Software Sourcing – How to do it right

We show you how to approach the topic of "Software Sourcing" so that you can generate the optimum benefit for your business. Analyze your situation, plan carefully and implement high quality software with a partner like Riwers.

At the beginning: Analysis & Planning

The right start to an IT sourcing project is essential to setting the course for success at an early stage. What are the most important points to consider when planning an IT sourcing project?

As with all IT projects, a realistic estimate of the time and effort required is a must. If your company has a successful internal IT department, it can be handled with its help. If you do not have this or would like to carry out the project with specialists, a trusted consultant or consulting firms and their competent support helps immensely. For those who want to take it into their own hands, we have the following practical tips.


Even before the planning phase, a company should ask itself these questions
  • Competence – What is your own maturity level in the execution of IT projects? Are you familiar with software development or is the discipline only a means to an end for the actual business and you actually feel uncomfortable with it? The handling of software projects is often underestimated, mostly too much is reduced to the technical aspects. However, projects rarely fail because of the technical competence of developers but rather because of the preparation, planning and execution. Therefore, a solid maturity is necessary.
  • Experience – Have you already carried out IT sourcing projects? This is firstly about actual experience and the ability to carry out an “international” project, especially in English and thus for many not in the language which they feel familiar with. And secondly, how to sensitively communicate a new IT sourcing project internally, because often it is seen as a threat by your own IT and can stir up resentment and existential fears.
  • Commitment – What cooperation are you prepared, as a company, to provide in the project? For example, do you provide the project manager, business analyst or product owner, or is a separate development team or individual developers involved? Especially with little maturity, the competent staffing of such key roles is a success criterion to avoid known pitfalls.
  • Project details – What is the volume of the project? Is it a new development or a further development? Are there any legal regulations that need to be observed? How much internal business know-how is required? These are the critical factors for defining the software development process. In any case, we recommend an agile process model.

In fact, the list can be extended and detailed as long as you like. The important thing is to arrive at a realistic picture of the maturity level of your own company in the execution of IT sourcing projects.

In practice, there are usually the following company-side challenges to carry out a software project faster, better in quality and more cost-effectively
  • Too much separation/too little cooperation between the individual departments
  • Too strict hierarchies/bureaucracies
  • Usually too detailed and cost-intensive planning

In concrete projects, we therefore almost exclusively propose agile project management and development processes that also take into account the interfaces to other departments and pragmatically address all organizational challenges step by step.

Good planning covers all important points, but does not have to define every detail in advance. This can also be done at a later stage in the practical implementation.


realize projects

After the project setup, the question arises: What are the critical factors to successfully complete the project?

As with all software projects, the practice, i.e. the actual execution, differs greatly from the theory, i.e. the plan. Therefore, in general, an IT sourcing project has exactly the same success factors as any IT project.

From our practical experience the following points are important for a successful IT sourcing project
  • Active project support by the management and the sponsor. The idea here is that the management ensures that the team can work successfully. Of course, there is a legitimate self-interest involved, the own project should be successful.
  • Establish a simple and pragmatic development/reporting model. It is important to have a model that takes into account parameters such as team performance, backlog, sprint goals, error rates, effort expended and costs. Only then is a reliable outlook possible and problems can be identified, addressed and eliminated at an early stage.
  • Competent staffing of key positions. In addition, these persons must be given the appropriate time and competencies/authorization to act. Regardless of whether they are filled internally or externally.
  • Open discussion of project risks as well as their management. Risk management must never be a side show, but should be a constant topic and should be systematically built up. This includes a reliable forecast model that provides data for early detection.
  • Realistic time and financial budget planning. A reliable estimate of effort and thus costs is essential for business planning. If this is not readily available at the beginning, it often makes sense to invest a few days in detailing scope and requirements to enable accurate estimates.
  • Define and implement regular reviews and suggestions for improvement in the team. Especially in the start-up phase, regular reflection on all possible aspects of project execution is valuable. This is the only way to identify weaknesses at an early stage and eliminate them without much effort.
  • Selection of a trustworthy and competent IT sourcing partner. And again, technical competencies are essential but rarely critical in the project process. It is important that the partner acts quickly and at eye level, is available, works transparently and anticipates obstacles in order to eliminate them early on.
  • Consider feedback from your own project staff and partners. Regular feedback loops and informal exchanges not only help to identify obstacles early on, they also bring in the opinion of the employees, which leads to high appreciation and ultimately higher motivation.
  • And letting the team work

It’s that simple … and yet it’s not!

