Practical IT Research that Drives Measurable Results Get Ready for Application Development Outsourcing

Introduction Application development outsourcing offers much in the way of potential benefits, but it can also go horribly wrong. After you’ve made the decision to outsource, consider the risks and make the organizational adaptations necessary to keep the project from spinning out of control. This research is designed for: IT leaders and managers Organizations of any size considering, or currently engaged in, an application development outsourcing initiative This solution set will help you: Evaluate which applications should be outsourced for development Decide which outsourcing arrangement is right for the project Choose an outsourcer that meets the organization’s needs Modify problem areas within your organization before the engagement begins Manage the project’s progress going forward

Executive Summary Application development outsourcing is an effective method for creating unique applications through a third-party organization. arrangements can include vendors: - in a different country (offshore), which are highest risk, - in the same geographic region (onshore) or, - on the customer premises (on-premise), which are of least risk. Outsourcing application development offers organizations potential cost benefits, an expansion to their IT skills, and a higher level of flexibility with their IT resourcing. However, proper preparation and management is essential to prevent outsourcing projects from running over budget, falling off-schedule, or being of poor quality. should not be treated as a silver bullet for solving all of the organization’s application development issues. If the internal process has flaws, outsourcing the project will not side-step them, and the project will, in all likelihood, fail to meet its objectives. may force organizations to make changes to their current policies and/or resources. The more changes an organization makes in order to outsource, the more complicated the project will get and the more likely it will fail. Therefore, changes should be made carefully and only when deemed absolutely necessary. Outsourcing

Application Development Outsourcing Understand Application Development Outsourcing: There’s more than one way to outsource application development, and all methods come with their own set of risks and rewards. There are different stages in an application’s lifecycle; organizations can outsource the entire lifecycle, combinations of stages, or each stage individually. Outsourcing offers organizations an expansion of skills, resource flexibility, and labor cost savings. As with any project, outsourced projects risk running over-budget, missing deadlines, or not meeting requirements. To mitigate risks, outsourcing projects may require adjustments to your organization’s policies and resources. Understand Self-PreparationContract Control Project and Partner

Application development outsourcing isn’t an all or nothing choice; outsource as much or as little as you need Application Development Outsourcing refers to the design, coding and/or testing of an application. The project can be done solely by the outsourcer or collaboratively with your own internal staff. The application outsourcing relationship can be characterized by a short-term, vendor-client relationship which lasts for a single project or by a long-term partnership spanning multiple projects. 49% of companies that outsource are outsourcing application development. Organizations who outsource application development spend an average of 26% of their IT budget on it. Application Architecture & Design Application Coding Testing and Quality Assurance Application Maintenance Application Lifecycle Depending on their capabilities and needs, organizations can outsource the entire application lifecycle or just individual segments of it.

The results of an Info-Tech survey of 206 IT professionals show that organizations of all sizes and industries have done application development outsourcing. No organization is too small, too large, or in the wrong industry to outsource application development. Industry and company size should not be determining factors when outsourcing application development

Developing strong IT capabilities internally is costly and timely. Outsourcing allows your organization to leverage the vendor’s economies of scale which your organization would likely never reach on its own. Moreover, outsourcers expose your staff to different project types, through which they can gain skills and expertise they would otherwise not have developed. The IT capabilities that your organization has may be inadequate. Outsourcing allows you to call on skills and expertise from a range of different specialties to fit with your current project needs. Reduce costs and financial risk by increasing or decreasing staff as needed, and providing access to inexpensive offshore professionals. Turn to application development outsourcing to reduce delivery costs or to expand IT prowess Gain access to staff with specialized expertise in application development or the customization of a particular packaged application. Develop applications quickly under tight timelines by easily adding skilled resources to a project. Improve overall business processes/ workflow as the organization learns more efficient processes from the outsourcer. “There are needs that arise sporadically. We cannot afford to hire that expertise permanently on our staff. With outsourcing, I have the ability to kick up and down my staff as necessary.” CIO, Engineering Services Application Development Outsourcing Benefits

Most organizations outsource application development to augment IT staff and skills, not to replace them In most cases, organizations use outsourcing to augment, not replace, staff. However, offshoring is the exception since its infamously cheap labor often attracts organizations wishing to reduce their salary expenses by downsizing internally.  The organization needs to decrease IT expenses  The organization does not have any complex IT demands (i.e. the organization uses packaged software and not systems built in-house)  There will still be a set of employees within the department able to manage the outsourcing teams and any problems  A temporary peak in IT projects requires additional resources  A single, one-time project requires a unique skill set not currently on staff  The IT department does not have the budget to hire an adequate amount of full- time staff, so uses an on-going outsourcing relationship to supplement its staffing needs Replace Staff When:Augment Staff When:

Select the right project, choose the right outsourcer, prepare internally & monitor the project to secure success Pick individual applications or entire system, but don’t divide up related applications. Preparing Internally 3 3 Monitoring the Project 4 4 Finding the right outsourcing partner is as essential to success as building a detailed contract that considers all the aspects of a project and sets clear expectations and responsibilities for the client and the vendor. Readying your organization can mean a lot of work. However, the more change you try to initiate before the outsourcing project, the more difficult and risky it becomes. Modify where necessary, but do so cautiously and carefully. The last thing you want is to reach your deadline and find out the project hit a major roadblock during the first week which you could have easily solved. Projects don’t generally go smoothly; monitor progress and know when to step in. 1 1 Selecting a Project Choosing an Outsourcer 2 2 Not all application development projects succeed, but your project doesn’t have to fail. Pay attention to each of Info-Tech’s recommended steps to secure project success.

Provide opportunities for internal staff to participate in the project in augmentation situations. Staff see the benefits to their own careers when they are allowed to manage teams or gain unique experience from the project. Internal staff will be able to explain the business’s needs to the hired experts, and the hired experts will be able to share their expertise and skills with internal staff. Convey staffing decisions early. Communicate the decision to outsource and address the concern over job security. In an augmentation situation, discuss the role that staff will play in the project. In a replacement situation, discuss options for other roles or outplacement. When an organization begins outsourcing, many employees fear for their job security. Regardless of whether or not your organization is outsourcing to replace or enhance your internal staff, take these steps to ensure staff remain on-board and in good morale. Internal staff will regard outsourcing decisions with fear and uncertainty – address these issues early with honesty Assure internal staff that there’s plenty of interesting work to go around. Employees may feel resentful when what they consider to be the “interesting work” is being assigned to external resources. To show you do care about their wants, talk to staff about what work they’re interested in and find them roles that they can be excited about, even if it’s not on this current project

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