#1 Underbidding to win the deal - 10 Ways to Fail at Outsourcing

Underbidding to win the deal - so why should you as the enterprise IT manager responsible for choosing an application development partner care that your vendor is underbidding to win the deal? After all, if your project is fixed bid, there is no risk, right? Wrong

First, let's admit that a sizable share of IT projects fail and that any number of factors can cause a project to be considered a failure.

When a single vendor low bids to win a deal, you might choose that vendor over the next cheapest vendor because they were cheaper, not because they were better. You might even renegotiate with the 2nd cheapest vendor that is better, letting them know you like them but that someone else is cheaper. How can you justify spending 15% more even though the quality is expected to be more, right? This is the IT equivalent to dumping.

Here's what happens behind the scenes: Vendor A low bids the deal to win it. Perhaps they lack the maturity as a company to accurately estimate the effort required to deliver hte project. Perhaps they lack the technical skills to foresee the complications. Perhaps they know well that they are losing money on this deal and hoping to make it up by putting entry level developers on the project.

In either of these cases, they will most likely fall behind schedule and /or deliver a poor quality solution which will cost YOU frustration and extra money as you have to spend more to maintain a solution which was poorly built. We see it ALL THE TIME!

So, you saved on the initial project cost but ended up delivering late which may have cost you market share or revenue or just plain frustration. The final application quality is lacking which will cost you extra in maintenance.. Do you get it?

Unfortunately most IT managers making these decisions will NOT heed the warnings and advice and will make this mistake on their own a few times before they become wiser. Human nature I suppose.

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Outsourcing

Software Development to Mexico: An Alternative to Profitability and Success

The results of the current economic crisis are clear: millions of people are unemployed and companies are going bankrupt or are struggling to make payroll.

Software companies are not the exception. Some software companies are buckling under pressure of the crisis and are failing. Sales are down, expenses are too high, and more importantly, expenses are fixed.

One of the most recent cases was LucidEra a prominent business intelligence SaaS start-up. LucidEra is struggling to stay afloat. They haven´t ceased operations yet, but the rumors of their imminent closure end are gaining attention.

LucidEra’s CEO said they have happy costumers and a good pipeline, so why are they sinking??

One angle to consider is that some SaaS Companies aren’t leveraging their best resources for application development. They haven´t looked for different and better options.

Many may be leveraging offshore vendors in Asia to reduce costs, but the last 5-10 years has seen a fair share of project and offshoring failures. The challenges of working with resources half a world away with a 12-18 hour time difference have taken their toll.

Perhaps they should consider working with SaaS product development experts in a nearshore location? Outsourcing software development to Mexico can be the ticket to reduced costs and reduced stress for building and maintaining their applications in a cost effective and productive way.

We clearly know cash flow and capital are the primary issues, so why don´t they look a little bit ahead and analyze the options that Mexican software providers give them? Undoubtedly, Mexico can be a “safe harbor” for companies that are suffering financial hardship.

The strategic geographical location, similar time zone, but specially the lower cost of labor makes Mexico an interesting place to outsource software development.

Nowadays, companies need to find and chose the best option to cut costs, while they increase the competitiveness.