How outsourcers rip you off

Both outsourcers and systems integrators (including the consulting arms of IT vendors) have a vested interest in ensuring that you don’t have the latest technology and that you implement as little automation as possible. Why? Because they are essentially body shops. Whether it is developers, testers or consultants their primary business model is to sell you more time with more people: if you, or they, started to use more sophisticated tools that required less time and fewer bodies then this would hurt their bottom line. Of course, they have to keep up with competition and as new techniques and technologies emerge some suppliers will adopt these and be able to undercut their competitors, thereby forcing adoption: a rising tide floats all boats. But, and of course I am generalising here, this is a lowest common denominator sector and not one at the forefront of technology, which is where it ought to be.

What brought this to mind recently was a conversation in which it was revealed that one company (which will remain nameless) had spent $200,000 developing a new application and then $2m testing it: mostly manual testing of course. Those sorts of figures are, frankly, a joke. And it’s not the only example. I’ve run across the same syndrome in software development: preferring to use bodies rather than tools. Another example is Safyr, from Silwood Technology. I’ve written about this product before but as a way to understand complex ERP environments, especially SAP, it is much, much better (faster and less expensive) than deploying consultants, so why is it not more widely deployed? I think we know the answer to that one.

Is there a solution to this issue? Actually, I think there is. It requires that the contracting organisation have some understanding and knowledge of how the particular project in question could or should be developed. As an example, in our last data migration report we found that companies adopting best practices for data migration were bringing in their projects on time and on budget in 78% of cases. One of those best practices was that organisations relying on third parties for the implementation of the migration should have an understanding of the technical requirements of the migration. Companies that did not have this understanding had a 55% failure rate (over running costs or time or both, or abandonment).

This is clear cut: if you want to avoid being ripped off then you have to have some understanding of the technical requirements and options that are relevant to the project in hand. You need to be able to ask why your provider is not using Safyr or automated testing tools or whatever. Moreover, you should not rely on the third party who is going to do this work for you to provide you with accurate information: it is in their interest not to. You will therefore need to do your own due diligence.