Risks of outsourcing, knowledge retention

For the past 2 ½ years, I have had the privilege of working in an outsourced environment. The company employs a few developers who oversee on site developers and development being performed over seas. This model does have its advantages. We are able to ramp up development quickly as the demand on a project dictates. The cost of development and re-development of our Oracle Apps customizations is decreased. Actually the incremental costs are lowered or rise at a lower rate over time. This allows IT to be more responsive to business changes, and have more resources available to meet project demands.

Outsourcing has its limits and risks. The first thing to remember with outsourcing for Oracle Applications is that you are dealing with developers who will at most only have 1-2 years experience in coding and coding in the Apps environment. If you pay more you may get someone with 5+ year’s experience. These programmers may have access to internal resources on their side to assist them in meeting development requirements but will they utilize them? This lack of experience increases the need for your in house developers who are managing the projects and code base to be very knowledgeable of all of the processes and enforcing code standards. This makes your development group of people very valuable to the company, and leaves the company at risk of losing knowledge if you developer leaves the company.

Contracts rule the relationship between your company and the outsource company. After 2 years, I’m starting to see turnover with our onsite and off shore developers. Why? The number one reason is costs. Everyone likes their annual raises; they are semi written into the contracts. The issue is that the job market for an Oracle Apps developer usually raises the costs for a developer greater than what was written into a contract. This causes turnover. Older contracts lose their experienced developers to new contracts. Why? The new contracts can afford to pay the experienced developer more money. This leaves the older contract capped at a certain experience level 1-2 years on average.

What happens when you do not keep your in house developers who are managing your code base up to market on their salaries and benefits? Your developers tend to leave, usually not one at a time, but several in a span of weeks. If one developer is not happy about what he/she is making. Then there is a high chance that the rest are thinking the same. Especially after the first developer leaves and tells everyone what he/she will be making. If your company is like the companies that I’ve worked for, your custom processes are probably stored on a network drive somewhere. Most likely grouped by project, or some other sort of method that know one knows how or why, except maybe the people who have walked out the door. With your experience walking out the door, you’re out sourced solution starts to perform less efficiently. Development times lengthen without the proper guidance. Utilization of your existing code base decreases. IT’s relationship with the Business becomes strained because of delays in meeting business demands.

Remember outsourcing is a way for IT to become more responsive to the business’ needs and in meeting a business’ demand for services. Outsourcing is not necessarily a way to do more with less or save the company money. Outsourcing is a way to have development done on demand and not incur the extra overhead for keeping idle developers on standby until a project is ready for them to code. If this is kept in mind and your in house developers are viewed more as managers of your code based assets instead of replaceable overhead. Then you will have a successful out sourced experience. Otherwise you may end up with a solution that costs the same and has the same results as if everything had been sourced internally.