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IT Consulting

How to Select a Perfect Software Outsourcing Company in 2019

In this article, Iflexion's professionals provide practical recommendations that will help you find a reliable, long-term partner for your IT projects.

According to CIO Survey 2018 by KPMG, last year, 49% of IT leaders worldwide got increased budgets to ensure further technological evolution of their enterprises. Since CIOs’ dispose of impressive funds, they will likely spend more on everything IT. Gartner predicts that the global investment in IT will exceed $3.8 trillion already in 2019 while the spending on IT services will reach $1 trillion.

Worldwide IT spending forecast

Increased IT budgets also mean that organizations will invest more in IT outsourcing. CIO Survey 2018 highlights an important trend: the bigger IT budgets, the bigger the organization’s willingness to outsource.

Bigger budgets mean more outsourcing

Many reasons explain the growing popularity of IT outsourcing. By partnering with a software outsourcing company, enterprises can access professional technical knowledge and skills as well as get the needed IT solutions without the proprietary tech capacity. This allows them to cut IT project costs and focus more on core business activities.

Still, we should say that choosing a tech partner ten years ago was much simpler than today, because of thousands of IT outsourcing companies present on the market in 2019. In this article, we won’t navigate across IT outsourcing basics but will zero in on practical recommendations for you to dive confidently in the ocean of software development outsourcing companies and find a reliable partner for your IT projects.

Where to Hunt for IT Outsourcing Companies?

Third-party recommendations and internet search stay two tried-and-true methods of finding a suitable IT outsourcer.

As a business owner or a CIO, you can get a recommendation from other entrepreneurs or executives. However, successful partnerships of other organizations can’t guarantee your own success. So even with great feedback in hand, you will have to do thorough research on an IT company before you start to cooperate.

If you are skeptical about recommendations, you can turn to the power of the internet. Searching for a software outsourcing company in the global web is easy, but tricky. Don’t draw conclusions about a company relying only on its rank in the search. To make up your first list of potential providers, check several search pages and dive deeper into service offering of each attractive service provider.

Fortunately, today companies have a more convenient way of finding a tech partner — through dedicated vendor directories. Entering such a directory, you can look through filtered lists of companies that provide specific IT outsourcing services. For example, if you search for IT outsourcing for an ecommerce project, you can access a ready-made list of companies with the relevant expertise, as well as discover their hourly rates, tech and service focus, and find verified customer feedbacks. To understand the general logic of a directory, take a look at Iflexion’s profile on Clutch.co.

Checklist for Your Future IT Outsourcing Provider

While every company has their criteria for choosing business and technology partners, they still need to rely on a standardized list of must-haves that each IT outsourcing company should correspond to. Let’s enumerate these must-haves first, and then, find out what’s behind each of them.

  • Geographical flexibility
  • Communication agility
  • Technological strength
  • Industry understanding
  • Established approach to project security
  • Openness to innovations
  • Maturity of knowledge management processes
  • Scope and diversity of accomplished projects

Geographical Flexibility

While IT outsourcing has many forms, companies that look for lower prices often choose nearshoring and offshoring, which means they have to build distant partnerships. Luckily, modern computing capabilities enable companies to stay connected regardless of their physical presence. At the same time, all the involved parties should understand that IT outsourcing is about adapting to geographical constraints. High-class IT outsourcers know how to work with customers from different regions; they have specialists on board to ensure barrier-free communication in various languages, and they are travel-friendly even when it comes to visiting customers in very distant parts of the world.

How to define? Many companies have interactive maps on their websites, where they mark out regions and countries they have worked in. You can also look through a project portfolio that usually provides customers’ geographical location. Both methods will let you understand whether a company operates worldwide or its services cover a limited area only.

Communication Agility

Today, it’s impossible for a software outsourcing company to build a strong presence without relevant language and communication skills. A single IT outsourcing project can unite people from the U.S., Europe, the Middle East, and Asia. Even though they all can speak English, they will still have their own understanding of IT development, project management, etc. So today, communication agility isn’t just about speaking English; it’s about being able to adjust to a multicultural environment and build up a fruitful dialogue whoever the involved parties are.

How to define? You can only test your provider’s communication skills in real life. So start with a simple phone call. Typically, you will talk to a salesperson who will be good at communication. However, while discussing your possible cooperation in more details, you can invite other specialists, including developers, to assess their communication behavior. Sadly, even behind brilliant salespeople, you can discover development teams that are weak in communication terms. So, if communication barriers are critical, you will have to find a more competent team.

Technological Strength

When it comes to technology, it can be difficult to understand the level of an IT outsourcing company, especially if non-tech people try to select a partner. Technological diversity, freshness, skills of particular developers, and the overall technology strategy of the chosen IT outsourcer are among factors that define the future success of your cooperation. Fortunately, you can build up a preliminary technological portrait of a company while exploring their website.

