hurdles to overcome, for instance, they need to be tested to ensure that they have the necessary skills to perform the responsibilities that are expected of them. And creating a team from scratch is even more complex. You have to search for the right people by creating a suitable job description to disseminate via job posts or word of mouth, conduct several rounds of interviews, test skills, and pay for certain services as part of the aforementioned. The process may linger for months, causing delays in the deployment of your project. On the other hand, when looking for IT outsourcing vendors, you can get a decent result much sooner, cheaper, and likely with better quality outcomes.
Companies also care about keeping their main priorities in focus and attended to, and that’s where outsourcing comes in handy as well. Software development, which is the most demanded IT function for outsourcing, takes a lot of resources and engagement from the team and management. Usually, you need to go through dozens of steps, such as specification writing, prototyping, designing, coding, testing, and don’t underestimate the importance of always checking and introducing changes and corrections to the software during development, as well as maintaining it thereafter. So digging in for in-house development might distract and divert the focus of the company away from the main operations and goals. If you choose to outsource, your CTO, Procurement Manager, or Vendor Manager will take care of ironing everything out with the software development vendors, while the rest of the team will remain focused on core business.
If you’re still unsure, let’s refer to other companies, and even internet companies and assess their experiences with using IT outsourcing partners to meet their needs:
- Alibaba, the Chinese e-commerce giant, turned to outsourcing at the beginning of its rise. The company needed to develop a website, and the lack of appropriate specialists in China prompted it to rely on a US vendor to fill in the gap. At the moment, Alibaba still uses outsourcing, although, for one reason or the other, they now resort to local partners.
- One of the most famous consumer goods companies Unilever signed a lot of remarkable outsourcing deals with well-known tech companies, for example, IBM and HP. The company mostly outsourced the development and implementation of universal software, like ERP, to use for all international offices. It helped with cost savings and kept staff focused on the core business.
- Slack, a messenger widely used in the workplace for business-related communication has happily outsourced its redesign. Their vendor successfully reworked the company’s website, app interface, and even logo.
As you can see, a lot of enterprises, as well as mid-sized companies choose to outsource as in most cases it’s the most optimal decision for their growth and efficiency.
Benefits of vendor outsourcing
At this point, you may be wondering what actually drives different businesses and even giant companies to resort to software development vendors. The first and most obvious attractive reason is the lower price and the possibility to start and finish the development much faster. These days, it’s all about time to market so that’s certainly a very compelling argument in favor of choosing to outsource to software developers. And in the business world, time equals money. However, that being said, the financial side is not the only one that attracts companies and makes them choose IT outsourcing vendors. Here are some other benefits that can be considered decision-making factors for businesses.
Experience
Top IT outsourcing companies create solutions for businesses all the time. They encounter a lot of bugs and issues on a daily basis and thus have already discovered and mastered the best problem-solving techniques. Moreover, when delivering a bunch of projects, top software development vendors probably don’t see new problems that they haven’t seen before often. And hence sees the obvious issues and solutions instantly, while you might need some extra time for research and competitor analysis.
Basically, when you are working with outsourced specialists, you receive quick and concentrated expertise and thought-through options for your desired solution.
Scalability
If your business is in need of scalability, and you need to develop an additional software solution or upgrade existing, hiring software development vendors will be much wiser than looking for new employees. Usually, in-house IT teams are focused on maintaining current affairs, and there are typically few resources available for taking on additional workload. Initiating this process may take months. Hiring new developers is tedious and expensive, especially if additional help is needed only for a limited amount of time.
In this case, the outsourced company is a perfect fit, as you will be provided with appropriate specialists who will immediately get down to business. Nowadays, any IT outsourcing vendor offers dozens of possible cooperation models, so you will definitely find the most efficient for you in this particular case.
Access to wider expertise
Through outsourcing, you can get superb specialists involved in your project. Outsourcing companies have a wide range of developers possessing various levels of knowledge and experience. For example, Altamira has specialists skilled in mobile and web development, as well as many programming languages and frameworks. Moreover, we add designers, QA engineers, and architects to every team to guarantee project quality.
It is almost impossible to keep such a multi-skilled, multi-purpose team in-house, especially if your core business isn’t connected to software development. But you may still need to create complex, functional solutions for different platforms (for example, desktop, Android, and IOS apps), and then outsourcing is undoubtedly the right choice.
Challenges in outsourcing vendor management
Top software development vendors give mid-sized and large businesses a lot of opportunities to grow, though, as we mentioned earlier, the final result isn’t guaranteed and could still be disappointing.
Simply hiring an outsourced crew isn’t a silver bullet by itself. As with any complex and major project, it requires monitoring and focus. It is also complicated to work with totally new people who are unaware of your managing style, company values, and workflows.
There are a lot of obstacles that you can encounter even while cooperating with top software development vendors. However, it doesn’t mean that you need to decline outsourcing services at all. As they say, forewarned is forearmed, and it’s a point when outsourcing vendor management comes in handy. Evaluating possible risks is the right step for a positive experience with outsourcing. Let’s look through these challenges.
Tips on IT outsourcing vendor management
Through 10 years of our work, we have cooperated with a large number of partners all over the world. Therefore, we are used to managing and developing projects within the budget and timeframe that was initially agreed upon.
Our portfolio consists of projects that were of varying levels of difficulty and size. So we have a huge amount of good experience under our belts that we would love to share with you. Here you can find the most efficient advice on how to make your cooperation fruitful and good-spirited instead of nerve-wracking and wasteful.
