SUBCONTRACTING
TRENDS AND DIFFICULTY
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Outsourcing is more complex and risky if the
outsourcer (the prime contractor) outsources
to subcontractors or utilizes overseas locations
36% IT Outsourcing contracts and 25% of
system integration contracts involve
subcontractors
Outsourcers go overseas for another important
reason : significantly lower programming costs
in countries like India, Israel or The Philippines.
The Increased Risks
To optimum use of subcontractors, clients should :
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Ensure that they are informed the use of
subcontractors. (Some prime contractors fail to
make this delegation open)
Appraise subcontractors and their key personnel
with the same diligence used for the prime
contractor
Insist on having & maintaining direct relationships
with the subcontractor.
The Increased Risks
Written contract is a rough outline of what
needs to be performed.
The sense of commitment and the resources
provided by key subcontractors are of
major importance.
Does One Size Fit All ?
Often contractors who have designed a system for
one client will propose to include it in a
package for another.
2 syst. development problems in its new usage :
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It is highly inefficient since the parts is mix
together
This mix system becomes more difficult to
customize further. It’s very difficult for
programmers to work with because so many
complexities are fixed in it
Does One Size Fit All ?
Designing systems with adaptable standards for
multiple customer needs is difficult.
If purchasing a previously developed “custom”
system, client should anticipate more time for
redesign and even restructuring of the system
and make sure the programming team
assigned to do the new “customized” system
includes those who were intimately familiar
with the model system’s details and faults.
Explicit Safeguards
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Client must choose prime contractor with
critical systems expertise to add the most
value, rather being subcontracted.
And the prime contractor should perform a
good share of the work and not simply be the
coordinator.
The contract should ensure the work is not
subcontracted without the client’s knowledge
and approval.
Explicit Safeguards
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The outsourcer should only use subcontractors
selected from a pre approved list. The client
must give time, energy & resources assessing
the competence and commitment of the key
subcontractors and their key project people.
Subs need to understand the larger system,
not just receive specifications for their part of
the system as translated by the prime.
Why Bypassing May Be Essential
There are several reasons for doing this :
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Commitment level of professionals can be increased if
there is a good personal relationship
Trade-offs will be made by programmers in developing a
new system. The client wants them to favor the business
needs and strategies, not technical convenience or
shortcuts that minimize costs or time investments.
During serious deadlock in the development effort there
can be extended, even destructive conflicts between the
sub and the prime contractor.
Appraising International Outsourcing :
A High-Risk Strategy
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Clearly definable projects requiring relatively
routinized programming (e.g., converting certain
kinds of reports to a different format) are safer to
have done overseas.
However, obvious cost saving and availability must
be balanced against the enormous geographic,
time & cultural barriers to frequent, easy
interaction and coordination.
For some clients, the global nature of their
operations may be significant factor in systems
development and ongoing operation.
Are There Cost Savings?
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Client’s multicultural projects are always
high risk. And this must be factored into
their outsourcing strategy.
In addition to the possibility of traumatic
political change, substantial problems can
be created by differences in legal systems
and even in the importance of laws,
contracts, property rights, and the like.
What a Client Should Demand
and Understand
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The use of overseas resources or
subcontractors must disclosed to client at
initial discussions, so client have an
opportunity to assess the risks and benefits of
this factor.
Clients should know that can be additional
costs and specialized resources associated with
successfully managing a multicultural project.
What a Client Should Demand
and Understand
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If international resources are part of an
IS outsourcing strategy, the client should
consider the extent to which they will be
willing to assign personnel to participate
in the effort and manage the relations
involved.
ASSIGNMENT : p.97 – p.99 A Case Study