2014 International Conference on Advances in ICT for Emerging Regions (ICTer) : 11 th - 12 th December 2014 International Conference on Advances in ICT for Emerging Regions ICTer2014 A Study Pertaining to the Barriers in Assessing the Outsourcing Risk Factors in Sri Lankan Software Industry H. Udayantha W De Silva #1 , Kennedy D Gunawardane *2 # First-Third Dpartmente, First-Third University Address Including Country Name udayantha311@gmail.com kennedy@sjp.ac.lk * Second Company Address Including Country Name second.author@second.com Abstract— Among many papers which have been published for many years more research has been done on software outsourcing risk management and mitigation; but barriers which affects risk assessment has been left aside creating a void. With reference to existing literature six factors were identified and this paper will validate its applicability and operational ability in the domestic software industry. Complexity of the undertaken project, Contractual complications between the vendor and the service provider, project execution mechanisms, financial models adopted, legal framework of the country and the organizational cultures were these main six components which wre subjected to the study. Study is based on all the SLASSCOM registered companies in Sri Lanka which are involved in the software operational outsourcing business. Keywords— Software industry, Operational outsourcing, Risk management, Outsourcing risk I. INTRODUCTION Near the bloom of the 21 st century, software outsourcing became one of the major markets in Unites status of America. The concept of software outsourcing was industrialized by Americans with the industrial revolution. Most of the day to day operations in related industries were automated through which they managed to offer the luxury of experiencing accurate and responsive services to its clients. With the rise of operational automation software became a core business solution and a critical success factor for most of the market leaders and emerging industries. From the business perspective the definition of outsourcing can be interpreted as the process of contracting internal operations to a third party. Outsourcing can be identified mainly in two different categories; namely ‘Foreign outsourcing’ and’ Domestic outsourcing’. What can really be achieved through outsourcing? Why is outsourcing has become so popular in the present market structure? Finding answers to these questions will define the real purpose of this study. Software industry comprises of many overhead expenses, unpredictable time lines, delivery failures and often requirement changes. Majority of major players in the industry believes that by outsourcing some of the in house operations the company would be able to adhere to these changing environments much easily. It is important to make sure that the outsourced components of the software does not any of the core operations and it is important to keep such processors with the project owning company. There are many things that can be achieved through software outsourcing. In a nut shell it has its own pros and cons but more pros can be enjoyed if it is being used right. The risk associated with any software product is very high. The risk component comprises of requirement changes, technical difficulties, time constraints, scarcity of resources and so on. Outsourcing is one of the best ways to pass these risks to another party. Simply by outsourcing the project all these associated risks will be passed on the service provider. Outsourcing is a very effective way of passing risks. Having said that, the risks which are associated with outsourcing process itself has a higher degree of criticality too. They will have to closely understood and monitored to make sure that ROI of the decision has a real meaning. What if the service provider fails to deliver on agreed time line, what if service provider doesn’t have the pool of resources which is required to carry out the tasks, lack of knowledge in the business domain are some of such risks which has to be considered before making the decision of out sourcing. When it comes to outsourcing, not every component can be easily outsourced. Quality assurance, business analysis, system support services, user training, management processers, security services, communication services and data management/ warehousing are some of the segments which can be given to a third party. But it is important to keep the core business functionalities under the ownership of the project owning company so that they can retain the competitive advantage over their competitors at the same time. Therefore before signing off an outsourcing all the stack holders has to be clear on the risk components they will have to deal with and should be prepared to take a calculated risk. In order to do that they have to have a proper process, mechanism to analyse the risks which are associated with software outsourcing? If the analysis fails to get a clear picture of what they are dealing with, all the project time lines, financial forecasts, risk mitigation plans, risk management plans and delivery plans will be seriously affected. A comprehensive risk analysis report will be highly useful in such scenarios to draw accurate and conclusive project delivery plans. This study will determine the barriers of the risk assessment of outsourcing in information communication