When it comes to IT outsourcing, what constitutes a good outsourcing deal?  The goals for each buyer are different and the answer to the question of whether or not an outsourcing deal is a good one, depends on the buyer’s objectives.  No matter what a buyer’s goals are in an outsourcing relationship, it is crucial to have a well negotiated contract that contains certain elements of protection and spells out all the agreed upon terms.

If you are an outsourcing buyer, be careful that you do not enter into an agreement that contains a minimum commitment.  Most of these types of outsourcing deals contain minimum volume or revenue commitments, which are not necessary.  Instead of committing to a minimum amount, you can develop an agreement based on volume discounts.

Make sure that you include a termination for convenience clause in the contract.  This provision will allow you to terminate the agreement before the contract expires for any reason without having to pay a termination fee.  Sometimes it is not a good fit between your company and the vendor and this clause will allow you to terminate without having to come up with an excuse.

Outsourcing contracts do not have to be lengthy.  It is advisable to enter into an agreement that has an initial term of two to three years with an option to extend it.

There should be provisions in the IT outsourcing contract that address intellectual property rights.  For example, when software is being developed, it should be very clear as to who owns the software, which will prevent the vendor from using the software again for another purpose.

If you are looking to outsource IT development, you may want to consider working with an outsourcing consultant who can help you ensure that you enter into a good IT outsourcing deal.  The outsourcing consultants at A&E Consulting have the knowledge and experience necessary to help you succeed.  Contact us today at (661) 200-3612 or email info@aandeconsulting.com.

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If your company is currently outsourcing or considering offshoring for the first time, you may be concerned about recent events, such as reported terrorist attacks, that could impact your outsourcing relationship.  You may be wondering if your outsourcing contract has the protection you need in this uncertain environment.

The current world economy and geographic instability has forced many companies to rethink the way they approach outsourcing.  It is possible to establish practices that will help you anticipate possible threats and create an alternative plan.  One of the ways you can protect your company when global sourcing is to negotiate or re-negotiate your outsourcing contract.  CIO.com gave several tips for negotiating outsourcing contracts, some of which are summarized below:

1. Revise clauses, such as force majeure to include other threats.  Force majeure usually releases both the buyer and vendor from liability when there is an event out of their control.  Typically the focus is on natural disasters.

2. Review termination provisions.  Termination provisions should take into account the possibility of an unforeseeable threat to the vendor’s viability.  The buyer should make sure that the provision allows them to respond to changing vendor conditions.

3. Modify change of ownership provision.  This provision should address an event where there is a breakup of the supplier.  The change of ownership provision should include acquisitions, as well as breakups.

4. Decide who owns the assets.  It should be clearly stated in the contract which entity owns software, documentation and other intellectual property.

5. Include terms and conditions that focus on emergent concerns.  CIO.com advises suppliers to use clauses addressing transition-out requirements, audit provisions and termination costs.

6. Seek advice from a professional.  It is advisable to contact a professional, such as an outsourcing consultant, who can help you get the contract right.

The outsourcing consultants at A&E Consulting have the experience and knowledge to help you succeed with your outsourced IT projects.  We offer support throughout the entire process and we will provide you with flexible solutions to meet your IT outsourcing needs.  Call (661) 200-3612 or email info@aandeconsulting.com today.

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The current economic climate has forced many IT executives to change the way they approach outsourcing decisions.  They are now faced with more challenging decisions regarding global sourcing strategy and objectives.  IT executives have to take into consideration such factors as technology trends, budget reductions and anticipated learning curves.

Most companies looking to outsource IT development typically focus on the benefit of cutting costs.  However, what most companies fail to realize is that global outsourcing has more to offer than just cost reduction.  Additional value can be created in an outsourcing relationship through innovation.  Once an outsourcing relationship has been established, it opens the door to innovation, allowing the buyer to realize an even greater benefit provided by the vendor and to stay current with technology trends.

Offshoring and near shore outsourcing provide a way for companies that have been forced to layoff key personnel, to still move forward with strategic projects.  Global sourcing is an attractive option for many companies that have had to reduce budgets due to the economic slowdown. 

Companies today are feeling the pressure to achieve results while avoiding the common mistakes made by other companies that have outsourced in the past.  This sense of urgency had made companies try to avoid the learning curve associated with IT outsourcing.  It is often difficult to attain this goal, but with the proper preparation and informed decision making, it can be done. 

