OUTSOURCING OVERSEAS AND ITS EFFECTS ON THE DEVELOPMENT PROCESS

Sam Eiring

Outsourcing Software Development “Outsourcing Software Development involves

shifting of software development activities by a company to third party service vendors or software firms that may be located in offshore destinations.” (www.cyfuture.com)

Outsourcing began in the late 1990’s when the cost of IT development skyrocketed because of the hype of the internet.

Outsourcing

Advantages/Disadvantages Uses for Outsourcing Outsourcing at Thomson Reuters Steps to Begin Outsourcing Cost Savings Hidden Costs

Advantages

Can save money and time Get access to specialized labor at low

costs Cut Human resource costs Software research at lower rates Reduce training costs Allows ability to provide product support

24 hours

Disadvantages

Must have very specific requirements Loss of managerial control Many hidden costs Threat to security and confidentiality Possible loss of flexibility Language barriers Difference in time Initial Cost

Uses for Outsourcing

Specialized Development Teams Specialized Testing Teams Support services

Call CenterDesktop SupportHelpdesk

Expanding workforces

Multi-Source Outsourcing

Multiple teams with specialized tasksCan gain access the best developers of each

taskLowers Risk of FailureCan use trained testing expertsAllows the company to use smaller outsourcing

markets○ Lowers cost

Not a single contractCreates independence between testing and

development

Outsourcing at Thomson Reuters Location: Bangalore, India This is an in house form of outsourcing

The facility was set up as a sister companyAt the beginning there were 10 developers

and one manager overseas and a Team Liaison in the office

The employees have been an expansion to the company

Overseas Employees Divided assigned to a specific team in the office

Training at Thomson Reuters There are Cultural Differences classes held

for both employees overseas and in house.Teach the differences between different cultures

Brought overseas employees to the US to have face-to-face meetings and training

Ratings of Overseas teams for each projectSurvey covering different aspects of the project

Culture Calculator

Overseas Employee Rating FormWork Request WR12345

Assigned To: Name

Feedback Given By: Name

Date mm/dd/ccyy

Areas of Observation Rating Comments Areas for Improvement

Analytical skill      

Coding skill      

Testing skill      

Process compliance / follow BDSG standards      

Communication skill      

On time escalation of issues      

Quality of deliverable      

Time management skill      

Task management skill      

Productivity      

Responsibility / commitment      

Rating scale: 1=Low, 5=High

Overseas Employee at Thomson Reuters Since they are in house they are treated

the sameTime reportingThey do not have any technical differences

Some Issues they haveSpecific InstructionsLanguage BarrierTime Difference

Steps to Begin Outsourcing Imagine a Software development Partner

Draw up what your ideal partnership Selecting your International Outsourcing

PartnerRequest referralsContact each potential PartnerPick a partner who uses the same

Development Process Ask for Code Samples

Helps determine the skill level

Steps to Begin Outsourcing Protect your rights

Use a LawyerSecurityDeadlines

Good CommunicationFace to Face communicationEmailPhone

Signing a Contract

Identify security requirements Require your partner to provide a 3rd

party security audit Allow the right to perform process

audits. Set turn around times Require Documentation for all steps of

development

Cost Savings with Outsourcing

Overseas help does not need:HealthcareSocial securityPensionPaid Time offBonusesOffice SpaceComputer and Software Licensing

Cost Savings with OutsourcingBenefit Median Amount % of TotalBase Salary $80,765 71.2%Bonuses $1,999 1.8%Social Security $6,331 5.6%401k/403b $3,145 2.8%Disability $828 0.7%Healthcare $6,103 5.4%Pension $4,138 3.6%Time Off $10,186 9.0%Total $113,496 100.0%

Overseas Developer = $20/hr x 40hr wks = $40,000

Hidden Costs

Initial Costs:Research to find a partnerTrainingSetting up a process to manage and send

work to your outsourcing partner Contact Liaison Errors from Overseas Developers

Conclusion

Advantages/Disadvantages Uses for Outsourcing Cost Savings Hidden Costs Outsourcing is Different for each

company It is a long term investment It is a constant improvement process

References Miller, Brett. "Selecting a Custom Software Development

Company." Custom Software by Preston blog. Custom Software by Preston, 1 June 2009. Web. 15 Feb. 2010. <http://cspreston.wordpress.com/2009/06/01/selecting-software-development-company/>.

Palisade : Controls for Outsourcing Software Development. Oct. 2004. Web. 5 Feb. 2010. <http://palisade.plynt.com/issues/2004Oct/software-outsourcing/>.

Berg, Ryan. "Guest View: Addressing security in outsourced applications - SD Times: Software Development News." SD Times: Software Development News. Software Development Times on the Web, 15 Aug. 2009. Web. 5 Feb. 2010. <http://www.sdtimes.com/GUEST_VIEW_ADDRESSING_SECURITY_IN_OUTSOURCED_APPLICATIONS/By_Ryan_Berg/About_OUTSOURCING_and_SECURITY/33685>.

References Mullaney, Jennette. "Software development trends in 2008:

Outsourcing, agile development." Software quality management, testing and QA resources - SearchSoftwareQuality.com. 26 Dec. 2007. Web. 5 Feb. 2010. <http://searchsoftwarequality.techtarget.com/news/article/0,289142,sid92_gci1287341,00.html>.

Filev, Andrew. "Adopting and Benefiting from Agile Processes in Offshore Software Development." MSDN: Microsoft Development, MSDN Subscriptions, Resources, and More. July 2006. Web. 5 Feb. 2010. <http://msdn.microsoft.com/en-us/library/bb245671.aspx#jour8adopt02>.

Kielpikowski, Bob. "Outsourcing At Thomson Reuters." Telephone interview. 19 Feb. 2010.

References "Salary Wizard - Java Developer." MySalaray.com.

Mar. 2010. Web. 04 Mar. 2010. <http://swz.salary.com/salarywizard/layoutscripts/swzl_salaryresults.asp?hdSearchByOption=0&hdSearchByOption=0&hdKeyword=Java%20Developer&hdJobCategory=IT05&hdZipCode=&hdStateMetro=&hdGeoLocation=U.S.%20National%20Averages&hdJobCode=IT10000289&hdJobTitle=Java%20Developer&hdCurrentTab=&hdNarrowDesc=IT%20--%20Computers,%20Software&joblevelcode=>.

Questions ???