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Vendor sourcing considerations

The offshoring of software development is an established practice among many large and small financial institutions. It is not just cost benefits that have driven banks and insurance companies to adopt offshoring as part of their business strategies. It provides access to talent pools beyond the local recruitment area – as hiring becomes increasingly constrained by skillset demands in the larger financial centres.

David Knight 14 June 2018

The offshoring of software development is an established practice among many large and small financial institutions. It is not just cost benefits that have driven banks and insurance companies to adopt offshoring as part of their business strategies. It provides access to talent pools beyond the local recruitment area – as hiring becomes increasingly constrained by skillset demands in the larger financial centres.

However, this doesn’t always go as smoothly as one might hope. Such development projects can fail to deliver for a wide variety of reasons, although it often primarily comes down to inexperienced local management, insufficient detail on requirements, poor communication lines, cultural differences and time zone delays.

It’s not enough to simply have a number of highly skilled technical people sitting together somewhere in the world. People thrown together at short notice with varied personalities can’t be expected to instantly feel part of something greater than themselves. Local management that can provide leadership and hold a team accountable is invaluable, but assembling such a team and developing the leadership is a challenge that can take valuable time when there is a pressing demand to deliver.

Previously, when systems and processes were less complicated, spending a significant proportion of the total effort capturing and documenting the requirements was an investment that enabled a team to handover smoothly to the implementation phase. As the world becomes more complicated and demands rapid turnaround of process change, requirements are becoming far more fluid. If a fledgling team requires incredibly detailed requirements to the point that the stakeholders are pretty much writing the code in order for the team to be effective, then it is time for an approach rethink.

Cultural influences can also play a significant part. A diverse group of people bringing together a multitude of influences can affect the outcome of a project in terms of how the team works together. To build a self-directed team with joint responsibility and inter-dependent empowerment that’s aligned to a common goal requires the nurturing of team culture – such that the team behaviour and individual attitudes come together and they feel part of the wider group.

In practice, trust is built differently in the varied regions around the world and it is essential that senior stakeholders are sensitive to these nuances in order to develop effective trust – that stems from empathy and goes beyond just rational thought. How teams are motivated and connect must be addressed.

Encouraging developers to appropriately challenge requirements and solutions takes time and extensive management support. Many financial institutions find it useful to have some members of the offshore team visit the onshore centre and, whilst effective, those involved must be prepared for costly up-front investment and a long payback period.

Time zone and communication lines are the critical bottle neck in the delivery. Strong local management, culturally aligned teams and clear requirements all contribute to empowering an offshore team to deliver. The time zone then becomes an asset where development continues through the night and stakeholders come into the office at the start of the next day to the latest iteration deliveries and questions assisting progress. Yet when this breaks down, the time zone can work against everyone – reducing team productivity while one team waits for the other.

A hybrid solution between analysis and offshore with appropriate allocation of projects allows financial institutions to minimise the overall risk profile to the portfolio of projects. Yet for a high-profile and high-risk project that requires direct and timely communication with stakeholders, using an offshore facility may be the riskiest solution of all.

A more practical and failsafe solution can be to deploy teams so that they are co-located with stakeholders, in order to directly provide end-to-end solutions. Riskcare has substantial experience in providing such services. We also work with a variety of clients’ preferred offshore partnerships by providing the bridge between financial centres and the outsourced provider to reduce the friction of delivery.