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What readers are saying about
Outsource It!
The quintessential guide to modern outsourcing, this gem of a book, laced with
real-world examples, will appeal to both experts and newbies alike. A must-read
for anyone venturing into this territory.
➤ Manoj Andhappilly, Director of Engineering, Motif Investing, Inc.
I manage several highly distributed development teams, including teams in Russia.
Outsource It! is a very pragmatic, easy-to-read "how to" reference, which has
practical recommendations for addressing the most common decisions and chal-
lenges with outsourced projects. In particular, I liked Nick’s observations about
cultural differences between popular outsourcing destinations, as it matched my
personal experience, and I could clearly relate to many situations described in
this book.
➤ Kirill Abgarian, Program Manager, R&D, Quest Software
If you want to work with outsourcing, Outsource It! is the book you need. All the
steps are described, and each step includes a lot of pragmatic tips. If you already
work with outsourcing, as I do with both offshore projects and freelancers, you
will still learn many things.
➤ Antonio Gomes Rodrigues, Java Performance/Load Testing Expert
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Outsource It!
A No-Holds-Barred Look at the Good, the Bad,
and the Ugly of Offshoring Tech Projects
Nick Krym
The Pragmatic Bookshelf
Dallas, Texas • Raleigh, North Carolina
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The team that produced this book includes:
Kay Keppler (editor)
Potomac Indexing, LLC (indexer)
Molly McBeath (copyeditor)
David J Kelly (typesetter)
Janet Furlow (producer)
Juliet Benda (rights)
Ellie Callahan (support)
Copyright © 2012 Pragmatic Programmers, LLC.
All rights reserved.
No part of this publication may be reproduced, stored in a retrieval system, or
transmitted, in any form, or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior consent of the publisher.
Printed in the United States of America.
ISBN-13: 978-1-93778-505-5
Encoded using the finest acid-free high-entropy binary digits.
Book version: P1.0—December 2012
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Contents
Acknowledgments . . . . . . . . . . . xi
Introduction . . . . . . . . . . . . xiii
Part I — Decide If, What, and How to Outsource
1. Make an Educated Decision . . . . . . . . . 3
1.1 Get SMART: Defining Outsourcing Objectives 4
1.2 The Risks of Outsourcing 5
1.3 The Rewards of Outsourcing 8
1.4 Understanding the Fine Print 10
1.5 Cost Savings: Expectations Versus Reality 10
1.6 Ability to Scale 14
1.7 Quality of Deliverables 15
2. Define and Refine Your Action Plan . . . . . . . 17
2.1 What—and How Much—Should You Outsource? 17
2.2 Working Together: Finding the Right Outsourcing
Model 18
2.3 A Sample Outsourcing Action Plan 23
3. Select the Right Sourcing Model . . . . . . . . 27
3.1 Multisourcing: Tame the Risks by Diversifying 27
3.2 Microsourcing: Outsourcing to Freelancers 30
3.3 Out-Tasking and Crowd-Sourcing 32
3.4 Outsourcing Your Life 34
3.5 Best-of-Breed Sourcing Strategies 35
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Contents • vi
Part II — Find the Right Vendors
4. Start with a Broad Search . . . . . . . . . 39
4.1 The Golden Rules of Vendor Selection 39
4.2 Selecting the Destination 41
4.3 High-Level Vendor Selection Criteria 46
4.4 Generating a List of Prospective Vendors 48
4.5 Detailed Vendor Selection Criteria 49
5. Move from a Long List to the Chosen Few . . . . . 51
5.1 The RFI Process 51
5.2 The RFP Process 54
5.3 Evaluating Proposals 56
5.4 It’s PowerPoint Time 57
5.5 Watching Out for Warning Signs 58
6. Choose the Right-Size Vendor . . . . . . . . 59
6.1 The Large-Vendor Selection Process 59
6.2 The Small-Vendor Selection Process 61
6.3 The Individual Provider Selection Process 62
7. Find the Personality Magic . . . . . . . . . 67
7.1 The Impact of Personality 67
7.2 Understanding Vendor Personality Types 69
7.3 Matching the Engagement to a Vendor’s Personality 74
7.4 Identifying the Personality of the Vendor 76
7.5 Managing Personality Differences 77