How to define? The first thing you can do to assess the technology state of your potential vendor is to compare their offering as well as technologies mentioned in a portfolio with the on-demand programming languages.

Tiobe Index March 2019

Unlike service pages where IT outsourcing companies place commonly used technologies, case studies will help you discover the technological stack in more details, including used frameworks, development tools, APIs, testing methodologies and more.

Obviously, IT outsourcers can’t describe each technology they work with on their website. So if you are looking for a rare fish, it’s reasonable to appoint a call and ask about the tech stack you are interested in personally.

Below there are a few common questions that you can be curious about.

  • Is it critical if a company has little experience in technologies that I need? It depends on your expectations and demands. If you aren’t pressed by time and you feel like experimenting, you can turn to a company that isn’t specialized in the technologies you need. There is a big chance for you to face such a situation if you look for a solution that requires using complex technologies such as AI, AR, or blockchain. At the same time, you have to understand that if you become a try-and-error project for your service provider, development timeframes can extend, while solutions can miss sophisticated functionality or contain mistakes even after the official release. That’s why it’s always better to collaborate with a partner that has already tested waters.
  • How do I understand the knowledge level of developers that will handle my project? The best way of understanding that is through requesting the certificates that confirm developers’ qualification in specific technological areas. This will guarantee that you cooperate with real specialists that passed an official knowledge checkup. There is a ”But,” though: you can only discover the knowledge of each particular developer if you go for a dedicated team model.
  • Do I have to request senior-level developers to handle my project? Not necessarily. Many projects don’t require any involvement of senior developers. Say, a team of junior and middle software developers can easily tailor a customized platform-based website. Moreover, remember that senior developers come at higher hourly rates, so if you don’t need them, use the chance to save some money.

Industry Understanding

For a long time, industry-specific knowledge wasn’t a must for software development outsourcing companies. First, industry-centric solutions were mostly delivered by software vendors. Second, a two-level development pyramid was popular: a software development company partially outsourced services to an IT outsourcing company. Today, more and more IT outsourcing companies work directly with end customers from different industries, which makes the former increase their industry knowledge.

Do you outsource or offshore?

So what does industry-specific experience mean?

It means that a company has completed a number of projects with a strong industrial bias. This can be an analytical system for a financial institution, an ERP solution for chemical manufacturers, or a custom EHR solution for a hospital, for example. Typically, the more years a company operates, the more extensive their industry experience is.

In some cases, industry experience isn’t critical, for example, if you need a corporate intranet for your travel agency. At the same time, if you need a custom B2B portal for your partners, an IT provider with a clear understanding of traveling business specifics will probably fulfill the task much better.

How to define? Case studies are helpful not only from the technology standpoint; they can also let you discover an IT outsourcer's knowledge in particular industries. Pay attention to concrete solutions that showcase profound industry grasp, such as a mobile banking app, a B2C portal for chronic disease management, an AR solution for construction or alike.

Established Approach to Project Security

If you take a look at the goals that organizations have for IT, you will see that cybersecurity showed the most impressive growth in importance over the past years.

Key issues for IT to address

Logically, companies not only require their IT departments to prioritize cybersecurity but also raise their security demands for IT outsourcers. To minimize security risks, IT outsourcing companies have to implement a clear security strategy ensuring secure development process and safety of all sensitive data involved in the development. It can start with general standards of information security management. For example, we at Iflexion stick to ISO/IEC 27001 standard to ensure the highest security level during all the projects that we handle.

At the same time, to stay compliant while developing industry-specific solutions, IT outsourcers have to act in line with industry regulations. Each industry comes up with specific rules, stipulated in the relevant laws and regulations, such as HIPAA, SOA, PCI DSS, and FISMA, to name a few.

GDPR compliance is another critical requirement to IT outsourcers that work with solutions that process sensitive data of EU citizens. Any leaks can result in huge penalties up to €20 million and can be a hard blow for the reputation and reliability of the involved parties.

How to define? IT outsourcing companies often describe their security methodologies right on their website, backing it up with relevant certificates. If you don’t find any documents on the website, you can ask about them as well as about the company’s approach to compliance via a contact us form or in a personal talk.

Openness to Innovations

Strive for innovations is another characteristic of modern organizations. While organizations aim at spreading innovations as part of their corporate cultures, they also expect the same mindset from IT outsourcing providers they cooperate with. If you look at the stats above, you will see that developing innovative new products and services is a brand-new requirement to IT that appeared in 2018. It means that innovation-driven projects will become typical for IT outsourcing in the coming years.

It’s also worth noting that innovations in IT outsourcing are not about tailoring breakthrough solutions, but rather about a provider’s ability to think outside the box while working with standard solutions or adopting new technologies to improve business operation and employees’ productivity.

