How IT outsourcing works: Five questions for Florian Apel, Co-Founder of BitKollegen GmbH and Omnics Technologies Pvt. Limited.

How does IT outsourcing actually work? What does it depend on and what are the challenges? Many companies that have not yet dealt with IT outsourcing ask themselves questions about the actual implementation. To shed some light on this and also to counter common prejudices against IT outsourcing in an offshore destination, we asked Florian Apel a few questions on the subject. Florian is an IT outsourcing specialist and co-founder of our companies BitKollegen GmbH and Omnics Technologies Pvt. Limited.

Florian, since when have you been professionally involved in IT outsourcing? Which destinations have you worked with? What differences have you noticed?

I started actively using IT outsourcing about 15 years ago. In the process, I was able to gain experience in both the so-called offshore and nearshore areas. Among others, I have worked with service providers and freelancers from Turkey, China, Vietnam, South America, India as well as Poland, Romania and Belarus. I haven’t had any experience in Africa yet, but there is an exciting new market emerging there that I would like to take a look at.

From my point of view, there are a lot of differences, which I can only describe in excerpts now. Generally speaking, it can be said that nearshore employees are usually culturally closer to us. Because communication is better, onboarding is easier and it’s easier to get into the flow of work. However, the costs in the nearshore area are about 30% to 50% higher than in the offshore area.

Language is also a very important factor. Of course, good English or even German skills are first employee-specific. However, in my experience, the average language level in the various outsourcing destinations is sometimes very high and sometimes not so high. In my experience, it is particularly difficult with English skills in South America; these countries are more suitable for outsourcing to Spanish- or Portuguese-speaking Europe.

In India, where we are currently active with BitKollegen and Omnics, English is even the official language, and court hearings or official correspondence are usually conducted in English. Therefore, communication with employees from India is not a problem in terms of language. Many may now object: But the accent! From my own experience, I can say that you get used to the accent within a few days.

Beyond that, of course, there are many differences in communication and learned ways of working. Asian countries, for example, are culturally more non-committal, which can lead to different expectations between the customer and the outsourcing employee. By the way, this is an important starting point for our cultural coaching, which is very important to us at BitKollegen and Omnics, and should take place right at the beginning of the outsourcing process. It is essential to invest sufficient time in this so that the outsourcing becomes a long-term success and does not remain a flash in the pan. By the way, we do not only provide such coaching for employees in the outsourcing destination to prepare them for the European or US market, we also recommend it to our clients or to the people in the client’s company who will work with their new team members in the future.

What are the different outsourcing models? For which application or type of project is IT outsourcing particularly suitable?

In web-based software development, I would divide outsourcing into two categories in terms of complexity.

Outsourcing of front-end development: I recommend this variant to companies that are making their first experiences with IT outsourcing. The complexity is low and the integration into the existing team in Germany is easy.
Outsourcing of backend and frontend development: In my view, this form of IT outsourcing is very complex and requires a lot of communication and project management from Germany. I would only recommend this option to companies that already have experience with IT outsourcing.

What resources do companies that are considering IT outsourcing need?

This is actually the first and most important question to ask at the beginning of an outsourcing process: Does the company have the necessary resources to coordinate the outsourcing staff and their tasks in the project?

First and foremost, there must be IT experts on the customer’s side who can reliably coordinate the project(s) and also evaluate the quality of the work performed. In addition, the customer needs clear goals and requirements and should strive for clear communication so that the partner can also meet the expectations. Here, too, we support our customers, especially those who are gaining their first experience with IT outsourcing, through our consulting services.

For frontend development, project management on the customer’s side from Germany can help supervise the outsourcing team. For backend and frontend development, in my opinion, you need an additional customer-side backend developer with strong communication skills in the team, who is even used as a project manager in some cases. However, a product owner with a good technical understanding can also do this if necessary.

When a customer has booked IT outsourcing services: What are the usual process steps to set up a suitable setup?

The first step is, of course, to have the right personnel available. Either we already have suitable specialists in our team or the position is advertised.

If an advertisement is required, we usually post a job opening on several online portals that specialize in the Indian market for IT professionals. Typically, 300-500 professionals currently apply for an open position with us.

To sift through the applications, we have established a five-step selection process. First, we use AI support to filter out those applicants who have the required skills. Those remaining are checked for consistency, including an extensive background check. Typically, after this step, there are then about 10% of applicants left, which are manually screened by our more experienced local senior developers. Then there is the first technical applicant round with the senior developers. Here, the applicants program live and solve smaller problems. By the way, the aim is not to complete the tasks as quickly as possible, but to test whether the applicants approach solutions creatively. In other words, it’s a little assessment center.

Those who score well in the technical round have a second interview, usually with one of the founders, in which the most important key points of the employment relationship are discussed. In the last round, the favored applicant has a final interview with one of the founders from Germany, which essentially revolves around the cultural aspect, i.e. the question of whether this employee is suitable to fit into a team of a European company. This requires tact and sensitivity, but not every cultural difference means that cooperation is hopeless.

Once the employee or the outsourcing team has been selected, further important steps are required. These mainly take place in-house at the customer. Here, too, we provide support as needed. To name just a few important points:

• Selection of suitable communication tools (chat, video conferences, special communication apps, such as Slack, Teams) and a conscious decision to use them consistently.
• Setting up a functioning ticket management in a project management tool to provide the tasks for the outsourcing partner.
  Formulating programming guidelines and guidelines for documentation. Once such common standards have been agreed upon, it is essential to adhere to them in the long term.
• Possibly setting up test systems suitable for third countries with anonymized databases for development.
  Cultural coaching, if possible on both sides.
• In general, if you prepare carefully and maintain structured processes and clear communication, nothing stands in the way of successful IT outsourcing!

What are typical problems and challenges in IT outsourcing in general and what solution strategies are suitable?

n the outsourcing provider’s side, the main challenge is to be able to offer a constant supply of highly qualified, culturally trained staff with good communication skills. If, for example, the partner does not manage to create a homogeneous working environment or does not have a good salary level, there will inevitably be a lot of employee turnover and loss of know-how.

That’s why I advise customers who are looking into the possibility of IT outsourcing and looking at different providers to also find out whether the developers in the outsourcing destination have a good working environment. Are there photos of the offices on site? This is where the partner should be transparent!

Finally, there may be some security and privacy risks associated with outsourcing. Make sure the partner has appropriate security and data protection measures in place and integrate them into the contracts.

Other problems can arise during ongoing outsourcing that can jeopardize the success of the project. Lack of or inappropriate communication is a common problem. So are requirements and expectations that are unclearly formulated. This often leads to misunderstandings and misinterpretations. Customers should prevent this by establishing clear communication channels, clearly defining requirements and involving employees in the team, e.g. by having them regularly attend routine meetings such as the Weekly or Daily.

Ultimately, however, all of these challenges can be solved if the outsourcing process is approached in a structured and culturally sensitive manner right from the start, and if difficulties are not immediately thrown in the towel, but instead a solution is worked out together. We see ourselves as a reliable partner at our customer’s side, even during the ongoing outsourcing process, who can always call on our cultural coaching and consulting services if necessary.