Outsourcing is not without considerable risk. Discuss.
Perspective 1: this compendium of Software Outsourcing Issues
In summary:

1. Insurance
2. Third party suppliers
3. Software licenses
4. Ownership of information
5. Contract duration and commencement
6. System specification
7. Service level agreements
8. Reporting and review
9. System access and security
10. Facility ownership and control
11. Personnel issues
12. Intellectual property indemnity
13. Warranties
14. Disaster recovery

Perspective 2: Software development outsourcing risks include:

• Cost and Time over-runs for the project:
  • Due to selection of wrong offshore outsourcing vendor that lacks expertise for executing that particular offshore project
  • Cultural mismatch with outsourcing partner and
  • Political or other instability in outsourced country.
• Data privacy is very difficult to ensure.
• Intellectual property rights
• Legal Standing and Access to Arbitration
• Lock-in.

Checklists by type of risk

Geographic Risks Checklist

• Political Concerns
  • How stable is the country politically?
  • Is there civil strife in the area of operations?
  • Are there any political strains that could undermine the outsourcing relationship?
  
  
• Legal Concerns
  • How easy is it to travel and obtain visas?
  • What is the legal framework that supports the outsourcing relationship?
  • How well are Intellectual Property rights enforced?
  • What are the labor laws?
  • Are we allowed to export the technology we have in mind for operations in that country?
  • Ease and speed of getting domestic import licenses?
  • What are tax implications for the country?
  • What are the customs and duties and other licensing requirements? What overheads are needed to manage these?
  
  
• Setup Ourselves vs Use Existing firms
  • Will the country permit a 100% owned subsidiary?
  • How easy is it to setup an operation? What are the Entry Barriers?
  • How easy is it to exit?
  • What is the Industry Structure in that country?
  
  
• What is the quality of the education system?

Project Risks Checklist

• Requirements
  • Are requirements clear?
  • Is there a well-defined performance and acceptance plan?
  • Is there a separate QA team that looks at QA processes?
  • Is there a QualityControlProcess, and what is the process? When is QA/QC planned?
  • How do we validate the deliverables?
  • How do we approve any intermediate deliverables?
  
  
• Management
  • Is there a Project management process?
  • Do we have a Project and outsourcing management process in place?
  • Is there a Software development lifecycle methodology?
  • Has this been certified?
  • Have the processes been defined and if so has the capability been assessed?
  • Is data collected to measure performance? What data is collected and at what stages? Is causal analysis performed?
  • How are activities base lined? What activities are base lined?
  • How will we measure service levels?
  • How effective is the handover process? Are the interfaces well defined?
  • How will we manage TechnologyRisks?
  • How will we assess Quality?
  
  
• People
  • What is the process for hiring, training, rewarding and staffing?
  • Do we know all we need to know about attrition?
  • What is the process to manage attrition? What is the experience of people who leave?

Operational Risks Checklist

• Disaster Recovery
  • Does the Company have a Disaster Recovery plan?
  • What are the main features of the Disaster recovery plan?
• Infrastructure
  • Is there adequate power infrastructure??
  • How efficient is the Voice and Data communications to the country? How easy is it really?
  • Is high bandwidth available?
  • Are the facilities shared with other companies? In that event how are the networks and people physically isolated?
• Security
  • Is the environment secluded?
  • How is access limited or controlled?
  • What kinds of physical security exists to prevent movement of digital resources?
  • What are the network security policies?
  • What are the password policies?
  • Are the facilities insured? Fireproof?
  
  
• Management
  • What is the personnel management process? How are the people hired, trained, rewarded?
  • What is the attrition management process?
  • What is the chain of command and control?
  • What SCM expertise is in use?
  • Can it sustain a development operation?
  • What cultural issues could arise?
  
  
• Last but not least, Us
  • Is the company internally prepared for outsourcing?
  • Are systems in place to support outsourcing?
  • Are people in the Company enlisted to support the Outsourcing process?
  • Have all the processes needed to make the engagement successful been defined?
  • Is there internal buy-in?
  • Does corporate sponsorship exist?
  • Have outsourcing standards been defined
  • Have are success criteria defined?
  • How is Quality measured?
  • How are service levels measured?
  • How will visibility be maintained into the development?
  • What regulates the change of personnel within our Company who are part of the outsourcing process?

See also Benefits of development outsourcing, Development outsourcing

See also Gartner: Five reasons why offshore deals go bust

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Contributors: Steven Black

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Category Project Management Category Out Sourcing Category Checklists Category Risk