A company must decide if it will outsource to multiple providers or focus on one vendor.  While choosing to outsource to just one IT provider does make the process a lot simpler, the company can be missing out on the opportunity to take advantage of the diverse expertise offered by multiple providers.

Global sourcing offers many advantages to IT companies.  Companies can benefit from IT outsourcing during this downturn, as long as they take into consideration the unique factors presented in this economy.

The outsourcing consultants from A&E Consulting can help you choose the right outsourcing location and partner.  It is our goal to provide each client with a personalized solution that minimizes the time of implementation and maximizes the return on investment.  Contact us today at 661-200-3612.

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According to a study by Black Book Research, the fact that we live in an unsafe world has spilled over into outsourcing decisions.  When you are outsourcing IT development, insuring data and intellectual protection is crucial, which is why you should be aware of the risks associated with different outsourcing destinations.  As the world economic climate has shifted, one of the most challenging decisions you will now have to make is choosing the appropriate outsourcing location and provider.  Based on Black Book Research’s study, which evaluated the risks of offshoring, there are definitely some locations you may want to avoid.

The purpose of the study was to assign rankings to major metropolitan locations of outsourcing.  Researchers assessed the safety and security of outsourced operations by analyzing downstream risks of offshore outsourcing in 2009, evaluating supplier side risk, developing a decision model for outsourcing buyers regarding the ramifications of offshore outsourcing’s downstream risks and providing insight into these risks.

Researchers used online surveys and interviews of over three thousand corporate development leaders and experience to assign rankings to offshore locations based on risk perception.  The following is a brief list of locations that researchers found to be the riskiest as far as unsecured and unprotected networks, infrastructure, technology and telephone and legal system immaturity:

• Bogota, Colombia
• Bangkok, Thailand
• Kingston, Jamaica

The locations that were considered the safest in offering secure and protected networks, infrastructure, technology and telephone and legal system maturity for outsourcing included:

• Toronto/Montreal, Canada
• Singapore, Singapore
• Dublin, Ireland

The Outsourcing Dangerously report by Black Book gave some tips to mitigate the risks of offshoring, such as performing a risk analysis and being aware of where your processes and data are outsourced.  It was also suggested that threats could be minimized by identifying industry consultants who can assist you in an offshore crisis.

A&E Consulting can help you choose the right outsourcing location and partner.  It is our goal to provide each client with a personalized solution that minimizes the time of implementation and maximizes the return on investment.  Contact us today at 661-200-3612.

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Choosing to outsource your IT project is a big decision that requires extensive preparation and expertise to realize the full potential of the outsourcing arrangement.  That is why you need someone on your side who has the experience and knowledge to help you succeed.  Below are the top 10 reasons why you should partner with A&E Consulting for your IT outsourcing project.

We are experts in our field.  When you partner with A&E Consulting, you are adding our experience to your team.  Our consultants meet the highest qualification standards in the industry and have completed rigorous training.  We possess real world outsourcing experience.

A&E Consulting offers support throughout the entire process.  We offer support and flexible solutions to help you with your outsourcing needs.

You will be able to avoid hidden costs.  Through benchmarking with our industry experts, you will be able to avoid the hidden costs associated with outsourcing. 

We will create a customized decision framework.  Our global sourcing strategists will develop a tailored framework to lead your company through the entire outsourcing project.

Our strategists will provide tools to capture value.  There is more value to an outsourcing relationship than just cost reduction.  We will show you how to capture additional value and innovation.

You can learn to avoid common pitfalls.  Through our experience, we will help you address and prevent the common issues that arise in less effectively managed outsourcing relationships.

A&E Consulting will help you establish governance structures.  We will help you develop a structure to manage your relationship with the IT provider.
 
We provide support for objective evaluations and decision making.  Our consultants will assist you with the evaluation process that will be based on your company’s needs.

Our consultants manage the change process to minimize disruption.  We offer support with early and frequent two-way communications, as well as assistance with developing a communications strategy.

We will help you get the contract right.  Even though we do not provide legal advice, we do have the capability to advise you on matters that will help ensure you have a successful outsourcing relationship.

For more information about A&E Consulting, call (661) 200-3612 or email info@aandeconsulting.com.

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A beneficial outsourcing relationship can lead to successful IT projects and development.  The IT outsourcing industry has grown significantly over the years, but according to research, a large percentage of outsourcing agreements are not meeting the expectations of either the outsourcer or provider.