Again: It is important that all central roles (product owner, scrum master, senior developer) are filled competently, that there is a clear scope and clear objectives, and that the team has the decision-making authority within the project. The central task of management is to support the team and to have their backs and to address and eliminate problems, e.g. conflicts of different departments or inappropriate operational processes.

A professional sourcing provider can and will additionally support the management as well as the internal team in this process. When selecting a provider, this point should be asked for, as it can be an indication of having a provider who is already familiar with these problems, has gained experience and knows how to deal with them.


Choosing a partner: Which IT sourcing provider suits me?

When selecting an IT sourcing provider, the following criteria are important
  • Competence – What about the desired technical competence? What is the methodological competence?
    Cost – What is the price of the services? What pricing models are offered?
  • IT locations – Which ones are offered? This is especially important if, on the one hand, you place a lot of emphasis on face-to-face meetings and plan to travel. On the other hand, the respective compatibility of the way of working and thinking is essential.
  • Company culture – Does the provider fit in with us and our ethics?
  • Methodology – Which procedures are offered? Ideally, exactly the desired procedure is offered as a service, or should be standardized.
  • Trust – The cornerstone of any relationship. I.e. the service provider should present a plausible game plan on how the project will be led to success.
The price question always arises, is essential, but must not be dominant

Generally speaking, the closer you are geographically and therefore culturally to the client’s market, the higher the hourly/day rates will be, as very definitely the cost of living and therefore wages will be higher. This can make about 30 to 40% difference in European comparison. The difference is bigger on junior level, on senior level the wages in the different countries tend to align again. It is important to know that all sourcing providers have about the same cost structure, about 75% are personnel costs.

You should be very careful with very cheap offers. Okay, now we speak out of experience as IT sourcing providers and managers for years: too cheap offers can only work in the long run by selecting/replacing employees or other billing optimizations. Too often, decision makers are led by the numbers and are taken in by a vendor that can’t deliver on quality, communication and collaboration expectations.

That is why it is very important to have a trustworthy provider and to know exactly which employees of the provider are working for your project. A reputable IT sourcing provider can pretty accurately assess when a sourcing project or a desired setup makes sense. Here it is important to be careful when a provider, or often the vendor of the provider, immediately accepts every project or setup.

In addition to the price, the following criteria are also important when choosing a location: stability (EU, Euro, inflation), flight connections (a lot, short, fast), general infrastructure, general language competence and very essential: is there a comparable work culture. There in favour are of course the countries which are already longer in the EU and bring a high degree of development.

Therefore, one should always obtain different offers and let all important factors flow into the decision.


What are the sensitive issues I need to be aware of when sourcing?

Generally speaking, outsourcing an IT project always makes sense if, on the one hand, the competencies (technical or methodological) and the organization are lacking, there are too few available internal employees and required skills, or if you want to optimize costs.

If an application has a lot of interfaces to other internal applications and therefore the employees have to be very often on site at the customer, you should turn to a provider who is also locally represented. That is why we at Riwers attach great importance to local presence, especially for roles such as project management, product owner or requirements engineer where active interaction with customers is important for understanding.

Another issue is language. If all internal processes are currently in German and this is to be maintained, this is a clear sign to look for a provider who speaks German. The development team doesn’t necessarily have to speak German; usually it works very well with a German-speaking bridgehead that “translates” language-relevant topics. And thanks to intelligent apps like Deepl, today the most complicated specifications can be translated in seconds with very high quality.

Offers like German speaking software developers in Eastern Europe or even Egypt exist, but German on an acceptable level, a maximum of 10% of the possible software developers are able to provide. So you can plan right from the start with a German-English interface in the form of a bridgehead.

In such a setup, employees are selected by the sourcing provider at the request or pressure of the customer primarily according to language competence and not according to technical competence. We do not recommend this, because it means that an easily solvable problem is given more weight than the focus on delivery quality, which always takes its toll at the end of the project.

The IT sourcing project should always have a certain volume/size, because there is always an overhead such as more travel, higher efforts due to detailed, structured requirement description, etc.. By the way, this is even more true for an offshore project.

But you can’t generalize. At Riwers we have projects in the form of extended workbenches with one developer who works directly with the customer. This has always worked very well for years.