When NOT To Outsource

The trend toward outsourcing software development in businesses has given IT management and senior executive management of any company a new avenue to get large scale software projects accomplished without swelling the ranks of their internal IT departments. While there are some compelling arguments for outsourcing, the decision about whether taking this step is cost justified needs to be put under the same cold scrutiny that any business decision must endure before it goes from concept to reality.

The question of whether outsourcing development to contractors is a good move from a cost benefit analyses can return mixed results. The use of consultants and contractors is almost always on the surface more expensive than using staff developers to do the same job. Highly trained technical consultants will change anywhere from $100 to $250 and hour which is far higher than what you pay even for well trained technical IT programmers and project developers on staff. So if you determine that the project will take 1000 hours to complete and do a simple spreadsheet comparison using only hourly rate to go by, the outsourcing decision will lose every time.

But a simple rate to rate comparison is too shallow to really be a good evaluation of whether going with an outsourcing solution is economical and a smart business move. For one thing, the company you hire to bring a solution may already have a commercial software package or a software solution they developed for another client that can be used as the base for your development. This not only saves money because much of the development has been done but it lets you start with working software so the project changes from a new development effort to one of modifying an existing product to customize it for your company.

However, there is a case for introducing some level of skepticism about the idea of outsourcing in light of the ambitions of consulting agencies themselves. If an external software firm comes in with a very convincing presentation about the value of going with a package answer to your software need or outsourcing that development, it’s a good idea to review that presentation without the “sales overhead” that was present when they were on site. To be blunt, software contractors are very good sales people and the viability of the software package or the proposed solution must be exposed to the most rigorous technical review possible before important financial resources are cut lose to turn over the solution to the contractor.

This is where a thorough and technically detailed project proposal is crucial and must be demanded of any contracting company before the decision is made about whether to turn the job over to an outside agency. Complex software solutions should be reviewed by the people within your IT department who understand the technology and the development methods being proposed. Your own IT department will look at the proposal in depth and with the interests of the company at heart and if the proposal is technically weak, they will find it.

The contracting company proposing the project should be open and patient to answer all questions and perceived flaws in the system design they present and come back with revisions to that design as often as necessary. Only when they have proven beyond any doubt to the technical gurus in IT that the solution is viable and the design will work should the contract be considered from a financial point of view.

These kinds of reviews, while rigorous also surface something else important about the contracting company. If they are transparent and willing to work with you 100% at this stage, that bodes will for an open and honest development relationship which will yield a quality product that is bug free. But if the sales people who are putting the “dog and pony show” on about their software solution are not willing to undergo in depth technical scrutiny, then it might be a time to NOT outsource, or at least not to do so with that particular agent.