“Boeing’s 737 Max Software Outsourced to $9-an-Hour Engineers” - this flashy headline of an article published by Bloomberg shook up a society that had not fully recovered from the tragedy of the plane crash in March 2019.
Only this time not only passengers who are afraid to fly Boeing airplanes, but also those whose interests are somehow affected by the article itself, have become tense. These are both outsourcing companies whose work has been questioned directly by business owners, who consider outsourcing as a powerful tool for optimizing their company's work.
What distinguishes good outsourcing from bad, what to outsource and what not, and why outsourcing is primarily a well-thought-out business process management system - let’s try to deal with these issues.
Good and bad outsourcing
A Bloomberg article mentions that outsourcing has become a sore point for some Boeing engineers, who, in addition to fear of losing their jobs, have noticed that this has led to problems with interaction between the teams and increased mistakes.
Good outsourcing is distinguished from bad outsourcing... by the level of its organization. The quality of the product at the outlet also depends on it at all levels.
The formula for successful software outsourcing is unchanged:
Competent management and interaction + Qualified coders + Full testing
Not all companies understand that outsourcing is not hiring employees “from the outside,” but is mainly full-fledged cooperation in a particular area.
It is extremely important to distribute the areas of responsibility and influence in the Customer-Executor relations.
The specifics of the industry are from the side of the Customer. The knowledge and skills on how to implement them in software is the task of the Outsourcer.
The main advantage of an outsourcing partner is its ability to adapt to the requirements of the client. The best option for the Customer is to allow the provider to do well what he does best. All that is needed is to simply use the accumulated knowledge and well-established standardized processes of the provider. This is the key to high quality service and minimizing the number of errors.
Outsourcing will not be a problem
Mistakes happen anytime, anywhere. The world is imperfect. And people even more so.
Unfortunately, the price of mistakes is different in different cases. In order not to wonder who is to blame and what to do, you need to have a clear understanding that outsourcing is always an integrated and reliable partnership. This is the only way to achieve the desired quality of the software being developed. This means that work on its creation (including the preparation stage) should be considered routine.
Areas of responsibility of the Customer:
- Definition of the goals and objectives of the outsourcing project
The main thing here is to avoid the substitution of concepts. First of all, they should correspond to the interests of the business, not managers. Then they will become an additional guarantee for investors.
- The study and evaluation of the proposed outsourcing partner
In order to adequately evaluate the outsorcerer's proposals and be ready to conduct a dialogue with them, companies must be well informed about their current financial condition, familiarize themselves with the qualification level and inquire about their skills in the chosen field.
- Determining the principles of managing an outsourcing contract
Long before the transfer of certain functions to an outsourcer, it is worth thinking about management principles. This will help create the right framework for a service provider within which he can perform his duties. Early identification of management principles also simplifies the management process and eliminates most everyday problems in outsourcing projects.
- Competent work on the contract and the study of SLA
It is difficult to exaggerate the role of a SLA when building a relationship with an outsourcer. This document, even at the provider selection stage, can tell a lot about the maturity of the supplier. A detailed study of the document gives the Customer measurable metrics of services and the ability to compensate for their financial losses in case an error occurs on the part of the contractor.
This is one of the most important stages of organizing work on any project. Budget planning helps to optimize resource allocation, to take into account possible risks and to predict project flexibility.
- Participation and control over the implementation of the outsourcing project
It is about collaboration and about the importance of a business participating in managing outsourcing. Company management should be aware of the main issues related to outsourcing. In turn, it must promptly inform the partner about possible business changes such as the planned growth, changes in the structure of the company, etc.
Outsourcing partner area of responsibility:
- Research infrastructure and customer processes
It is necessary to understand and take into account factors that may affect the outcome of the project. The purpose of this test is to reduce the risk of contradictions in the interpretation of the results achieved.
- Standardization of processes and expertise
In the arsenal of each professional in the field of outsourcing there is a whole suite of processes, methods, tools and resources that help to ensure the work on the project at all stages. This includes control over the execution and timely elimination of errors, as well as the improvement and evaluation of the effect on the business.
