How the different types of risks that emerge in offshore engagements are minimized depends on how well client and vendor are prepared and on how experienced they are in handling them. It is useful to understand how risks emerge and how they can be mitigated with adequate preparation.
Depending on People Instead of Processes
Control and performance risks in an offshoring engagement increase drastically when clients and vendors do not establish processes and performance metrics. Software development is people-driven. When people who work on a development project are from different companies, countries and continents, risk escalates substantially.
Risk also increases with an over-dependence on the specific working styles of individuals. Enabling a large number of people with different working styles to collaborate in a way that generates consistent, timely results requires formal processes, templates, and milestones for all interactions and deliveries. Typical software development lifecycle processes include the establishment of requirement specifications, design and test plans, and acceptance criteria documents. While working with globally distributed teams, critical meetings and conferences should be recorded, verbal commitments avoided, and minutes circulated promptly.
Developing metrics in the planning stage will reduce risk throughout the project. If the vendor mentions that delivery is on schedule, track the progress reports. At the end of the development phase, request written updates; and when tests are concluded, ask for their results. As the familiarity with processes increase, their effectiveness depends on how well they are enforced. Consistently enforced processes will result in substantially lower risk, as the offshoring relationship matures.
Vendor Misunderstanding of Client Requirements
Some clients fail to explain adequately to their vendor how their organizations work and why. On the other hand, vendors often do not understand the client’s market pressures, end-user requirements, and time constraints. This lack of mutual understanding between client and vendor partner can increase risk substantially.
For instance, if the vendor is unaware that an application will undergo several rounds of changes during the design phase due to fluctuating market needs, they may be insufficiently prepared to handle changes, causing the product release to be delayed. If a developer is not told that the end-user prefers a specific browser, he or she may build a user-interface that is difficult to use. The client needs to spend time with the development team explaining their market pressures, end-user requirements, and their organization’s internal processes.
Inadequate Senior Management Involvement
Senior management at the C-level needs to dedicate adequate time to each offshoring venture. Too often, relationship and project management gets relegated to junior staff, as the project progresses. This increases all types of risks.
Periodic due diligence of the engagement and its individual components as well as regular discussions between key representatives from both the vendor and the client organizations can go a long way in reducing risks in offshoring. The relationship also needs support from other departments within the client organization, such as sales and marketing, human resources and finance. The longer and deeper the offshoring relationship, the more due diligence is required.
Project managers on both sides often avoid discussing unpleasant issues that are easily corrected but may cause momentary friction. Senior management’s involvement can bring resolution to these types of issues. If senior management is actively involved in the engagement and reviews its progress often, risk is minimized and the relationship objectives are met.
Insufficient Contractual Details
Effective contractual agreements to back up the engagement need to be in place before successful offshoring can begin. The agreements should not be tortuous. Nor should they be cursory or left to verbal commitments. Security risks can be avoided through Mutual Non-Disclosure, Non-Compete, and NonEmployee Solicitation Agreements. Signed and Accepted Proposals, Statements of Work, Professional Service Agreements, and Licensing Agreements can cover most contractual obligations.
Lack of Communication
Risk in offshoring engagements increases exponentially with poor or one-sided communication. Limiting communication to only a few individuals can cause multiple problems that are often recognized too late. These can include cost overruns, schedule slippage, and people-related problems. All too often, risks increase at a point in the project when mitigating them has become very costly.
A detailed communication plan developed at the beginning of the engagement is part of a good risk mitigation strategy. This plan should detail communication tools and processes, responsibilities for reporting on the different aspects of the engagement, and contingency plans. It is equally important to copy all team members one-mails and other key pieces of information, across hierarchies and disciplines. By operating as a team across organizational boundaries, the client organization can ensure that multiple people in their own organization interact seamlessly with the people of the vendor organization.
Insufficient Team Motivation
For the overall success of the offshore engagement, it is especially important to invest in team motivation. The departure of a key member from the team can hit a project harder than some delays or even cost overruns. It therefore pays to make a serious effort to understand the members of the offshore team. Find out what motivates them. The same routine peer review that seems ordinary in the client organization may be considered de-motivating in the vendor organization, due to cultural differences or peer group dynamics. Organizations would do well to work with the vendor to draft plans for appreciating the work of key employees and the team as a whole. Simple end-of-project vacations, picnics, or merchandising items from your company can go a long way towards motivating your offshore team.
