Outsourcing and Risk
Outsourcing software development projects has been on the increase in the recent years. The largest benefactors have been countries like India and Russia where software development is seen to be relatively cheaper than most countries in the world (Mathew, 2011, p. 184). Most companies see this as an opportunity to save lots of money in areas such as the staffing required for such an undertaking, they are therefore able to add on to the efficiency and productivity of the firm; however this is not always the case. It is necessary for firms to view the risks involved and ways of mitigating these risks. Having a tradeoff between the risks involved and the benefits involved in outsourcing software development is vital for a firm (Vogel & Connelly, 2005, p. 285). Most of the risks involved have been seen to occur before a firm was contracted, during the period in which the firm was contracted to develop software, and after such outsourcing had taken place.
Most of the information required for the development of software is intellectual property; this property has to be kept safe. Protecting such intellectual property is one of the major risks in which firms outsourcing software development face in the current times. This is because very sensitive information is transferred to the vendor or third party (Mathew, 2011, p. 179). This information may include secrets of the business and codes. There have been cases where very sensitive information has been stolen and sometimes purchased from vendors; this has led to great losses to customers. This can happen when an employee, for example, sends a source code or other important information through their personal email address so that they can work on it from home. Alternatively the employee may sell the information to other parties who may be interested. This has raised a lot of concerns from potential customers, however it can be reduced. The vendor contracted and the customer should take precautions in monitoring the IP, and preferably ensure its protection in the contract (Vakkayil, 2011, p. 624).
Increasing the number and level of procedures to beef up security such as having authorization codes specific to different employees, use of access cards and creating limitations to the number and kind of documents that are accessible to certain employees has been effective. Another effective method is when one is outsourcing to different vendors, one would break the code into smaller parts and distribute it among the vendors and making sure that its reconstruction is impossible.
Another risk usually occurs if the vendor is offshore or in a different time zone. This makes communication a challenge, which may lead to an increase in the time and cost required for the building of the project. This is because depending on the time, stability and connectivity of the country when a customer calls the vendor, it may be difficult to communicate with them or the communication system may be down. Lack of or inadequate communication may lead to the vendor not meeting the needs or requirements of the customer (Vakkayil, 2011, p. 616). This can be reduced by using email as a communication mechanism but this is not effective to explain everything needed for a project. Another way of mitigating this risk may be using a mix of offshore and onshore vendors to undertake the project. This is because the two teams can work in continuous shifts which may make their difference in time zones an advantage. Therefore with mitigation of risks involved in outsourcing software development, it is possible for firms to outsource and enjoy maximum profits from such an endeavor.
References
Mathew, Saji (2011). Mitigation of risks due to service provider behavior in offshore software development: A relationship approach. Strategic Outsourcing: An International Journal, 4(2), 179 – 200
Vakkayil, Jacob D. (2011). Learning through shared objects in outsourced software development. International Journal of Managing Projects in Business, 4(4), 616 – 632
Vogel, David A. & Connelly, Jill E. (2005). Best practices for dealing with offshore software development. Handbook of Business Strategy, 6(1), 281 – 286
