Rory Graham, head of the outsourcing/offshoring group at law firm Baker & McKenzie, said firms were failing to reap the benefits of offshore development because they were rushing ahead without proper planning.
Companies could find themselves in difficulties because they sent work overseas to meet urgent deadlines on the false assumption they could flesh out the contract and service level agreements later, he said.
"There are certain things you cannot do without. You will need to put a lot of management effort into the early stages to make sure processes and the contacts are in place. We are talking about a market that is three years' old. That is not a criticism, it is a fact."
Businesses needed to make sure contracts were watertight before starting work. It is important to make provision to allow work and data to be transferred to another supplier, in a different country, if necessary, if the relationship fails to work out, he said. Companies must also make sure suppliers follow any compliance requirements, under Sarbanes-Oxley, Data Protection Act or Financial Services Agency regulations.
"You cannot delegate your responsibilities under the FSA. It is not enough to have it in the contract. You have to show your supplier has the right processes," he said. The youth of the Indian software and services market can mean suppliers lack experienced project managers, he added.
Firms may have to work with suppliers to set up management training programmes, a tactic that could reduce high staff turnover rates by providing programmers with a career path.