Issues and challenges are common to business from planning to end. Contractual challenges, demand and supply, business process issues are the most common.

Contractual challenge

In this scenario supplier management contract is the key to the success of any outsourcing deals. Rao (2009) points out the contracts are usually written by the central contract team and the execution is generally done by a different team who do not have an in-depth understanding of the contract. Most of the time the contact considered as a highly sensitive and confidential. The long term contracts should have provisions to review and renew at least once a year as the size and the complexity changes over the period of time.

Demand and Supply challenge

When caring out a specifically software project development the billing generated by application support team is often fixed. And the billing by the development team depends on the actual effort spent in the projects.  Erdill et al(2003) outlines that to achieve a considerable margins for the projects it is important to maintain at least 85% billable utilisation. For this to happen, an agreement has to be made by the customer on the pipeline at the beginning of every year. This is one of the critical characteristics of the matured software development projects. The biggest challenge today’s IT industry is to get the right skilled people within the specified time frame.

The business process issues

During the IT outsourcing business process or part business outsourcing, company manages may give least importance to processes since the customers core business is in the different domain. Rao (2009) finds following could be seen as list of issues that may arise due to lack of process definitions in the beginning.

         Documentation issues : Nicholson and Sahayb (2006) reveal that non existence of required documentation is a common problem in the industry. It always takes the least priority over the other deliverable.  Standerised documentation helps to make the surveillance process transparent and visible. Most of the time, in most cases, required documentation are not available or they are not up to date. It is the responsibility of the organisational managers that update all relevant documentation frequently.

        Upgrade and development issues: Rao (2009) saysmost organisations are failing to realise that they need to make an effort at least once a year towards the development and upgrade of the minimum tools. Tools or systems automation of time sheet management, service management and project management are very important as the first step to improving accuracy and reliability, eliminating unnecessary misunderstandings and generating accurate reports on performance against the agreed key performance indicators (KPIs). Apart from the above in summary, continuous attention is necessary on the development of:

  • Culture and communication management – address the management of cultural issues, communication styles, difficulties in understanding each others contexts for decision making;
  • employee morale management – necessary steps should be taken to implement the teams to gain power during high-stress periods;
  • Innovation at work – helps the service provider to optimise the business model, operational process, service efficiency.

        Ending the contract issues: Williams (2007) explains that when the outsourced functions are brought back in-house after the contractual period, the organisational management should consider:

  • The timing of the change – The transition period should start as early as possible. Ideally, it is advisable to allocate an year of transition time;
  • The transition time and hiring new staff – Organisations should try to retain maximum knowledge and maximum number of the clever staff while hiring new staff to fulfill the skills need during the knowledge transfer process;
  • The cost and institutional memory – Organisations may have to pay higher salaries than expected in order to find qualified members of staff in-house and it is natural that the organisation loses the ability to perform well during the first several months of transition.