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Risks Associated with Global IT Sourcing

Aug 29, 2008
Companies have been able to save both time and money through global IT sourcing. However, when considering global IT sourcing, companies need to be aware of the associated risks. Some of the most common challenges that IT managers face when sending work to a global sourcing provider are outlined below.

Employee turnover. There is a lot of competition among global sourcing providers and these firms try to attract the most talented IT professionals. It is not uncommon for a vendor to try to lure employees from a competitor. Since there is such a high demand for IT workers, the employee turnover rate is fairly high. Unfortunately, this high turnover rate can impact the outsourcing company, as the projects can be delayed during the time it takes to train new employees. Outsourcing companies should understand this possibility and have a back up plan just in case a project gets behind schedule.

Vendor misunderstands project specifications. Outsourcing companies must give clear and well defined project guidelines to the vendor to avoid errors in development. IT managers can prevent this problem by creating a thorough project specification that outlines how the project should be developed. Also, the vendor should have a quality assurance test in place that will help identify any errors in the programming.

Intellectual property can be stolen. Intellectual property is one of the most valuable assets a company can possess. Theft of intellectual property or proprietary data can cause significant financial loss for the outsourcing company. Before an outsourcer chooses a global sourcing provider, it should review the company's data security policies and access controls. These policies should be included in the signed contract. To further protect vital information, only the data that is crucial to the project should be shared.

Business knowledge is lost. When it comes to IT development, most of the application knowledge resides with the developer. An outsourcing company can stand to lose business knowledge as more projects are sent to a global sourcing provider. Sometimes an outsourcing company can become so closely connected with a global sourcing provider that it is difficult to sever the relationship. The loss of business knowledge can be prevented by determining what projects can be outsourced without compromising the outsourcing company's position.

Communication obstacles. The difference in time zones and work schedules can put a strain on communication. For most of the vendor's employees, English is not their native language, which increases the potential for miscommunication. A communication plan should be implemented that will outline how the communication will take place and the frequency. After a meeting takes place, summaries should be generated that go over what was discussed during the conversation. These summaries should be dispersed to all team members to ensure that everyone knows what is to be expected.

Vendor fails to deliver. In some situations, the vendor just does not get the project done. Since this risk can greatly impact the outsourcing company, it needs to be considered before sending work to a global sourcing provider. The outsourcing company should have a back up plan just in case the vendor does not perform as agreed. If an uncompleted project is too detrimental to the outsourcing company, then it should be kept in-house.

Global IT sourcing has some notable risks, but these challenges should be weighed against the benefits. A decision to send work to a global sourcing provider should not be made until the outsourcing company has thoroughly evaluated these risks and benefits.
About the Author
A&E Consulting is a full service consulting firm that has been successfully helping clients with their global needs. Visit http://www.globalsourceyourit.com or call 818-572-8399 for more information.
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