Great Expectations of Outsourcing
For some of you offshore outsourcing of your software development can seem like a giant leap into the deep unknown. Why would you want to do programming in India or anyplace else offshore, when directing and motivating a team in your own office is hard enough?
Yes, the boss and the board say you can save money, but you suspect the savings will be limited in the long run. And it is certainly more satisfying to run a collegiate engineering team with a focus on technical excellence rather than measuring your progress by computing the cost of each line of code.
These basic concerns were expressed to me in an email last week from the VP of Engineering at a software company here in Silicon Valley:
We currently have a small team of java programmers working on our software product. I'm wondering what the implications of switching to an outsourced model would be. For example, if we kept a couple of our existing engineers to work on specifications and communication, what could we expect from outsourcing the rest of our development?
I think the answers to this and the other questions in the email below will be of interest to many of you.
(1) So what should you expect from outsourcing the rest of development?
You should expect very similar results to what you are getting now, but at a much lower cost. The way to do this is by finding or building an excellent offshore team that is as professional as one you can build in the U.S. Lately this may be easier to do than hiring programming professionals in many cities and towns in the U.S. where good technical talent is not readily available.
(2) What is the “real” cost savings from outsourcing? In other words, can I get productivity equivalent to one of my engineers here for 70% of the cost? 50%?
Yes, the savings should be at least 50% and can often be much less. Let's look at some numbers. My budgetary estimate of the cost of an offshore engineer is about $4K per month. You can hire engineers for less by using the total number of engineers and the length of the engagement as negotiating leverage to reduce the cost further. For example, if you need a mix of 15 senior and junior engineers for a year or more, then a rate closer to $3K per month is possible.
Compare this to what you are paying or would pay engineers locally, usually $8K to $10K per month depending on experience and your local cost of living. On an hourly basis that is about $50 to $62.50 per hour. Of course, the take-home amount for the employee engineer is much less than this.
The efficiency of the offshore engineers is another issue that impacts productivity. Even if you figure that productivity is only 80% of the programmers you could have in the next room, the savings are huge.
(3) How long should I expect it to take to get a deal done? 3 months?
Yes it can take three months or more to perform a careful search and evaluation to select the best offshore vendor for your situation. Some people spend over six months to make a decision after traveling to visit the offshore operations of several vendors.
You can shorten this by just selecting from the vendors you know through direct contact or referrals from friends. But this gives you only a few choices. Online directories of offshore vendors give you many vendor choices but little information to compare them. You can hire an offshoring advisor but that can be expensive.
The Accelerance approach is to combine the sourcing and screening steps to get you selecting from a short list created very quickly from a much larger list of pre-qualified and vetted vendors. It takes only a few weeks.
(4) How long does it typically take for the outsourcing company to come up to speed? 6 months?
Less. It takes at least two weeks for a vendor to gather the engineers and get started. Full productivity depends on how well you have described the software you need, the relevant experience of the offshore team and the freedom you grant the offshore team to work autonomously without your daily instructions. Full productivity is usually achieved in about three months.
(5) Any other thoughts on what I could expect?
Don't settle for an offshore vendor that is just giving you the number of “bodies” you ask for as programmers. You should expect to work with a professional team of programmers with both senior and junior members and a management process in place. Expect the same level of dedication to your success that you would require of your own team of programming employees.
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The results of my brief survey about the format of my new teleseminar series on describing software for offshoring showed about half of the respondents prefer lectures and the other half prefer both lecture and clinic.
Respondents that prefer lectures do so because they are either not developing software now, or prefer to keep the details of their software private. Therefore, the teleseminars will start with lectures and then ask for volunteers to share their specific situations as examples and for real-time coaching.
Stay tuned for more details about this new teleseminar series I am calling: A Fast Track to Offshoring Your Software Development.
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The Runtime Bottom Line: If you have limited experience with offshoring then replace your fears of the unknown with great expectations. It isn't always easy to achieve success offshoring your software development, especially on your own. But don't settle for mediocre results. Expect greatness from your offshore team.
Until next time,
Steve Mezak, CEO
Accelerance, Inc.
Risk-Free Outsourcing
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