How to Benchmark Software Outsourcing Services for Optimal Results

Benchmarking is a helpful technique in which companies analyze providers’ performance and compare them with industry standards. In software development outsourcing, this typically occurs ahead of hiring one outsourcing company for the long haul.

This practice helps companies achieve optimal results with their outsourced team by making informed decisions with significant impact on project success and ensuring service quality. After all, selecting the right outsourcing provider saves time, reduces costs (potentially contributing to yearly cost reduction), and helps ensure high-quality deliverables.

The most important reason why companies benchmark software outsourcing services and service providers is because they differ in how they’re delivering services. The expertise and track records vary greatly between providers, and a comprehensive benchmark analysis helps companies identify the best teams for their needs with the necessary skills, experience, and work culture for the project or outsourcing relationship.

Key Criteria for Evaluating a Software Outsourcing Service Provider

There are several key criteria for companies to consider when benchmarking and evaluating a potential outsourcing deal or service provider. While these factors do include technical expertise and quality assurance, they also extend to industry knowledge, communication, and collaboration.

#1 Technical Expertise

Assessing the technical expertise of a potential software development outsourcing provider is one of the most important factors when benchmarking them. By doing this, companies ensure that the providers under consideration have the necessary skills and experience levels required to handle the specifics of the projects or for the longevity of the relationship.

Technical expertise not only impacts the overall success of the outsourcing arrangement but also the quality and efficiency of the products and provider’s services. Companies should take a look at the provider’s previous projects and case studies as part of the evaluation as it offers a glimpse into the complexity levels the team handled previously, the technologies utilized, and the overall outcomes of the projects. Team leaders should also consider the outsourced team’s certifications, qualifications, and other achievements.

Unfortunately, there isn’t a standardized test to give to each provider to grade everyone fairly, so companies must play a bit of detective in order to properly complete their due diligence when benchmarking. This may involve looking into issues surrounding benchmark data.

#2 Industry Knowledge

Having industry knowledge is a bit more important than people think when it comes to software outsourcing relationships. While the outsourced team does just handle the technical side of things, having an insight into the hiring company’s industry helps them understand the specific needs and challenges of the niche.

This translates into more tailored solutions that then better align with industry best practices, standards, and necessary regulations. This contributes to the overall success of the outsourced project and relationship, as well as overall operational performance.

One effective way to use this as a benchmark to evaluate before signing on with a provider is to review client testimonials and case studies related to similar projects. This will help you gain insight into the provider’s ability to deliver industry-specific products.

Hiring companies should also conduct interviews and discussions with the outsourcing provider’s team members to get a feel for their understanding of the industry’s technologies and requirements. This may seem tedious, but it helps businesses gauge the provider’s depth of knowledge as a team.

#3 Communication and Collaboration

Communication is the backbone of every good outsourcing relationship between the provider, all involved business units, and the third-party team. Without it, no one involved achieves success in their endeavors. When benchmarking potential software outsourcing providers, companies must evaluate their communication skills as a major area of concern.

One area to benchmark is the provider’s language proficiency. They should have the ability to communicate effectively in a common language if they’re located in another country. Fluency in the language used in-office for communication is vital for effective understanding of projects, their requirements, problem-solving, and collaboration, as well as overall service management.

Responsiveness is another major area of service delivery and communication that companies sometimes forget to consider as a benchmark. Outsourcing providers should respond to questions, address concerns, and provide updates regularly and promptly to ensure transparency and keep all project stakeholders up to date. This also plays into the provider’s preferred communication channels and tools. They should offer tools that help make collaboration easy via seamless interactions and real-time communication.

#4 Clearly Defined Pricing and Outsourcing Providers’ Service Levels

Good outsourcing providers offer clearly defined pricing guidelines and service levels to their clients so that everyone stays on the same page for the duration of the relationship or project.

Most outsourcing contracts offer terms and pricing transparency giving organizations a clear understanding of what exactly they’re signing up for, the costs involved, and the level of service to expect. This is vital information required for hiring companies to ensure that they’re making informed decisions and that the outsourcing provider’s offerings align with the necessary budget, timeline, and specifics.

