Lessons learned in IT outsourcing

Despite the abundance of logistics-related software on the market, many companies still prefer to develop their own apps. That requires a hefty commitment of in-house IT resources, however, since a single application can require thousands of lines of source code. To handle the added workload, some companies have turned to third-party software developers, many of which are located outside the United States.

But that approach presents its own set of challenges, as Mark Ohlund can attest. Ohlund, who is vice president of technology strategy for third-party logistics service specialist PLS Logistics Services, described his company's experience with outsourcing at eyefortransport's 13th annual Logistics CIO and Supply Chain Technology Forum this past April.

Based outside of Pittsburgh in Cranberry Township, Pa., PLS Logistics has long used a proprietary transportation management system (TMS) in its operations. The software, which PLS touts on its website as "one of the industry's best supply chain solutions," was developed by the company's in-house programmers. But when PLS went to upgrade the app 18 months ago, it took the outsourcing route to hold down costs and avoid a huge staffing buildup. Ohlund notes that programmers—particularly Java and .Net developers—are in short supply in the Pittsburgh area.

PLS cast its net wide in its search for the right contractor. In total, it evaluated 27 candidates from countries all over the world, including Russia, China, Argentina, Brazil, Germany, and Vietnam. It rated each supplier against an extensive set of criteria that included pricing, programming capabilities, and considerations such as time zone, language, and presence of a U.S. office.

In the end, PLS chose a company in India for the job, which included making three separate enhancements to its TMS. It then arranged for the vendor's employees to spend several weeks onsite at PLS's premises to familiarize themselves with the technology as well as the company's work flow.

Given its meticulous preparations, PLS had every reason to expect the process would flow smoothly. Yet problems quickly developed. For starters, there was confusion about the timeline. When it took on the assignment, the Indian software developer assumed it would be making the upgrades one at a time. So it came as a shock to learn that PLS wanted all three done at once. To keep the project on track, the contractor was forced to hire additional programmers.

Then there was work quality. PLS soon realized it had made a crucial error by not verifying that all of the programmers had the necessary skills. It turned out that more than half of the offshore developers lacked experience with the relevant technology. As a result, it took them longer than expected to complete simple tasks, driving up project costs. It also created extra work for PLS's staff programmers, who found themselves having to fix coding errors. Ohlund reports that several of the in-house programmers became so frustrated they quit.

PLS did make some mid-course corrections. It conducted phone interviews with all of the offshore programmers and had those without the requisite skills taken off the project. PLS also got the Indian contractor to reimburse it for the software repairs.

You might think this experience would have soured PLS Logistics on outsourcing, but that's not the case. Ohlund said his company would give it another try, although it would do some things differently next time around. For one, it would be more conscientious about vetting the people assigned to the project. For another, it would focus on one project at a time, rather than trying to tackle several at once.

As for why his company considers this approach worth pursuing, Ohlund says it's all about the flexibility to match IT staffing levels to needs. "I believe outsourcing can be successful and can provide flexible staffing to augment a permanent onshore staff," he said. "Given the learning curve and lack of industry experience, I don't believe the win is with cost savings, but rather with the ability to have a variable-cost development staff."