A Risk Profile of Offshore-Outsourced Development Projects

November 5, 2011

A Risk Profile of Offshore-Outsourced Development Projects

            In the today's world of Economic Globalization, offshore-outsourced development projects are increasing day by day, and, the trend in its increase indicates that in future, more of the business would be relying on it. The problem lies in this process, for any business, to be able to efficiently achieve the objectives they are looking for, in the products and services, they are outsourcing. ACM performed a study of the risk factors of offshore-outsourced development which presented a serious threat to the successful completion of the project (Iacovou, Charalambos L). Previously, studies had been conducted, but, it was based on in-house and domestically outsourced environments (Iacovou, Charalambos L).

            The study started by selecting experienced senior project managers and directors to complete a form summarizing their experience, and finally, selecting 15 out of 57, well qualified individuals to participate in the study, such as, Delphi Survey method (Iacovou, Charalambos L). The result of the study basically suggested that most likely, “offshore initiatives experience the same fundamental issues that affect non-offshore ones.” (Iacovou, Charalambos L). But, the in depth insights from the panelists’ suggested that they most likely poses sever threats in multinational and distance based working teams (Iacovou, Charalambos L). A recent ACM report suggests that outsourcing "magnifies existing risks and creates new threats” (Iacovou, Charalambos L). Therefore, as an offshore client, we need to be very careful in providing the resources to communicate with the outsourcing companies, so that; they would be efficient in delivering our deliverables.

            The panel came up with the 10 most important risk factors in offshore project development which concentrate on three major areas of concern, that includes - miscommunication in client-vendor communications, language and other environmental factors that miscommunicate the original set of requirements, and, the most common – language and cultural barriers in the project communications (Iacovou, Charalambos L). The other risks that need to be solved are poor change controls and the lack of informal interactions between the developers and the users (Iacovou, Charalambos L). Lack of top management commitment, lack of offshore project management know-how by client, failure to manage end user expectations, lack of know-how by offshore team, as well as, failure to consider all the costs involved, are the major issues that the study came up with, in accordance to mitigate the risk factors in offshore projects (Iacovou, Charalambos L).

            In short, offshore projects face higher risks that involve the traditional project risks as well as threats that are common to offshore environment. Hence, they need to overcome these risks and threats so that, the project would incur less level of failure. I agree on all of the risk factors and, their rating given by the panelists which is very helpful for us, if we decide to offshore our projects. The risk factor 17, “Constraints due to time zone differences”, and its rating at 5.8 seem to be over stated, in my opinion. This should not have much impact on the communication between the offshore team and the client, because as far as I know, offshore team manages their working schedules according to the time zones of the client location. But, overall, this study really gives us insights of what needs to be prioritized by the clients, before or during their outsourcing of their offshore projects, so that, they would be able to select the risk factors that are more important to them and the outsourcing companies abroad.

           

Works Cited:

Iacovou, Charalambos L., and Robbie Nakatsu. "A Risk Profile of Offshore-outsourced Development Projects | June 2008." Communications of the ACM. ACM New York, NY, USA, June 2008. Web. 05 Nov. 2011. <http://cacm.acm.org/magazines/2008/6/5389-a-risk-profile-of-offshore-outsourced-development-projects/fulltext>.