October 18, 1999

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Outside Development Partners
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sidebar: Unusual Partnership Benefits Medical Center, Outsourcer

Should deliverables be late, buggy, or in violation of agreed-upon specifications, payments should decrease according to terms in the contract. "Every detail should be spelled out and agreed to by both parties," Chaganty says.

Of course, unpredictable snags will arise, and you'll need to define some mechanism for handling these, he says. A classic example is when new government regulations require a company to generate a report with different data. At the outset, the company and outsourcer should establish guidelines in the contract that state the responsibilities of each party in determining procedures and payments associated with unexpected changes in their initial agreement.

Quality should not be a problem if a company has chosen a good outsourcing partner. In fact, there is a high likelihood that code quality will improve. Programmers for hire are trained to be very disciplined in fundamental techniques, such as program design, coding conventions, and programming style. They are often seasoned professionals who have learned the value of adhering to best practices in code and design as they move from site to site picking up projects from other team members. As a result, they become productive right away and are disciplined about documenting their work.

Likewise, the programs will be well-tested. Disciplines such as unit testing, integration testing, regression testing, code reviews, and user testing with full documentation of test results should be requested in the contract. Again, this is likely to raise the quality of the deliverable.

Finally, every scheduling milestone should require a signature by the company--generally, from the project leader or IT manager in charge--indicating that some deliverable has been completed. Deliverables can vary from checking in a program after Y2K remediation to having a program unit successfully complete unit testing. By having frequent milestones, the company and the outsourcing partner stay in close touch about the status of the project. This practice tends to reduce confusion, false expectations, and schedule slippage.

In determining these factors, companies should rely on their own standards and expectations. They should also make heavy use of the pilot project, which acts as a baseline. "The pilot shows what can be done, how well, and within what time frame," Recca says. "Both sides should use it to set expectations and schedules." Thereafter, the outsourcing firm should agree to improve on the baseline.

Once both parties agree on terms, staffing and compensation must be worked out. Staffing concerns are most important if the consulting partner is expecting to hire some of the company's programmers. This practice, while not common, follows more in the tradition of permanent outsourcing, wherein a whole IT function, not just a specific project, is sent off-site.

Take, for instance, the Detroit Medical Center, the city's largest non-governmental employer. The center has more than 18,000 workers, including a medical staff of 3,000. In August, the medical center signed a $1 billion 10-year contract to outsource its IT functions, including application development, to a Compuware subsidiary (see sidebar story, "Unusual Partnership Benefits Medical Center, Outsourcer").

As part of the deal, Compuware hired 379 medical center IT staff members and promised to guarantee jobs for 180 days. IT staff members interviewed Compuware managers "to make sure it would be a comfortable place for them to work," says Don Ragan, the medical center's CIO. This allowed for a virtually seamless transition.

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Illustration by Matt Foster

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