Hvordan finder man en outsourcing leverandør

Denne blog handler om hvordan man finder en outsourcing leverandør samt giver nogle indspark til hvad man skal spørge om og hvad man skal passe på.

Bloggen er på Engelsk, ikke for at være smart, men fordi jeg bruger voice recognition på Engelsk (kan ikke få det på Dansk) . Håber det går :-)

 

 

The following is written with a small business and small project (DKK 150.000 on less) in mind.

When you start sourcing for a supplier there are many things going through your head, especially if this is the first time you do it:

• Will the supplier deliver quality?
• Will the supplier deliver on time?
• Will the supplier in business tomorrow, how is their financial situation?
• Will they keep quiet about what to learn about my company?
• Will they steal my idea?
• Will they steal a copy of my source code?
• Can I rely on them when push comes to show?
• Etc.

Remember: The same questions can also be asked if you are planning to use a Danish supplier. The difference between a Danish and a non-Danish company is that with a Danish company both parties come from the same cultur and speak the same language. 

Specify your requirements

Before you start write a few paragraphs about your requirements, be specific and detailed, write it in English and do not leave anything open for interpretation. Next send an e-mail to 5 or 10 suppliers you find on google, amino.dk or through your network (worth of mouth). 

 

About suppliers

Finding a reliable supplier can be very difficult and many companies will promise anything you want to hear in order to get the contract. Their point of view is that problems arising from empty promises will be dealt with later once the contract is in house. While this is a very short-sighted, primitive, unprofessional, naive way of doing business, it is unfortunately a way that many in the industry does business. 

Why is that so?

Companies knows that once you have spent i.e. $15,000 on development you are very unlikely to stop, in short they are banging on:

a) The two of you find a solution to your problems and continue working together.

b) You give up and let them keep the money.

They know that you will not go to court in India or the Bangladesh for $15,000. Going to court would be absolutely suicidal, a court case will take five years and you run, or rather you are almost guaranteed to lose the court case unless you pay a so-called "facilitation fee" to the judge. A judge will almost always favor the local company. (yes yes, I know there are honest judges around).

Some of the things IT outsourcing suppliers promises new customers to get the job are:

• Extremely low prices US$ 7 for SharePoint development or high-end .net development per hour. They claim that this is possible, but in reality they use developers who are straight out of college, and you may not not notice that before weeks into the project after you have rendered one or two payments.
• Extremely short delivery times, one month to finish a large system for which everyone else needs four months. 
• Promises of high skilled labor.  This is a favorite of mine: A company promises and gives you high skilled developers.  These developers work for you 2 to 3 months and then they are removed in exchange for low skilled developers straight out of university. At this stage of the project you almost cannot stop anymore. What do you do now?
• Claim to have done similar projects in the past and that they have a lot of experience with exactly your kind of problems, but in reality they have never done it before. 
• Using reference projects which they have not done themselves.

Things you should ask for

• Always ask for customer references, minimum 4 or 5. If you cannot get that, for whatever rason then walk away.
• Do a Skype video conference call. During the call, ask the supplier to show his office by panning the camera. 10 seconds can reveal a lot.
• If you pay hourly rate, find out how time is recorded. 
• Never accept rounding up to the nears 15, 30 or 60 minutes. 
• The possibility to do a short project, 2 or 3 weeks to "get to know". 

Check your supplier, do they keep what they promise?

You need to check your supplier to find out if they generally keep what they promise before you start working with them. If they do not do what they promised before you start working together, imagine how it's going to be after they have received the first payment. One way you can do this is to ask for something that takes 10,15 or 20 minutes of work to do. Casually ask when you will get that (do not press to get it done quickly), just ask for a date. Next sit down and wait, if they do what they promise on or before the date, then that is a good sign, if they don't then that is a bad sign.

 

The cultural differences

The bad - The cultural differences between you and your supplier is enormous

The good - You can learn to overcome this, but it takes practice and patience

Many things will be different, some things you will like and learn to accept, others will drive you up the wall.

Suggestions

• Look for a company where there is at least one Dane employed (unless you know the culture very well).
• Check the references, speak with a few of their customers.
• Go with the flow, think about the problems at hand, don't think about what happens two months down the road.
• The Asian yes. Just because a person says yes I will do it, or yes I understand does not guarantee that the person understood what you said or will do what he/she promised. Ask follow-up questions to make sure that the person understood what you said.
• Use screen recording software when you want to convey information to the supplier. Seeing things while you explain what you want makes it so much easier. Camtasia (and there are others) is a very good tool.
• Chances are that the country where you source your supplier has a crooked president who steals everything from the people. When you speak with the local employers, don't mention it.
• Make sure that you are allowed to deal directly with the local project manager.

 

Partnership

There is also a different way of doing outsourcing, go into partnership with a company. Right now some Danish IT companies go into partnerships with IT companies in Vietnam. The idea is that the Danish IT company will help the Vietnamese IT companies through knowledge transfer, and Danish companies will get access to the Vietnamese market for their products. Danida will be helpful in many ways, for instance by sponsoring a trip to Vietnam for the Danish company so that they can see the local facilities. You can read an article about the program here.

Personally I am against this kind of help, the Danish government financing brain drainage by subsidizing export of Danish jobs to third world countries. In my view there should be as little government intervention as possible, if outsourcing to Vietnam or partnerships between Danish and Vietnamese companies make sense then it will happen anyway, with or without the help of Danida.  

But then again if there are free money to get, why not take them?

A partnership has its advantages and disadvantages, some of which are listed below:

• You will have better access to resources.
• You will have a voice in how the companies run, including which technologies will be focused on..
• Your costs will be even lower (can be at least).
• You can get subsidized by Danida in some way (I am not 100% sure how the program works, you will have to check it yourself, but I'm sure you can get money from Danida).
• You can get some so-called expertise help from Danida on how you operate in a Third World country. Personally I'm not totally impressed with how Danida does things from what I've seen in the Philippines. 
• You can easily be cheated by your local partner, he knows what is generally accepted and what is not (to hell with what the law says, it's about what is generally accepted and what is not ).
• If ever there will be problems ending in court, you will most likely loose, the court will favor the local partner 99.99 out of 100 times.
• You must be ready to commit at least one Danish resource to be on-site all the time, that cost money, a lot of money, and there is a real chance that when your expat employee has been in the country for one or two years and knows his way around he will resign and start his own business.

 

Negotiation

Remember that the supplier also have to earn money. If you press the price too much the following will happen:

• There will be no loyalty, you will get lousy people working on your project and everything they do for you will have the lowest priority.
• Whenever you need changes after the project is finished there will be a long response time (you are low priority).
• You are likely to see a copy of your project in different colors somewhere else at some point time.

When you negotiate the pricing structure, make sure that you have the following areas covered (hourly rarte / man hour project):

• Hourly rates during the main project
• Hourly rates after the project is finished
• If there are special tools, software, add-ins etc. needed on the project who pay for these?
• If there are any extra fees such as special taxes etc. make sure that you know about them and agree who will pay them.

if you work on a fixed price project:

• Make sure that the payment terms are 100% clear and agreed to by both parties.
• Make sure that the warranty terms are 100% clear and agreed to by both parties
• Try, if you can, to crack a deal wherein you do NOT pay the final 10 or 20% before after the warranty period has expired. Needless to say why that is good...

And above all:

• Get the source code at regular intervals during the development process so that your work is not lost if you part with your supplier 
• If possible negotiate the contract so that you get the final source code before the last payment. Chances are that the supplier says no, but if they agree then good for on you.