Steve Mezak will be speaking at the International Software Development Outsourcing Conference on May 20, 2008. His agenda topics include, “Is Outsourcing Right For Start-Ups?” and “How to Choose Outsourcing Partners”.

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Just saw a press release for a new book Debugging Your Information Technology™ Career published by Elegant Fix Press and written by career consultant Janice Weinberg. I haven’t read the book yet but the press release has some detail that makes the book look interesting.

Whether you believe there is an IT job shortage or not, it is clear employees are being displaced by offshoring. More and more companies are offshoring these days and this book promises to be a valuable resource for those directly impacted by the changes and job loss.

The job loss issue comes up with Accelerance clients when they have an existing software development team that they need to expand with resources offshore. The question is what to do with the programmers you already have in-house? Instead of coding, these U.S.-based employees often become project or product managers if they stay at the company.

This book promises to offer additional choice of career change and growth.

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More details on how many and which jobs are being offshored from the U.S. are in a report called “Jobs Beyond Borders” just issued by the Wharton School and CareerBuilder.com.

The report has lots of statistics from a survey of more than 3,000 HR professionals and 6,700 workers in the U.S.

13% of companies surveyed outsourced to third-party vendors in 2007 and 7% say they moved job functions to offshore affiliates or subsidiaries.

The main reason is cost.

64% of companies are offshoring to save money. 32% of companies surveyed are offshoring software development work.

No doubt there are many ways to spin the numbers. One blog focused on the statistic that 27% of companies went offshore to find skilled workers, implying a shortage here in the U.S.

For me the handwriting is on the wall. American companies are offshoring for a number of reasons. And if your job is in the list of those most likely to be offshored, then it’s time to adapt to this reality.

If you are a company joining the ranks of those taking advantage of offshore software development then Accelerance global partners have the skills you need.

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Today I ran across this article in Baseline magazine that questions if there really is an IT labor shortage. It reports that the idea of a shortage is popularized by lobbying groups trying to convince congress to increase the number of H1-B visas.  I mentioned a looming IT talent crunch back in January.

This newer article quotes several experts and reports that state there are plenty of IT jobs available, just not high paying ones that Americans are willing to take. Instead companies are bringing in low-paid workers or just sending the work offshore.

I think this new article is closer to the truth based on the large number of comments from people that have actually lost their jobs due to outsourcing or offshoring.

But companies will always want to save money. It’s the main reason we don’t make shoes in New England, steel in Pittsburgh and grow apricots in Silicon Valley anymore. If you are running a company, how would you handle IT? If you are starting a software company with your own money, where would you do your programming?

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Selecting the right kind of engagement model with your offshore programmers (and / or the company where they work) is the best way to ensure you get more dynamic engineers that will deliver your software with the level of quality you would expect from your own software engineers in the U.S.

Generally you want a model where you have more control over the programmer hiring process and the on-going management of the software development process. But you may have to trade-off control with your budget and ability to manage the software development process. Below are the six engagement models most commonly used.

Choosing the right offshoring engagement model is a key to your success

From left to right, each model is capable of handling an increasing level of resources and control.

Freelancers – complete control over the programmers hired, but you have to evaluate each one individually. It is common to hire several on a trial basis and even have them create the same software and then keep the ones that do a good job. Managing more than three freelancers at different locations and time zones is very challenging! Good for small projects for several months or longer if you can get the freelancer(s) to commit.

Body Shops – very little control over the programmers hired. This type of vendor is famous for giving you transactional programmers cheap, but without management or software development process. You have to tell them what to do and manage them yourself. At least they’re in the same room! Okay if you have the time and resources to manage your programmers from a distance.

Software Factory – or a vendor that bids on your software project on a fixed-price basis where you generally have no control over the kind of programmers that are used. Your specifications need to be as complete as possible and have a clear definition of what it means for your software to be finished. Some disreputable vendors will deliver some software for the first several progress payments and then drop you as a client if you make many changes or have no clear definition of what “finished” really means.
Yet, this is one of the most common forms of offshoring. Works well if you have a well-specified programming project and have the budget to try several

Offshore Development Center (ODC) – a vendor that gives you a dedicated team of programmers and you can usually participate in the interviews. You pay a monthly fee for each programmer and their activities are often managed by a team leader you also help select. Good for developing multiple releases of the same software application where consistency of the programming team improves productivity over time.

Build, Operate & Transfer (BOT) – like ODC but with an option to transfer your team of programmers into your own captive operation or offshore subsidiary in future, usually two or three years.

Captive Operation – most appropriate for larger software companies that are developing complex software applications and systems needing fifty software engineers or more. You have complete control (and responsibility) for the hiring and management of the programmers.

Accelerance services can help you with the more complex, rightmost four engagement models. Use Offshoring Jumpstart to find partners that will bid on your fixed price projects and / or build your ODC. Use Rapid Ramp-Up consulting for more complex ODC, BOT and Captive Operations.

