To Outsource or Not to Outsource

By Srinivas Balasubramanian  |  Posted 2009-11-05 Print this article Print

To outsource or not to outsource

By now you know you don't have to be a Fortune 500 company to leverage outsourcing. It's time to get into the game. But as the IT buyer, how do you know when it makes sense to outsource and what projects should be kept at home? While there are no hard and fast rules, the following guidelines will help you make an informed decision that fits your business needs and may even make you look like a hero.

Guideline No. 1: Determine which parts of your IT project can be outsourced

Not all project components can be taken offshore all of the time. Projects that require very sound understanding of the business process-such as implementing a software for a manufacturing unit-are better done close to the business itself. For instance, activities that involve interaction with the business stakeholders such as functional design or setting up of the production environment cannot be outsourced. A well-managed process combines the advantage of both on-site and offshore development.

Guideline No. 2: Decide on your vendor

This is not a one-size-fits-all industry, and outsourcing vendors should be carefully evaluated per project. To select an outsourcer who's right for you, make sure the partner:

1. Has expertise in similar projects

If you need a few dozen people to maintain your mainframe applications or ERP systems, go with one of the "Big 5" outsourcers who have deep benches and specific legacy application skills in-house. On the other hand, if you are looking at enterprise or Web 2.0 integration initiatives, you will benefit greatly from partnering with an outsourcing company whose DNA is the Web and these new technologies.

Additionally, find out what the customer base of the vendor looks like. If they have several VC-backed startups, they are probably working on breakthrough technologies (since such customers tend to be on the forefront of innovation). On the other hand, if the customer base trends towards Fortune 500 companies, the outsourcer probably has more skills in staff augmentation and mature rather than cutting-edge technologies.

2. Passes the peer recommendation test

Since companies may end up working with several IT partners for different projects, be sure to network and get recommendations from your associates. And remember: the IT outsourcer will likely provide you with references only for projects that went well, so third-party due diligence goes a long way.

3. Agrees on budgets in advance, including specifics on what is or is not included

Discuss upfront what is included and what is not. The less specific you are with the outsourcing partner upfront, the more you'll pay down the road-in both time and money.

Srinivas Balasubramanian is Chairman and CEO of Photon Infotech. Before Photon, Srinivas was a senior vice president at Webmethods. Prior to that, Srinivas was founder, president and CEO of Infravio. Srinivas served in various capacities at Infravio, initially responsible for raising the initial institutional venture capital round. Thereafter, Srinivas served as chief strategist of the company, driving the company to a thought leadership position in the emerging Web Services and SOA market until Infravio's ultimate sale to Webmethods, which he architected. Srinivas has an MBA from the prestigious Indian Institute of Management (IIM), Calcutta and is a graduate from Birla Institute of Technology and Science (BITS), Pilani. He can be reached at

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