8. Finalize the Selection . . . . . . . . . . 79
8.1 On-Site Visits 79
8.2 Technical Due Diligence 81
8.3 The X-Factor 84
8.4 The Final Decision 85
Part III — Negotiate Solid Contracts
9. Negotiate for Long-Term Success . . . . . . . 91
9.1 The Basics of Negotiations 91
9.2 The Forces That Influence the Outcome of Negotiation 92
9.3 Navigating the Negotiations Process 94
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Contents • vii
9.4 Negotiations Walkthrough 95
9.5 Getting What You Need with Win-Win Negotiations 98
10. Learn Contract and Rate Essentials . . . . . . . 101
10.1 Offshore Contract Basics 101
10.2 Controlling the Total Cost of Outsourcing with Your
Contract 102
10.3 The MSA Invisibility Cloak 104
10.4 Rates and Total Cost of Outsourcing 105
10.5 The Enigma of Rates 106
10.6 Researching Offshore Rates 107
10.7 Negotiating a Fair Rate 108
Part IV — Lead Distributed Engagements
11. Control Your Engagement . . . . . . . . . 113
11.1 Communicating with Your Offshore Team: Practical
Matters 114
11.2 Communicating with Your Offshore Team: The Squishy
Stuff 116
11.3 Managing Project Execution 118
11.4 Accepting Deliverables 120
11.5 Setting Up Metrics 122
11.6 The Outsourcer’s Toolbox 125
12. Build and Lead Distributed Teams . . . . . . . 129
12.1 Laying the Groundwork 129
12.2 Staffing Offshore Engagements 130
12.3 Choosing Candidates: The Personality Factor 133
12.4 Maintaining Your Team 135
12.5 Team Morale: Motivation and Rewards 136
13. Adjust Your Development Model to Fit Your Situation . . 139
13.1 Offshore Waterfalls 139
13.2 Agile Offshore 141
13.3 Outsourcing Quality Assurance 145
13.4 Outsourcing Code Development 146
13.5 “Black Box” Outsourcing 149
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Contents • viii
Part V — Keep Risks under Control
14. Mitigate the Risks of Your Engagements . . . . . 153
14.1 Using Contracts to Mitigate Offshore Risks 154
14.2 Protecting Data and IP 156
14.3 Joint Responsibilities 159
14.4 Dealing with Internal Risks 159
14.5 Minimizing Team Impact Risks 161
15. Minimize the Cost of Failures . . . . . . . . 163
15.1 You Are More Dependent Than You Think 164
15.2 The Benefits of Disposable Outsourcing 164
15.3 The Path Toward Disposable Outsourcing 165
15.4 Intermediaries in Disposable Outsourcing 167
15.5 Moving Toward Disposable Outsourcing in QA 168
15.6 The Complacency Trap 170
16. Maintain the Spirit of Partnership . . . . . . . 171
16.1 Watching the Pulse of the Engagement 171
16.2 Investing in the Relationship 174
16.3 Fixing What’s Broken 177
16.4 Terminating an Engagement 178
16.5 Closing Remarks 182
A1. Destination: Asia . . . . . . . . . . . 183
A1.1 India 183
A1.2 China 188
A1.3 Southeast Asia 195
A2. Destination: Europe . . . . . . . . . . 197
A2.1 Russia 197
A2.2 Central and Eastern Europe 202
A2.3 Ireland and Israel 203
A3. Destination: The Americas . . . . . . . . . 205
A3.1 Brazil 205
A3.2 Mexico 207
A3.3 Latin America 209
A3.4 Canada 211
A3.5 The Rural United States 212
A4. Outsourcing Readiness Assessment Checklist . . . . 215
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Contents • ix
A5. Vendor Search Criteria . . . . . . . . . . 217
A5.1 Macro Factors 217
A5.2 Critical Factors 218
A5.3 Subjective Considerations 218
A5.4 Tie Breakers 219
A5.5 Personal Factors 219
A6. Outsourcing Checklist . . . . . . . . . . 221
A6.1 Deciding If, What, and How to Outsource 221
A6.2 Defining Your Outsourcing Strategy 222
A6.3 Finding Partners for Your Outsourcing Initiative 222
A6.4 Negotiating the Contract with Selected Vendors 223
A6.5 Building and Leading Your Offshore Team 224
A6.6 Mitigating Risks and Minimizing the Cost of Failures 225
A6.7 Terminating the Outsourcing Engagement 226
A7. Offshore Vendor Technical Assessment . . . . . . 227
A7.1 Processes 227
A7.2 Competence 229
A7.3 System Architecture 230
A7.4 Technical Support and System Monitoring 231
A7.5 Security and Privacy 232
A7.6 Disaster Recovery and Business Continuity 233
A7.7 Other 233
Bibliography . . . . . . . . . . . . 237
Index . . . . . . . . . . . . . . 239
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