(July 28, 2005 - www.itbusinessedge.com) - Question: Deloitte Consulting LLP's study "Calling a Change in the Outsourcing Market" found that 70 percent of participants have had significant negative experiences with outsourcing projects. What does ESI believe are the biggest reasons for this high failure rate in outsourcing?

Foreman: In our opinion, there are a number of clear mistakes that numerous companies make in initiating offshore outsourcing contracts — the most obvious one being lack of preparation. In order to create and maintain a successful contractual relationship related to an outsourcing deal, corporate self-examination is essential. Organizations should ask questions such as: What are the objectives, and are they shared among key executives? What personnel will be affected and how will we prepare them? What processes will need to be modified (assuming they are functioning reasonably well before the outsourcing deal)? What are the obvious risks and how will we mitigate them?

Question: The Deloitte study also suggested that these companies are now exercising greater caution in approaching outsourcing. How do project management and business analysis play a part in this increased level of caution when IT offshoring?

Foreman: The disciplines of project management and business analysis stress foreknowledge — inquiry, planning, documentation and preparation, all of which are necessary actions to prepare for a successful outsourcing experience. Project management and business analysis disciplines can assist the purchasing company in thinking through the implications of a preliminary decision to outsource and explore the ramifications, as well as to properly identify all necessary work actions to be accomplished prior to contract closure. Additionally, these disciplines can identify what needs to be measured and monitored after contract initiation.

Question: What can companies do in terms of business analysis to ensure greater success when offshoring IT?

Foreman: Business analysis techniques can be used to both analyze and support the repair or modification of current conditions, such as processes and workflows, as well as to support the execution of the offshoring contract. One financial services client of ours recognized when making the decision to offshore application development that clear requirements would be key to successful development, so professional development training focused on documenting requirements was initiated, with considerable success.

In the end, sound general management judgment combined with cross-functional activities in project and contract management, as well as business analysis, needs to be properly exercised throughout the entire sourcing lifecycle to ensure offshore outsourcing success. This cross-functional collaboration should be a hallmark of the entire lifecycle from the early strategic thinking through requirements definition and vendor selection. The collaboration should extend to include the vendor through contract execution and, finally, in contract closeout.