Stealth View of IT Outsourcing decision-making process
In my several years of IT Outsourcing experience, being on the other side of the fence of being a vendor, I have always found CxOs getting caught in between a question,
Should I outsource my project or not — or — whether I did the right thing by outsourcing the project?
If you answer No to any one of the below questions, then you may probably have to consider — or — you did the right thing by outsourcing your project.
- Can I manage to hire the required technical expertise and does all and each of the technology stacks require a full-time engagement?
- Can I manage the staffing issues — Attrition, behavioral issues, commitment of the resource, etc.?
- Can I manage all the risks in-house to deliver what is intended, on time, within the budget and of high quality?
- Do I have a robust process to mitigate all the risks related to people and technology?
Either if you have answered No to any one of the above questions — or — If you had answered Yes to all the above questions, and you still are intending to outsource your project for different reasons, the below decision-making process would come handy for further course of actions.
While there are different ways of engaging with an outsourcing company it can be consolidated into 4 major engagement models
- Full-time resource engagement (FTE)
- Dedicated Resource
- Managed Product
- Business partner
The above Stealth View will aid in asking yourself the right question and traversing through the most probable path to land in which type of engagement model is appropriate for your project.
The below explanation will provide more insights to each of the engagement models, so you can refine your thoughts.
1. Full-time resource engagement (FTE)
Nature of the model
- The vendor owns the talent placement
- The client owns the delivery
- It is a Time and material pricing model
- It is a remote/offshore only engagement
Top Benefits
- Reduced cost with a sufficient-skilled person
Top Challenges
- Doesn’t work for all the business with < 4 weeks engagement
- Service provider Center Of Excellence support will be limited
- Adjacent skills of any project will need new resources
- Delivery to be owned by onsite client management
2. Dedicated Resource
Nature of the model
- The Vendor owns the talent placement
- The client owns the delivery
- It will be a Capped Time and material pricing model
- It is a remote/offshore only engagement
Top Benefits
- Reduced cost with a sufficient-skilled person
- In addition to dedicated resources, the Service provider’s leadership and COE team will be available to aid clients with any challenges.
Top Challenges
- Doesn’t work in short term business i.e. < 2 months duration
- Delivery to be owned by onsite client management
3. Managed Product
Nature of the model
- The Vendor owns the Delivery
- The client owns the Product
- It will be a Milestone based Fixed pricing model
- It is a remote/offshore only engagement
Top Benefits
- Low-risk model.
- The service provider will / should have an excellent understanding of the customer’s systems
- Delivery owned by Service provider.
- The work is scoped out, with clearly marked out milestones and deliverables.
Top Challenges
- Doesn’t work in a business with < 4 months duration
4. Business partner
Nature of the model
- The vendor Owns Delivery / Product
- Client Monitors
- Consulting led Engagement & pricing model
- It is a hybrid engagement — remote/offshore and on-premise
Top Benefits
- Extreme predictable on delivery once established
- Scaling reduces IT project management cost by optimizing the efforts using shared and core talents pool
Top Challenges
- High effort in the beginning
- Tends to require a lot of time for ideation and journey map
With this decision-making process, you will have the right level engagement which is most appropriate for your outsourcing need.
Whichever the model might be, the relationship between the vendor and the client should be a well established professional relationship. By getting into robust contractual agreement terms, with unambiguous Intellectual Property, PII (Personal Identity Information), Non-compete, and Non-solicitation clauses, with proper mentions of legal jurisdiction in the Non-disclosure agreement and/or Master Services Agreement, will lead to a long-lasting professional relationship.
Please feel free to reach out to me, if you have any questions or need more information.
