Frequently Asked Questions

Why should I consider using a consultant when undertaking an outsourcing imitative?

What should I look for when choosing a consulting firm to help with our outsourcing initiative?

What makes Backes Crocker, LLC different from other consulting firms?

What factors affect the labor rates that I will pay when I outsource?

I am interested in outsourcing but know nothing about it. How can get familiar with the subject?

Should I be concerned about protecting my intellectual property (IP) when outsource?

How is "offshore" outsourcing different from other types of outsourcing?

How much will I expect to pay for outsourcing services?

What type of legal agreement will I need in an outsourcing deal?

How important are cultural considerations when beginning an outsourcing program?

Can start-up companies be successful with outsourcing?

How does a vendor's attrition rate affect my outsourcing program?

Q. Why should I consider using a consultant when undertaking an outsourcing initiative?

A. Qualified consultants add value in structuring an outsourcing program in many ways. Primarily, they bring deep experience to the project and can greatly accelerate progress. Outsourcing involves highly specialized areas of expertise that are not common in most companies. Consultants who understand how to integrate outsourcing into an existing technology organization can make a significant difference in time, cost, and reliability of the vendor and the overall program.

Q. What should I look for when choosing a consulting firm to help with our outsourcing initiative?

A. Our clients have indicated that they looked for accountability and active involvement from senior representatives of the company who had direct experience in developing outsourcing programs. There is no substitute for experience. The deeper the experience level and more hands-on the consulting firm will work with your organization, you will see a higher quality of service. Before you agree to hire your consulting firm, make sure they are providing truly objective guidance for you and not representing companies, countries, or associations that may influence the guidance they provide to you.

Q. What makes Backes Crocker, LLC different from other consulting firms?

A. Backes Crocker brings over 40 years of direct IT management and outsourcing experience to your organization through our senior consulting team. Each client works directly with one of our partners on virtually any aspect of technology outsourcing programs. We view outsourcing as a business process that must be managed within your company in order for it to be successful. Our methodology applies concepts and processes that we know work and can be implemented quickly - assuring that you are able to maintain control over your intellectual property and effectively manage all work that is outsourced. We don't just broker deals, we provide sound guidance to help you plan, implement, and manage a complex business process.

Q. What factors affect the labor rates that I will pay when I outsource?

A. There are many factors that affect the cost of outsourced resources. Primarily, geographic location of the vendor and the technical skills that you require will have the most impact on the rate that you pay. Other factors include the number of resources that you plan to use, whether the work will be performed on your site or at the vendor location, and the other terms you have in your services agreement.

Q. I am interested in outsourcing but know nothing about it. How can I get familiar with the subject?

A. There are vast amounts of resources available to get familiar with outsourcing. Our website has a number of papers and articles that will help you get up to speed quickly. We have found that even though there is self-help material available on the subject, applying the information to your specific situation can be difficult. Attending seminars, others that have active outsourcing programs, or talking with consultants about what you are trying to achieve will give you the perspective you need to start making decisions.

Q. Should I be concerned about protecting my intellectual property (IP) when I outsource?

A. Intellectual property protection is one of the biggest issues that companies face when implementing an outsourcing program. Intellectual Property does not just apply to technology, it applies to virtually every unique software module, business process, or operation. It is imperative that you have great IP protections within your contract. One of the most overlooked IP risks is in determining if the outsourcing vendor themselves present an IP risk by virtue of their geographic location or other lines of business they are in that may conflict with your business. Always seek advice on IP protections from you legal team or industry experts before you commit to a particular vendor or country.

Q. How is "offshore" outsourcing different from other types of outsourcing?

A. As the name implies, offshore outsourcing involves working with a service provider that is outside of your country of origin. Typically, for companies located in the United States, offshore outsourcing refers to work done in Europe, India, or countries in eastern or southeast Asia. For service providers that offer services in the same continent but in a different country, e.g. Canada, they are referred to as "near-shore" service providers. While each term connotes work being performed by a third party, how work is done and what type of safeguards can be diverse and should be carefully considered.

Q. How much will I expect to pay for outsourcing services?

A. While labor rates can be as low as one third the cost of US labor, there are many factors that affect the actual negotiated labor rate. Outsourcing vendors will typically lead with extremely competitive rates buy the buyer must be careful to consider the total cost of that labor. Buyers should be aware of the skill level and technical experience that is reflected in the labor rate, whether the rate is different for work location, what additional costs and overhead are required to actually get project work completed. It is prudent for buyers entering a long term agreement with a service provider to understand the intricacies involved with doing work in an offshore environment. Without this knowledge, the effective labor rate may not be as advantageous as reflected by the base labor rate.

Q. What type of legal agreement will I need in an outsourcing deal?

A. For long-term relationships with outsourcing service providers, buyers should consider comprehensive contractual agreements that establish a strategic relationship between that provider and buyer. It is extremely important for buyers to have a comprehensive agreement if the work is being done offshore. Agreements should include business areas that are important to a buyer from a relationship and protection standpoint. Protecting intellectual property, especially in countries outside of the US should involve an attorney that specializes in international law. No work should begin that involves exposure to intellectual property until a comprehensive agreement is in place.

Q. How important are cultural considerations when beginning an outsourcing program?

A. Cultural issues in outsourcing relationships come in a variety of forms. There will be obvious cultural and language differences for companies that outsource to different countries. Although there are techniques to mitigate these differences and create a very good cross-cultural working environment, these differences must be recognized as a major area of concern when entering the relationship. Just as important, no matter where you outsource, there are corporate culture issues that transcend geographies. Consider that outsourcing relationships are almost like corporate mergers on a small scale. It is critical to consider and match corporate practices, business ethics, and working environments to those of your own company.

Q. Can Start-Up companies be successful with outsourcing?

A. Outsourcing is an excellent way for start-up companies to extend their venture funding and create a cost effective and responsive technology team. With careful planning and selecting the right services provider and location, a start-up company can use outsourcing as an effective business tool as the company grows.

Q. How does a vendor's attrition rate affect my outsourcing program?

A. Attrition is a real problem for every company and an outsourcing service provider is no different. Attrition can introduce risk to the outsourcing initiative in the form of project delays and even loss of intellectual property when experienced vendor employees leave the company. Companies must take steps to mitigate these risks through contractual features, choice of projects or technology that is outsourced, and even understanding where the vendor is located geographically. By managing these areas, companies can assure that work continuity and intellectual property protection can be maintained no matter how severe the attrition rate.