Prepare accurate documentation from the beginning
While negotiating the contract with your software development vendor, make sure to aim for a contract that you will be comfortable following. Even if it’s a chore of your financial or legal team to review a contract, it’s better for a manager to be involved as well, as you will be the one to actually be working with the IT vendors.
Your contract should identify and highlight the responsibilities of each side and have clauses for all kinds of possible applicable controversial situations. Thus, check if the project fits your standards, the scope of work and payment terms, limitations, and terminations. In the beginning, you should also consider if you need to sign other papers as well, for example, NDAs or GDPRs.
Provide relevant info and set realistic expectations
The outsourcing team usually knows how to develop the most appropriate solution for your needs. But it’s your responsibility to provide the context of why you are looking for a software solution. When describing your desired project, try to be as accurate as possible and not to spare any details. The more the IT outsourcing vendors will know from the beginning, the more accurate planning and estimation will prove to be. Namely, share what problem or problems you encountered, why you decided to engage in and go with a development team, how the outsourced project should align with the goals of your company.
Manage your expectations as well. Discuss the project length and budget with the software development vendors and refer to the comparable experience your development partner can provide you with so that you can get a ballpark idea of how your project development might go down. For example, if your project is a custom CRM development, you can learn how much time it took the vendor to develop a similar solution previously, what bottlenecks there were, and correct your internal plan accordingly.
Establish a reporting system
Every company may need reporting of different depth: for some, receiving weekly reports with details on what part of the budget has been expended will be enough, while others may ask for a wide and expansive report with details about touches and features that have been added over the past week to keep tighter control.
Determine what amount of info you need for optimal management, but establish that right from the start, and be sure to discuss your plans with your development partner. Agree on the schedule of report submission as well as on the make-up of its contents. Consider how you want to receive the report: maybe you need to discuss it on a video call instead of just checking a spreadsheet or preparing a written-up summary that is shared with you. All of these things depend on personal style, personality, individuality, the details of which definitely should be ironed out before delving into a mutual business relationship.
Use project management software
You’ve probably used dozens of different applications to manage different projects and teams. It turns out that it’s also useful for cooperation with IT vendors too. While the outsourced team tracks all the tasks, you can easily check the progress of the project and then point out, highlight, or specify anything that you consider important.
Ask your partner to grant you access to their wikis or other software, so you can be empowered to track the progress yourself. Some of the most popular examples of such software are Jira and Confluence, widely used in companies with Agile practices.
Synchronize regularly
Regular synchronization is no less important than accurate contracts or realistic evaluations. Your engagement in the development is important, so don’t neglect calls or other forms of communication. If you have reservations, it’s better to voice them in the middle of development than at the end of it when everything is already said and done. Your feedback guides the developing team in the right direction, and thorough comments will be a helpful contribution towards creating a great application.
Encourage video calls, as face-to-face communication makes synchronization easier and more genuine, and personable. With the help of Skype, Microsoft Teams, Google Meets, or Zoom it’s possible to connect with offshore teams from any place in the world, so why not use this fantastic opportunity?
Manage risks
We talked quite a lot about the risks associated with hiring a third party. They demand a lot of attention from your side, as you should be prepared to react and act in the worst-case scenarios.
The main risks are connected with data security, payments, and compliance. Your goal here is to clearly identify the risks, evaluate their possible impact on the project and your company, as well as plan mitigation measures.
As your cooperation progresses, the risk profile will also change. We suggest reevaluating them every step of the way during your cooperation and adjust your plan for software outsourcing management accordingly. Keep track of possible threats and monitor the actual evolving situation, and you will be able to handle and control issues before they snowball to become insurmountable.
Trust your vendor
At the end of the day, having trust between you and your vendor is essential to your continued cooperation. It doesn’t mean that you should have blind trust, performance monitoring is still necessary. Although, keep in mind that you’ve contacted a software development company for a reason, and you need to concede part of the control reins to the vendor. Being anxious, suspicious, or snoopy will only harm your relationship, and thus the quality of the project. But as soon as you find a partner who matches your standards and openly communicates with you, you will be able to rely on their expertise freely.
Verify the competence and validity of your vendor even before you start your cooperation. Research their website, check testimonials and their profiles on special directories like Clutch or GoodFirms, look for other reviews. Ask your partner about their portfolio and learn how they establish and set up cooperation with their clients. Learn about their security measures. When you start your project, agree on the preferred communication channels. Ask if your vendor plans to give you access to the intermediate results, for example, prototypes.
Transparent communication is a great basis for a trustworthy relationship, so stay open and motivate your partner to engage you more.
Why choose Altamira as your vendor for software development
Altamira is a trusted vendor for more than 200 clients. We develop mobile and web solutions for business purposes, including the fields of business intelligence, healthcare, HR & recruitment, logistics, and others. Our clients highlight the following benefits from cooperation with us:
In conclusion
Most of the time, business owners should resort to delegating their projects to develop software to experts. We promise that it will prove to be more than worth it over the long haul. Further, you should probably make a decision in favor of “outsourcing vendor management” as it is the most effective solution for any mid-sized or large business that hires a third party for software development. It gives you a complex vision of your partnership, insulates your business from unpleasant surprises, and provides a structure and platform for cooperation and collaboration, which is very important considering that many business owners value having control. Software development vendor management is a mature, structured approach to outsourcing, and there is a high chance that it will bring you to success in your partnership.
We suggest that you stay open and positive, but thorough while working with outsourced partners. Your goal is to accept your software development vendors as your allies, and that is guaranteed to bring you the best results.