How to define? Ask your potential service provider about their experience in setting up innovation culture within their enterprise (they might have an R&D or innovation team on board), as well as in being part of projects that required an innovative approach to solutions or processes.

Maturity of Knowledge Management Processes

Another critical, yet often ignored, aspect of any software outsourcing project is an IT outsourcer’s maturity in knowledge management (KM). Why does it matter? Because the entire project cycle depends on the knowledge flow between team members and between a team and an end customer.

Let’s take a rough, but possible scenario. An IT team develops a CRM system for your enterprise. Suddenly, a senior business analyst leaves the project, which creates a gap between developers and you. In the absence of KM, such a gap can ruin the project, as there won’t be anyone with the equivalent knowledge to close the gap and replace the missing team member.

On the contrary, if KM works well, there is always a backup for any team role at any stage of the project. Knowledge is never lost but is shared equally between team members, which reduces the risks of critical gaps causing unexpected project interruption.

How to define? To understand the maturity level of KM at a particular IT outsourcer, discuss it during the negotiations. Ask about implemented and used KM systems, their approach to KM processes during different stages of an IT project and find out if there are people responsible for KM throughout the development cycle.

Scope and Diversity of Accomplished Projects

Finally, we came to an outsourcer’s portfolio. Checking up a portfolio is the quickest way to identify the real expertise of a service provider, its strengths and weaknesses. However, if you visit a portfolio of a big IT outsourcing company, you can see dozens or even hundreds of cases. So what should you look for to understand whether a software outsourcing company is the one you’ve been looking for?

  • Project freshness. A company can post a multitude of case studies, but if the majority of them describe projects with outdated technologies and development approaches, it’s a bad sign. This can mean that the company can hardly deal with modern solutions and is barely tuned in the current state of development.
  • Project diversity. It may happen that for years a company has been dealing with the same type of projects. For example, some software development outsourcing companies focus on specific solutions (web portals or websites), while others cooperate with customers from one domain (e.g., healthcare). Coming to a company that developed 20 portals for hospitals with a request to create a mobile AR app for a retailer isn’t a good idea, just because they won’t be experienced enough in this area.
  • Project scope. Never limit yourself with reading cases’ headers only. The header can be quite catchy while the project essence might be poor. You have to read the full case to understand the overall complexity of the tasks done, the team’s approach to the project, as well as the team’s involvement depth. For example, if you see that the projects the company worked on are uncomplicated with only a few specialists involved, it can mean that the company will have difficulties in building large outsourcing teams and managing large projects.

To show our customers the whole breadth of Iflexion’s expertise, we enrich our portfolio with projects that involve smaller teams, as well as large projects with scaled up to 100 people.

What Do You Pay For?

Do you know what you should pay for when you sign a contract with one of the software development outsourcing companies?

Five major factors define the rates offered by a particular IT outsourcing company.

Factors that drive outsourcing rates

As we’ve already mentioned, you can find a provider's rates for development on dedicated directories. However, to count a precise cost for a specific project, you will have to send an official request for proposal describing all the aspects of your future project. The overall project cost will include a variety of categories, including engaged workforce, used software and hardware, IT services as well as contingency costs. The final bill can vary substantially, depending on the IT outsourcing type that you choose, as rates vary across regions.

Global outsourcing rates

Now let’s answer a few common IT outsourcing budgeting questions.

I plan to cooperate with an IT outsourcing company that offers their senior developers at a rate of $60 per hour. How did they form this price?

Traditionally, companies establish average rates based on the prices across their industry in a given region. The $60 you pay for a developer aren’t the money that the developer puts in his/her pocket. This price includes not only salary expenses but also related costs, such as the used infrastructure, workplace, or developer tools and subscriptions needed to make the job done.

Will a Fixed Price project cost more than a Time & Material project due to the hidden risks?

Not necessarily. There is a chance for you to accomplish a fixed price project with a lower budget than a T&M project. However, it will work this way only if your vision and requirements to the developed solution are crystal clear and you don’t plan to bring in any changes to the initial specification.

When a project goes through troubles (the delivered solution works inappropriately, there are code errors, UI and UX issues), should I pay twice to fix the issues?

Each IT outsourcing company has its established approach to handling post-deployment issues. We at Iflexion, provide our customers with a month-long period during which a product owner on the customer's side and a project coordinator on our side discuss technical issues, if there are any. If an issue is identified as a bug, our developers fix it for no additional cost. If it is qualified as a new requirement or feature, we keep cooperating with the customer according to the established pricing model to deliver necessary improvements.

10 Hands-On Tips on Choosing an IT Outsourcing Provider From Your Expert

Let’s finalize our trip across the IT outsourcing secrets with a few additional hints from Iflexion’s sales manager, Anastasiya Mikhaleva.

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Blog

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