The International Association of Outsourcing Professionals (IAOP) completed a study that analyzed the state of outsourcing relationships for more than a decade.  Researchers discovered that some of the factors that impact the success or failure of an outsourcing relationship remain the same.  A study that was conducted in 1997 identified some of the same factors in the success of an outsourcing relationship as IAOP’s most recent report.

According to the 1997 study by the Outsourcing Research Council, some of the factors that negatively influenced outsourcing relationships included the following:

• Setting unrealistic expectations and over-promising during the sales process.
• Structure of the relationship was inappropriate, which led to a discrepancy of interests during the engagement.
• Transitional details were not given adequate attention.
• Both parties were inflexible when it came to business needs and changes to operational requirements.
• Clash of culture between the two parties.
• A high turnover rate.
• Customers did not work through their business objectives.

Even though these studies identified potential problems, IAOP did identify some ways to assure the success of the alliance.  The IAOP study analyzed the key elements involved in creating a successful outsourcing relationship between the outsourcer and provider.  These findings were also consistent with the 1997 study and are summarized below:

• The expectations set by the outsourcer will lead to improved market standing through acquisition of new skills and competitive positioning.
• The provider will use its techniques, competencies and processes to improve the efficiency of the operation and cost basis.
• Both parties must understand that there has to be a strong relationship, including communication in order to create a successful alliance.

The IAOP researchers came to the conclusion that the factors necessary to create a successful outsourcing relationship have remained consistent and will continue to do so in the future.

If your company is considering IT outsourcing, contact the global sourcing strategists at A&E Consulting at 661-200-3612.  We can help you choose the right outsourcing location and partner.  It is our goal to provide each client with a personalized solution that minimizes the time of implementation and maximizes the return on investment.

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What if you were able to boost the productivity of your IT department and get products on the market faster, while cutting your costs dramatically?  Many companies have been able to accomplish these goals by global sourcing a component of their IT services.  This topic has generated a lot of heated debates, but the bottom-line is that businesses are able to benefit substantially by using global sourcing providers.  Today, most of the Fortune 500 companies are outsourcing at least one of the daily business operations to global sourcing partners.

Some of the major benefits of global sourcing are listed below.

Expanded hours of operation. Most businesses put a major emphasis on a project’s budget, which is important.  However, it is just as crucial to focus on the time it takes to get the project done.  When working with a global sourcing provider, you are able to have an IT department that runs 24 hours a day.  As the workday for your U.S. employees comes to an end, the vendor’s employees will just be starting their day.  For IT managers, this schedule is extremely productive.  They can review a project, make suggestions and send it to the global sourcing partner.  When the IT manager returns to work the next day, the revisions have been made and the development process is able to continue.

Access to qualified IT personnel. According to a Duke University study, businesses are looking for offshore employees because there has been a steady decline the number of engineering and science graduates in the United States.  It is estimated that countries such as India and China graduate 12 times more engineers than the United States.  Many of these graduates are fluent in English, which makes them attractive to U.S. employers.

Ability for rapid scaling of operations. A global sourcing provider can be used to grow or downsize an IT department very quickly.  Global sourcing also gives the outsourcing company the ability to easily add or subtract a new type of software.

Better reach in the global market. By mere geography alone, global sourcing helps companies looking to expand globally.  Global sourcing allows businesses to reach international customers and provide improved service and problem solving.  Having different locations gives the outsourcing company more flexibility in making sure that the business continues even in the case of a disaster.

Accelerate technical implementations. When your company is looking to create a new system or business process, it can be done fairly quickly with a global sourcing partner.  Many vendors already have the necessary hardware and software in place, which makes it easier to turn ideas into actual products.

Provide seasonal workforce flexibility. Workload can fluctuate depending on the amount of projects currently being handled by your IT department.  A global sourcing partner can be used on an “as needed basis,” meaning they complete projects during the busiest times for your company.  By using a seasonal workforce provided by a global sourcing partner, your company can avoid the hassle of hiring temporary IT employees.

Cost reduction. The salaries paid to employees in many other countries are considerably lower than the amount that U.S. employees are paid.  In some countries, the average amount that an IT employee earns is less than 30% of a U.S. employee’s salary.

Global sourcing greatly reduces the cost of production and operations, as it decreases the amount paid on overhead.   As costs go down, the financial position of the company strengthens, which in turn frees up more money that can be used for core business services and new development.