Contract terms and pricing structures are essential parts of benchmarking potential providers. If possible, the hiring company should request a detailed proposal of what the outsourcing provider can do for them, including the cost breakdown, hourly rates, projected milestones, and any additional fees or expenses that they may not know of.

The contract or proposal should outline key aspects for companies to approve and understand ahead of signing on. These aspects include not only project timelines and deliverables but also important legal terms including intellectual property rights, confidentiality clauses, termination provisions, and dispute resolution terms.

#5 Quality Assurance and Control

Quality assurance and quality control help ensure that delivered software of any kind meets the necessary standards, reliability, and functionality required. In software outsourcing, QA and QC prove even more important to ensure that companies get the product they set out to achieve. Strong processes for these areas also minimize the chance of defects in the software product and enhance client customer satisfaction.

Before companies sign on with an outsourcing provider, hiring companies should evaluate their quality assurance and quality control processes as a benchmark by reviewing their test plans and methodologies. This helps give an idea of how thoroughly the provider truly tests its products for bugs, overall performance, and specific functionalities. They should also assess QC processes like code review, version control systems, and standards for documentation.

Benchmarking Process for Software Outsourcing Providers

Many hiring companies know they need to have a benchmark process in place but don’t know where to start.

Benchmarking involves a systematic approach to the evaluation and comparison of providers and, when done correctly, helps to ensure the most objective and informed decision-making possible. Here is a simple 5 step approach that you can tailor to your organization’s needs.

Define Your Requirements
Identify Potential Providers
Evaluate Providers Based on Key Criteria
Compare and Rank Providers
Make a Well-Informed Decision

Now let’s dive a little deeper into each of these.

#1 Define Your Requirements

Successful software outsourcing engagements start with clearly defined project requirements. These requirements set the foundation for the entire project while making sure that all stakeholders clearly understand the goals, deliverables, and scope of the project.

These same stakeholders should take part in creating detailed documents to reduce ambiguity, prevent misunderstandings, and facilitate effective communication between the internal team and the outsourced one.

#2 Identify Potential Providers

Browsing online research for recommendations for software outsourcing providers are great ways to find potential leads. Online platforms, directories, and sometimes forums are also good places to start the search.

Referrals from trusted sources with good experiences in outsourcing also offer useful recommendations. Remember that with outsourcing contracts, you have global services at your disposal and can cast a wide net.

#3 Evaluate Providers Based on Key Criteria

Companies should evaluate potential providers based on the benchmarks listed above customized to their specific needs and wants in an outsourcing partner. Team leaders should assess different companies’ technical expertise and industry knowledge, communication skills and transparency, pricing, and quality assurance and control practices.

#4 Compare and Rank Providers

Based on these benchmarks and evaluations, companies then have the ability to rank the providers based on their scores in each criteria. This allows for a systematic comparison of their strengths, suitability, and weaknesses. They may then use weighted scores or decision-making tools or strategies to objectively rank the providers, before ultimately finding the one best suited for the job.

#5 Make a Well-Informed Decision

By utilizing the benchmarking strategy for ranking and evaluating outsourcing providers, companies set themselves up to make a well-informed decision at the end of the process. This ensures thoroughness and accuracy as best as possible in the final decision.

Conclusion

Benchmarking is a helpful process through which companies find their best match in an outsourcing provider based on carefully thought-out criteria and market benchmark data. This process takes some time and due diligence; however, companies better ensure the success of their outsourcing endeavor by doing so.

FAQ

What is the importance of benchmarking software outsourcing providers?

Benchmarking software outsourcing providers is important because it allows hiring companies to identify the best fit for their projects or long-term relationships based on predefined factors like industry knowledge, technical expertise, average customer churn, quality assurance, and communication skills.

How can I assess a provider’s technical expertise?

Companies should assess a provider’s technical expertise by using benchmarking to compare their technical abilities based on case studies, previous work experience, client testimonials, and evolving services.

What factors should I consider when comparing pricing and contract terms?

Companies should consider a few factors when comparing pricing and contract terms. This includes important areas like cost transparency, intellectual property rights, deliverables, and contractual obligations.