Application Outsourcing: Achieving Success and Avoiding...

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Application Outsourcing: Achieving Success and Avoiding Risk

An Excerpt from the Impact Research Report

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This Impact Research report also includes the following tool:

Application Outsourcing Probability of Success and Appropriateness Assessment Tool

+ Plus five unique application outsourcing case studies.

Table of Contents

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Excerpt



Table of Contents: Charts and Graphs

Report Participant Profile Organizations by Size

Organizations by Industry

Outsourcing Status

Report Contents

Excerpt

1. p. 15 – Allocation of IT Staff by Component of Application Outsourcing

2. p. 17a – Respondents who Outsource by Number of Employees

3. p. 17b – Respondents who Outsource by Annual Revenue

4. p. 18a – Project Budget

5. p. 18b – Outsourced FTEs for Project Duration

6. p. 21 – Application Outsourcing Motivators

7. p. 29 – Application Outsourcing Project Success

8. p. 30 – Likelihood of Recommending Outsourcing

9. p. 31 – Application Outsourcing Motivators vs. Success

10. p. 36 – Most Significant Challenges Encountered

11. p. 44 – Factors Influencing Vendor Selection

12. p. 45 – Use of Third Party Advice by Outsourcing Program Complexity

13. p. 46 – Offshore vs. Onshore: Success at Cost Reduction

14. p. 47 – Size of Organization vs. Size of Outsourcer

15. p. 48 – SDLC Success Rate: High Priority vs. Highly Structured

16. p. 49 – Impact of Partnership, Contract and Metrics on Success

17. p. 50a – Pricing Model Popularity

18. p. 50b – Contract Length Popularity

19. p. 51 – SLA inclusion of the Most Successful Organizations





Research Methodology

► This Impact Report study is based on the information collected from 264 organizations representing all company sizes and major industry segments.

► 229 respondents completed a comprehensive survey, and 35 engaged in a detailed interview process.

Excerpt: Research Method

Organizations by Size

5001+

(16%)

1001-5000

(21%)

501-1000

(10%)251-500

(13%)

101-250

(9%)

1 - 100

(32%)

Outsourcing Status

Completed at

least one

engagement

(89%)

Planning first

engagement

(4%)

Evaluated.Did

not outsource.

(3%)

First

engagement

underway

(3%)

Organizations by Industry

Government

(8%)

Healthcare

(5%)

Primary Industry

(4%)

Wholesale/Retail

(6%)

Education

(8%)

Financial Services

(12%)Trans/Utilities/

Comms

(15%)

Manufacturing

(18%)

Business Services

(23%)





Organizations can achieve outsourcing success in a wide variety of areas and most would recommend outsourcing to others in a similar situation.

The ability to improve overall business processes/workflow or gain expertise through application outsourcing are the two primary motivators that drive successful projects.

Relative to other survey respondents, highly successful organizations display the following governance and project management characteristics:

Use the “Application Outsourcing Success Estimation Tool” to determine your fit with app outsourcing, and anticipated level of benefits and challenges.

Governance

Influencers

on Success

Outsourcer keeps organization well informed of the project status

Both outsourcer and internal resource are assigned to manage the project

Both parties view the outsourcing relationship as a partnership

There is a well defined escalation process

Project

Influencers

on Success

Formal agreement defining responsibilities of each party

Specific metrics in the contract, such as service level agreements for quality,

resource availability, and on-time delivery enforced with rewards and penalties

A regular process for evaluating target completion

A regular process for resolving issues and managing change

Excerpt: Executive Summary

Successful application outsourcing projects depend

on effective governance and project management





Every aspect of software development is an outsourcing

candidate

Survey respondents outsourced all components of software development to some

extent, with development being outsourced the most often, and QA outsourced the

least:

Excerpt: What is Application Outsourcing?

*Percentage of respondents who outsource this component of software development.





Many factors influenced vendor selection: Technology the

most, location the least

Excerpt: Choosing an Outsourcing Partner

Organizations considered many factors when selecting a vendor.

Those that placed emphasis on vendor experience and price were more likely to be

“The basic factor is whether the outsourcer has the capability to support our

technologic footprint. Location is not important to us.”

IT Director, Manufacturing

Factors Influencing Vendor Selection

37%

28%

26%

23%

15%

19%

9%

12%

60%

61%

62%

64%

70%

63%

52%

42%

10%

10%

12%

13%

17%

35%

33%

5%

12%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Experience with Tech

Stability

Industry Experience

Price

Vendor Interactions

References

Vendor Size

Location/Time Zone

Extremely influencial Influencial Somewhat influencial Not influential





Included Assessment Tool: Application Outsourcing Success Estimator and Assessment Tool

Sample: Tool included with Report



Based on 25 modeling factors specific to your enterprise, we’ll help you effectively calculate the probability of success with application outsourcing…

This tool also pinpoints successes/challenges and provides suggestions for planning.

You can download this tool with the complete Impact Research report.



Sample Case Study

Industry Engineering Services Total Employees 5000

Type of Organization Private IT Employees 111

IT Complexity Moderate App/Dev Employees 55

Technology Adoption Mainstream Revenue $1B-$5B

% of App Budget Outsourced 10-15% Revenue Growth 15%+

Type of App Outsourced Configuration of a learning

management app and

major upgrades to ERP.

Trigger for Outsourcing Staffing constraints and desire for staffing flexibility. Cost was a factor but not main driver.

Vendor Selection:

Majority of development work is done by an offshore vendor

with 300 consultants in India.

To acquire new vendors, IT will sometimes request a list of

trusted partners from the vendor supplying packaged

software.

Do not conduct a formal RFP, but will sit with vendor to talk

about requirements. The CIO feels this is faster than RFP.

Managing the Outsourcing Relationship:

There is always a project manager on the organization’s

side assigned to each project. PM also reports to a steering

committee.

IT expects a detailed project plan from each vendor and

insists on strong communication throughout the project.

Payment is withheld until deliverables are provided to the

quality level specified.

Result and Lessons Learned: The CIO feels his

organization is able to do more as a business by

outsourcing and has been able to elevate internal staff skill

sets. He believes offshoring to India is a double-edged

sword: on the one hand, work is accomplished 24 hours per

day, on the other hand, it is difficult to contact offshore staff

during the day for immediate concerns. Communication

problems do happen but are rare. He found that it helps to

occasionally have offshore staff spend time onshore.

Sample Case Study:Engineering company shares the pros and cons of outsourcing offshore





Application outsourcing offers benefits to many types of organizations,

but requires planning, diligence and strong governance…

Get the complete report here:Return to Registration Page

Download the complete Impact Research report to get the complete details, including:

A complete list of outsourcing challenges

Guidance on when and how it works best

19 charts and graphs illustrating the motivators, processesand success factors

5 case studies

… Plus a tool to assess your probability of outsourcing success!

Are You Prepared?



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