Global sourcing is a resource worth considering for most IT departments.  A&E Consulting can help you choose the right global sourcing partner and will assist you in establishing the business relationship.  In addition, we will manage the first outsourced project to make the transition as smooth as possible.

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There are numerous terms related to outsourcing and the way people use the terminology varies among location and industry.  It is common for outsourcing terms to be interchanged and there are no set definitions.  An overall understanding of what the words mean though, can help when talking about the subject of outsourcing.

Most executives know that outsourcing is defined as delegating business functions to a supplier or external partner.  What many individuals do not realize is that there are different types of outsourcing, including IT outsourcing, (ITO) and Business Process Outsourcing, (BPO).  With ITO, some or all of the IT services are sent to another provider.  The outsourced function can be software development or IT infrastructure services.  BPO refers to the delegation of non-core IT intensive business processes, such as supply management, data entry and customer service.

There are many terms used to describe the geographical proximity of the outsourcing provider to the customer.  Onshore outsourcing means that a company is sending work to a provider located in the same country.  In the United States, that would basically mean a company contracts with a U.S. supplier for business services.  Near shore outsourcing refers to contracting with a company located in a nearby or bordering country.  Usually near shore means that the outsourcing provider is a short travel distance and may even be in the same time zone.  For the United States, Canada or Mexico would be considered a near shore location.  Global sourcing, also known as offshore outsourcing, offshoring, describes the process of delegating functions to a provider located in a distant location, several time zones away.   India, China and the Philippines are all considered to be offshore locations for U.S. based companies.

It is important to also be well-versed on the key players of the outsourcing relationship.  The company looking to outsource work is referred to as the buyer, outsourcer or customer.  The firm that accepts the outsourced work is called the supplier, service provider, outsource service provider, vendor or resource.

Companies looking to outsource should consider sending work to more than one service provider, which is known as multi-sourcing.  When the outsourcer utilizes the services of more than one provider in different geographical locations, this is known as an outsourcing portfolio.

A&E Consulting can bring you up to date on the newest terms in outsourcing.  We can assist you in choosing the right global sourcing provider and establishing the business relationship.  In addition, we will manage the first outsourced project to make the transition as smooth as possible.

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There is a lot of speculation as to what the coming months will bring for the global sourcing industry.  According to Gartner, a research analyst firm, spending on offshore IT services is expected to grow 40 percent in the United States and 60 percent in Europe in 2008.  The big question is what new trends will occur among global sourcing?

More companies will begin to send work to countries other than India. For the past several years, India has been the leading provider of global sourcing.  While this country is expected to remain in the lead, there are more challengers in the industry.  The IT market in India has been impacted by wage inflation, shrinking pool of talented professionals and infrastructure issues.  It is likely that global sourcing providers in Latin America, China, South Africa and Eastern Europe will attract more IT business.

Global sourcing providers will consolidate. Competition in the outsourcing market has become fierce. The leading IT service providers are expected to consolidate by purchasing smaller competitors in the industry.  There is speculation that the number of mergers and acquisitions will continue to go up and there will consequently be a smaller amount of suppliers for buyers to choose from.

Remote infrastructure management (RIM) outsourcing will grow. RIM refers to managing servers, applications, networks and databases.  This market is estimated to grow 60 to 70 percent in 2008.  RIM outsourcing is considered to be an asset-light deal and provides a lower cost infrastructure for the outsourcing company.  Traditional infrastructure outsourcing will start to decline as RIM outsourcing grows.

There will be a greater demand for high quality work and more services. The focus has been on cost reduction, but more outsourcing companies will be putting an emphasis on high quality work and additional services.  Outsourcing companies will be looking for better talent, expertise and flexibility from the global sourcing providers.  There will be a bigger demand for higher-value work including process improvement and application portfolio rationalization.

Green outsourcing will become more popular. Environmental concerns are growing and corporations are requiring that suppliers adopt green policies.  The Brown Wilson Group conducted an independent study of 20,000 outsourcing users. According to the survey results, 43 percent of outsourcing companies said that green factors would be important when choosing a supplier for the first time.  More than 94 percent of executives that were surveyed stated that they plan to add green clauses in their renegotiation processes.  This spotlight on environmental concerns could force global sourcing providers to develop eco-friendly processes and policies.

A&E Consulting will make global sourcing work for you.  We will assist you in choosing the right global sourcing partner and establishing the business relationship.  In addition, we will manage the first outsourced project to make the transition as smooth as possible.

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