Expert articles
Steer clear of IT discounters
By Rudolf van Megen, CEO of SQS Software Quality Systems AG
The debate surrounding IT outsourcing and offshoring in some ways resembles that about Aldi, Lidl and other low-cost supermarkets. Until recently German consumers were still in a discounter frenzy, but the pendulum is now swinging back. Time and again, frustrated customers have been forced to realise that when buying lawnmowers, kitchen appliances or bicycles they are better served going to a specialist supplier after all—working out cheaper in the long run.
Many European industrial enterprises which have recently relocated numerous IT tasks to low-wage countries are still in the middle of this learning curve: the day-to-day picture is dominated by problems understanding the people they are dealing with in the Far East, for example, or by quality deficiencies in supplied products.
The alternative is not, of course, to turn back the clock on offshoring. Just taking a look at traditional industrial production shows which route has to be taken. In automobile manufacture, for example, assembling vehicles in Brazil, Eastern Europe or the Far East is no longer a matter of concern for the industry’s bosses, in contrast with IT production. Why is this? Above all because industrial manufacture follows a tried-and-tested pattern of division of labour, based on a network of highly specialised suppliers. And because quality assurance obeys the principle of independent testing.
IT offshoring, on the other hand, usually sets itself apart from these two principles of success. As a result, many clients work with just a small number of system suppliers. These provide everything from one source, from design through to maintenance, while at the same time working with low prices. Because such all-rounders are fairly good at everything, but master hardly any task really well, they are only rarely able to secure the necessary IT efficiency and cost-effectiveness in the long term. What is worse, in most cases software production and quality assurance are in the hands of the same people. Every engineer knows: this is asking for trouble.
And when you are dealing with IT systems, the trouble is particularly bad. In comparison with traditional industrial manufacture, communication and coordination requirements between the client and the service provider are higher in IT production. Translating the customer’s demands into reality, for example in terms of design and implementation, is much more reliant on verbal communication and non-formalised information. This is a fact that those in charge have to bear in mind.
The first consequence of this is that the service provider’s most important contact staff have to speak their customer’s language. In the case of German, this is something that Indian suppliers for example almost never do. South African, Eastern European but also North African providers, on the other hand, generally offer a multilingual capability. Secondly, clients have to optimise their steering capability to the extent that they are able to manage a network of IT specialists who offer the state of the art in their respective technical fields. Thirdly, those in charge should make sure that their suppliers have sufficient onsite capacity in Central Europe, because experience with IT projects indicates that the often-promised ten per cent share of resources offsite is not enough. The management has to expect that between a third and half of all tasks can only be dealt with on their own doorstep. And finally, quality assurance must be placed in the hands of independent, external specialists. This is the lesson learned from decades of experience in the industry.
None of this, of course, is available from a discounter. The initial investment is higher than with an all-rounder, who tempts customers in with low prices. The payoff, though, is that IT production runs efficiently and cost-effectively in the long term.
