Businesses are focusing on cutting costs, which is increasing the popularity of offshoring.  As companies look for ways to cut costs while still maintaining productivity and maximizing profits, offshore outsourcing will become an even more attractive option.

Current activity within the outsourcing industry shows that companies still outsource even when the economy is slow.  According to Gartner’s report, many U.S. companies are taking measures to quickly implement offshoring programs and are sending more jobs to offshore locations.  If the economic downturn is only temporary, there will be many first-time outsourcers looking to offshore IT providers.  In the situation where the economic downturn turns into a sustained recession, Gartner believes that IT budgets will be cut more aggressively, which will just increase the need for offshoring.

As more companies are turning to offshoring, the outsourcing destination will be one of the main considerations when choosing an IT service provider.  It is important for companies to carefully analyze the benefits and risks of each location to determine which country would best fit the organization’s needs.

TJ Singh, a research director for Gartner, commented on India as one of the main destinations for offshore outsourcing.  In a statement he said, “Factors that will give India the edge over other offshore locations are scale and quality of labor. North American and European buyers of IT services have been the force behind a growing offshore services market and India is central to almost any discussion of offshore services delivery for these buyers. Whether it is the indigenous India-centric service providers that have a wide-reaching impact on the IT services sector, or a vast and growing IT labor pool being trained to support a global client base, India will continue to be the most-sophisticated country option to source offshore IT services in the near term.”

Offshore outsourcing boasts many benefits for the IT sector, whether the economy is slow or not.  Some of the main benefits include expanded hours of operation, access to qualified IT personnel, ability for rapid scaling of operations and the opportunity to accelerate IT implementations.

For more information regarding offshore outsourcing, contact  A&E Consulting.

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Service level agreements define the boundaries of the project, including the functions and services that are to be provided by the vendor.  This legal document details the volume of work and costs involved.  It also specifies the needs of the outsourcing company and sets expectations for both parties.  An effective service level agreement should minimize disputes that may arise between the buyer and supplier.

Creating a good service level agreement requires a set of steps.  First, the buyer and vendor must agree on the terms that will be included in the contract.  Next, performance measurements should be established.  These metrics will be used to measure the global sourcing provider’s overall performance and determine whether the objectives are being met.  For example, measurements may be used to evaluate the volume of work, quality of deliverables and efficiency.  It is important that the measurements are set to reasonable performance levels. 

The service level agreement should also detail how the performance metrics will be tracked and communicated, whether through regular performance reports or through real-time monitoring.  Reports often include summaries of results rather than a long list of metrics.  A simple reporting system is usually more advantageous to the buyer and supplier.  The frequency of communication and the information included will depend on the project, buyer and supplier. 

A good service level agreement will include a process for resolving situations where the service provided is unacceptable.  If this process is discussed and agreed upon in advance, it will make it easier if such a circumstance arises.  When the resolution process is clearly communicated, the outsourcing company would then know how to handle the situation until it is resolved with the vendor.  If a dispute cannot be resolved, the service level agreement should detail what constitutes a termination of the contract.

Service level agreements are crucial when it comes to establishing a good working relationship with a vendor.  A&E Consulting assists companies looking to take advantage of global IT sourcing and will oversee the first outsourced project.

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A statement of work is a document used to solicit proposals from global sourcing providers and is usually included as part of a Request for Proposals.  It describes the work that is needed and generally includes a timeframe as to when the project must be completed.  Vendors will respond to the statement of work with a proposal and cost estimate.  Buyers can then choose the most qualified vendor for the project.

Creating a statement of work is not an easy task and can be time consuming.  However, it is well worth the effort as it is fundamental to the success of the project.  A statement of work must be specific and clearly outline the work that is to be done.  If a statement of work is too ambiguous, it can lead to misinterpretation and future problems.  IT managers therefore, must take the necessary time to draft this essential document and ensure that it is detailed.

There are many items that should be included in a statement of work.  The scope of work required and the time in which it should be performed should be defined.  Hardware or software that is to be used should also be mentioned so that vendors know what is expected of them.  A statement of work generally discusses the location of where the work is to be completed and the allowable time for projects.  It should incorporate a schedule for specific deliverables.  If there are any special requirements, such as security clearance, necessary skills or travel requirements, it should be outlined in the document.

A statement of work might also include criteria for defining a project’s success or failure.  Defining success can be especially helpful in eliminating potential misunderstandings between the buyer and vendor.

When reviewing proposals from vendors, IT managers should evaluate the vendor’s plan for performing the required work, the skills of the vendor’s employees, performance history and price.  All of these factors are equally important and each one should be considered when choosing a vendor.

For more information regarding statements of work, contact A&E Consulting at 818-572-8399.  A&E Consulting assists companies looking to incorporate global IT sourcing into the overall business strategy and will help oversee the first outsourced project.

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