- Work on the SLA
From the provider’s side, it is equally important to pay attention to this document. During the writing of the SLA, he has the opportunity to streamline the services provided, to limit his area of responsibility, and also to get a certain freedom in solving problems of the client (within the stated metrics).
- Motivation of employees and their retention
A good Service Provider always has a professional team that is at the disposal of the IT manager at the right time. Work with motivation and continuous staff development is the concern of an outsourcing partner.
- Creation and maintenance of equipped workplaces for employees
This refers to the technical side of the issue. Professional outsourcing companies always pay due attention to the equipment and the maintenance of jobs in accordance with all standards. After all, the work of specialists directly depends on this, and therefore the quality of the product development too.
We outlined the main spheres of influence and areas of responsibility of the two parties/participants in the outsourcing project. They form the basis of a successful outsourcing strategy that works 100% if the following conditions are met:
- Bilateral cooperation between the Customer and the Contractor is confirmed
- Performance standards are defined
- Comprehensive analysis and selection of possible partners is conducted
- Key performance indicators have been developed and the effect of outsourcing on the efficiency of internal processes has been predicted
- The budget issue is well-designed
Almost the greatest furore in the article was caused by the fact that the development of software for aircraft building was entrusted to developers from India, whose hourly rate does not exceed $9, as well as that Planemaker and the suppliers used lower-paid temporary workers.
The market for outsourcing services is full of offers. The pricing policy is presented in all its diversity as well. Let's be honest. Money is an important factor that is taken into account when choosing an outsourcing partner.
Important, but not key. For a long time, many users of outsourcing have ceased to consider it the main goal of reducing costs. In actual fact, it is far from always possible to achieve direct cost reduction.
Cheap does not always mean bad. However there is no guarantee that it will be good. What quality of service is hidden behind the hourly rate of the developer? This is the task to be solved by the Customer.
Analysis of other (except the price of the service) evaluation criteria of the proposed partner can help. Among them are the experience and reputation of the provider, the presence of certified specialists in the team, the observance of development standards, etc.
Read more about how to choose an outsourcing partner in our article: The ultimate guide on how to choose the right custom software development company
Tip: when choosing a partner, focus not only on the hourly rate of developers, but on the benefits that the prospective partner can give to your business.
Successful examples in favor of outsourcing
Considering errors in the code as the only problem that led to the tragic consequences of the crash of Boeing liners is not a rational approach. In this case, you need to think about the failure in the business process management system as a whole.
Outsourcing was not born yesterday and has already managed to establish itself as a powerful management tool. Currently many world leaders in various industries, including Boeing competitors in the aircraft industry, use the services of outsourcing companies.
Such giants as General Motors, IKEA, KODAK and Nokia have long been supporters of the transfer of production development to outsourcing.
Surely it is worth mentioning that Apple is the recognized leader of offshore outsourcing.
It's no secret that almost all Apple products are manufactured and assembled in East Asia. And it's not just the issue price. The main role in the transfer of production to outsourcing was played by the customer focus of partners. (Well, the labor market, too of course).
Speaking of customer focus, the well-known story about how Apple decided on the choice of a factory for the production of glass for the screen of the next iPhone model immediately comes to mind. During a visit to one of the manufacturing plants, company representatives saw that another technical building was under construction nearby just in case the contract is signed. By the way, the contract was signed. Here it is a real interest in cooperation!
In general, outsourcing has been and continues to be a lucrative deal for many companies that do not have enough resources for total control of all stages and processes of production. This is confirmed by global statistics.
Startups and large enterprises increasingly resort to outsourcing to gain a competitive advantage.
Both the positive dynamics and the upward trend in demand speak of good prospects for the development and strengthening of outsourcing in the global market for services. It is important to remember the right approach to organizing and building partnerships. And, of course, about a rational balance: there are functions that it makes sense to outsource and there are some that are better left to follow.
Effective outsourcing can be used for any company, regardless of its size, industry, geographical location, or number of business processes. This is all because, according to the main idea of outsourcing, service providers provide their clients with access to specialized skills and not only save their time and resources, but also allow them to focus on solving key business problems.