pate in our study. Each of the
selected executives had managed
multiple offshore projects in the
past; in total, the panelists had
managed 135 such projects. On 2
average, each panelist had over 17
years of IT-related experience and
over 15 years of project manage- 3
ment experience, and had managed 51 projects, nine of which
were offshore development ones.
This level of expertise suggests
that the selected panel was well- 4
qualified for the task.
To solicit the input of these
experts, we utilized the Delphi
survey method. A brief description of how their input was collected and analyzed is provided in
the sidebar “How the Study was 6
Conducted.” Table 1 summarizes
the risk factors as identified and
rated by the experts. 7
The results of our study represent a set of conventional risk factors that have been previously
identified by well-cited research
[ 5, 9, 11], as well as threats that 8
are more distinctive to offshoring.
On average, the risks that relate to
long-established factors (risks 1, 2,
4, 6– 10, 12, 13 and 16) have been 9
ranked higher than the factors that
are relatively unique to offshoring
(risks 3, 5, 11, 19– 21 and 23– 25).
This suggests that, for the most 10
part, offshore initiatives experience the same fundamental issues
that affect non-offshore ones.
However, as the panelists’ ratings
and insights reveal, these traditional risks are likely to pose more
severe threats in the offshoring
context due to the complexity and
the specific challenges that are inherent in multinational, distance-based working teams. While the novelty of some of the risks could be questioned, their
importance to effective project management should
not be discounted. As a recent ACM report suggests,
outsourcing “magnifies existing risks and creates new
threats” [ 2]. Thus, offshoring clients will be well
advised to spend the resources needed to assess the
increased exposure to risk and its sources, and to identify ways to mitigate it [ 2].
Rank Risk Factor
1 Lack of top management commitment
Without meaningful top management support and commitment, projects face challenges that can lead to
political battles, delays and even rejection. Top management support is essential in securing the needed
resources and cooperation across organizational groups, and for enhancing the legitimacy of the project.
Original set of requirements is miscommunicated
Ensuring that the developers and the end users have a consistent understanding of the requirements can be a
challenge in offshore development because of the reduced face-to-face, informal communications between
these two groups. No matter how specific the requirements report is, there is often a window for assumptions
to be made. This is especially true in development situations that are based on long-distance collaborations.
Language barriers in project communications
Language differences make project communications difficult and can lead to delays and conflicts. Even when
all parties speak English, there may be misunderstandings because much of our language is based on cultural
assumptions. Also, slang terminology and accents can create problems and may slow down communications.
Conducting reviews over the phone can be problematic (due to the linguistic differences among team
members). Frequent give-and-take may be needed to reach understanding. Overall, it takes more time and
effort to communicate effectively in offshore projects.
Inadequate user involvement
Effective user involvement is a critical success factor in any project. However, many offshore projects are
stewarded by IS groups without significant participation by users. This can lead to conflicts, delays and other
problems. Participation helps educate users about the risks and challenges of software development.
Lack of offshore project management know-how by client
Offshoring is new to many companies. Many of them don’t have the in-house expertise that is needed to
adequately monitor offshore work and to incorporate effectively the new technology into their existing
portfolios. In addition to traditional project management factors, offshore development requires effective
management of several specialized issues. For example, the need to delineate responsibilities across the
duplicate project management structure is not always fully understood. The lack of project management
know-how can lead to cost and time overruns.
Failure to manage end user expectations
Expectations must be managed to ensure that the project deliverables will be consistent with the perceptions
of the users. This is a difficult task in all projects, but it is especially challenging in offshore situations because
the users are not in direct contact with the developers. If expectations are not managed properly, the
software may not be accepted by the end users.
Poor change controls
Changes to the initial set of requirements can cause delays, overruns, and other problems if they are not
managed properly. Even when changes are documented and justified properly, there may be delays due to the
exchange of questions and answers that must take place before the change is understood. Also, remote
offshore resources may not obtain the sense of urgency for the changes without extended effort. If scope
modifications are not managed well, they can result in overruns and hostile situations, especially in fixed price
or penalty contracts.
Lack of business know-how by offshore team
Frequently, overseas resources do not have an intimate understanding of the client’s business context and
don’t get sufficient training on it. Lack of business know-how and lack of access to key business contacts
(to get things done) can cause delays. Choosing a vendor (with good technical skills) without regard to
domain expertise can lead to trouble. Domain understanding is critical in offshore projects as normal
workflow in one country may be inappropriate (even illegal) in another.
Lack of required technical know-how by offshore team
Ensuring that the development team consists of quality resources can be a challenge. Sometimes the skills
and knowledge of offshore resources are misrepresented by vendor management. In other situations, the
level of technical sophistication in a country is lower than that of the USA, limiting the pool of expert
resources. Moreover, good vendor resources may be overcommitted. Even though some vendors are
“process capability” certified, their depth of expertise could be limited.
Failure to consider all costs
Typically, firms do not consider all the costs associated with offshore outsourcing. Many hidden costs can
exist in such arrangements. For example, travel expenses for moving and hosting development resources
on-site in the U.S are often underestimated. Costs associated with delays and rework due to
miscommunication also tend to be ignored. Finally, costs associated with the “duplicate” project team
structure (for having a manager onshore and another offshore) are often overlooked.
Table 2. Top
IMPORTANT RISK FACTORS IN OFFSHORE
While we recognize the significance of all identified
risks, we concentrate our discussion on the top 10
factors as described and ranked by the experts in our
panel (see Table 2). These 10 were rated as “very
important” or “important” by the expert panel in its
final evaluation. Given the significant level of consensus among the experts, we believe that this list
represents the most notable set of risks salient to offshore projects.
As the findings indicate, the risks focus on three
major areas of concern: the communication between
the client and the vendor, the client’s internal man-