Managing the Risk of Offshore Vendor Selection

Managing the Risk of Offshore Vendor Selection 

Enterprise ::

Companies considering the use of offshore resources for their next development project need only spend 2/10ths of a second on Google to find roughly 5,150,000 options to choose from using the exact phrase “offshore development.” The options are boundless and the capabilities limitless. So why does this cause more confusion than good?

Today’s lean organizations have little time and energy to search through, locate, validate and negotiate contracts with a short list of offshore firms. But nonetheless they do need to create a short list of potential providers.

In general there are five questions a client must ask of each potential offshore provider:

• Is the offshore provider dependable?

• Do they have the necessary technical skills to get the job done?

• Is there work of an acceptable level of quality?

• How will you protect your company should you have to revert to legal channels to resolve any problems?

• How are you going to manage the project from afar?

This paper will help clients sort through the set of requirements to identify that magical short list with a level of confidence that the work stands a very good chance of being completed on time and on budget while satisfying the requirements.


Measuring dependability is a function of more than just getting the nod from a reference. Dependability is often a gut feeling you get as you begin the most basic of conversations with the offshore provider. Are they responsive to your emails? Does the telephone get answered? Do they have multiple avenues of communication, such as a backup for the project manager? Has their business development manager pulled the technical resource into the conversation at an early stage? Much of what you feel inside is going to give you the most comfort as you move forward with the selected provider. Often times it simply means you have to spend more money to get a higher level of comfort of your ability to really depend on the offshore provider. But keep in mind, higher costs does not necessarily mean better or more dependable work, it’s simply something you may have to endure so you walk away from signing the Statement of Work with a high level of confidence you will be successful.


The broad base of technical capabilities available in the offshore market is staggering. Companies that take their software development offshore will never again feel the IT resource shortage such as were encountered in the late-1990’s. Many companies have and continue to move into the offshore market and as a result there are many, many new offshore providers that have a fairly shallow pool of experiences to draw from. This leads to the simple requirement for a detailed list of references, including specifics about each of the projects. Clients should demand at least five solid references from each potential provider. Ideally, there will be references from Western Europe and / or the United States. Be sure to collect the size of the project, including man months and cost. Offshore providers hesitant to provide this should at least be able to provide a range. A company used to 4 – 6 week projects may not have the skills to be successful in a 2,000 – 20,000 hour project. Clients should collect both the business solution and the technologies applied to satisfy the business solution. This will give clients a feel for the provider’s ability to strategize about how to best apply technologies to meet your unique requirements. However, do not eliminate an offshore provider simply because they don’t have specific experience on a project just like yours.


Quality is a term that has been thrown around for decades. For one client it may mean that the offshore provider has achieved a certain level of the Capability Maturity Model, while the next customer may simply want to be assured they are getting a “satisfaction guarantee”. Unless there is a specific requirement for a certification, clients should concentrate on the specific practices of the offshore provider. Clients should ensure they have documented information about the quality processes and environment for the offshore providers. All respectable offshore companies will be able to readily provide this and able to communicate it clearly, even to the extent of providing recent examples.

How many levels of testing will there be? Where will each testing level occur? How will the application be introduced or released into the client’s controlled environment? What are the tools and processes used by the offshore company perform change management and defect tracking?

Despite the advent of e-time and rapid application development, there is still a basic requirement that applications follow a fundamental software development life cycle; the geographically removed location of the development team does not eliminate this (out of sight, out of mind).


The legalities of working with offshore companies can cause any company’s legal counsel to cringe. The idea of working directly with a company controlled by foreign laws requires thorough due diligence to ensure any contract will indeed be legally binding. Often, gaining this level of guarantee can delay the start of any offshore project by weeks, if not months.

There are two ways to manage this risk: an independent assessment of the offshore company or using a US corporation, which takes responsibility for the project but uses existing relationships it has to stream the work to its offshore partner network.


The greatest risk associated with offshore development revolves around management of the offshore relationship and the development efforts. This begins in the very early stages with the customer not being adequately prepared to do business offshore. Which applications should be moved offshore? Who will manage the relationship? Are our project managers trained in the nuances of managing virtual teams, let alone one from another country and culture?

The most important action a company can take when considering the use of offshore resources is to seek guidance from an independent offshore consultation firm. These firms provide a variety of services including conducting on-site assessments of offshore companies, helping establish dedicated offshore development centers, providing offshore project manager training, and other industry-specific information.

For More Information:
Phone (+1.480.710.0953)
Email (

Write your comment