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Last year a 25-page study Getting the Numbers Right: International Engineering Education in the United States, China, and India was published by several professors from Duke University (abstract & more download links available here).

This report is grasped at by both advocates and detractors of the H1-B visa as proof that we Americans are not doing so bad after all and that the specter of soon being overrun by hoards of qualified foreign software engineers is not a reality.   Notice my emphasis on the word qualified. That’s the main point of the study – yes, there may be a large number of IT workers being graduated in India and China (10 times the U.S. or more) but they are not at the same level of skill as software engineering and computer science graduates earning a Bachelors degree from a college or university in the U.S.

Hoards of Asian Programmers?

But here is the (incorrect) logic being used in applying the results of this study:

• Tech company executives (like Bill Gates) claim there are not enough skilled programmers in the U.S.
• The study says there are not as many qualified programmers in India and China as previously estimated
• Therefore, there is no shortage of qualified programmers in the U.S.

Wrong!

But this past April 1st or H1-B Visa day, an NPR interview says there is a 10 to 1 demand to supply ratio for talented programmers and software architects in the U.S.

Listen to another NPR interview with Vivek Wadwha one of the Duke professors and you will hear him say that most American companies are outsourcing offshore to save money NOT just to get hard-to-find talent.

I think it is for both.

But here’s the thing. American companies are offshoring even if they have to take a hit in quality of the programmers. The study discusses how much of a hit and why it exists to begin with.

The study draws on the previous 2005 McKinsey study that predicts a shortage of IT workers because only about 10% of graduates in Brazil, China and Russia and 25% in India are globally competitive programmers.

The study further characterizes these graduates as either dynamic or transactional engineers. Here’s a brief definition:

Dynamic Engineers

• Capable of abstract thinking
• High-level problem solving
• Using scientific knowledge

Transactional Engineers

• Solid technical training, but
• No experience to apply knowledge to larger domains
• Responsible for routine tasks in workplace

If 80% to 90% of the offshore engineers are transactional you have to wonder who’s going to be working on your software when you go offshore. That’s why it’s important to select a vendor that knows how to recruit the right kind of “dynamic” engineers up to American standards of excellence.

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I admit it.  I am a middleman.

Just saw this post on Business of Software blog. I’m not sure I’d use a middleman to buy a used car as described in the post. But I would if he/she could present several cars that meet my requirements and then helped me objectively choose between them.  Now that would be a service!

That is the kind of service I provide for companies that want to take advantage of global software development through our network of 40+ pre-approved global software development companies in over a dozen countries. And this “Offshoring Jumpstart” program is free.

Using offshore software development isn’t for everybody. And as you probably know, there are many offshore companies you can run into that aren’t really good for anybody.

Many will take your money and just give you some very junior programmers in a room in some exotic location you have to somehow manage yourself. Others will burn through most of your budget with the first few milestone payments and then never finish. They just go on to the next victim.

If you want to develop software professionally then after you get past the big Indian mega-vendors whose names we all know there are literally thousands of smaller vendors to pick from. So how do you choose?

There is a lot of crap out there – 90% or whatever. Using a guide, broker or middleman will help you get to the good 10% of smart programming teams around the world quickly.

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I was interviewed for an article in Business Week about outsourcing to Latin America but the author didn’t use any quotes from me. I guess I need to speak in more sound bites!

A more likely reason is because the examples in the article are for big companies doing outsourcing of all kinds.  All my examples were for clients using smaller software development teams.

But I agreed with the author’s premise that there is an increasing trend of outsourcing to Latin America instead of India. A major reason for it is the decline of the dollar compared to the Indian rupee.

The article also includes a link to a slide show of information about outsourcing “hubs” in Latin America. There are just a few statistics on each slide.  The most interesting are the change in the dollar and local currency exchange rate and the annual salary range for “skilled programmers” in seven Latin American countries.  I’ve summarized these numbers in the table below.

Country	Dollar Value over past 5 years		Annual Salary Range	Hourly Rate 2000 hrs/yr
Argentina		Up 10%	$16K to $19K	$8 to $9.50
Brazil		Down 49%	$25K to $27K	$12.50 to $13.50
Chile		Down 41%	$25K to $27K	$12.50 to $13.50
Colombia		Down 39%	$18K to $20K	$9 to $10
Costa Rica		Down 25%	$19K to $21K	$9.50 to $10.50
Mexico		Up 0.4%	$25K to $27K	$12.50 to $13.50
Uruguay		Down 28%	$15K to $18K	$7.50 to $9

You can see that the dollar has really taken a hit over the last five years in all but two of the seven countries. The dollar has held steady or increased in value compared to the Argentine and Mexican peso.

I divided the annual salary numbers by 2,000 hours per year to come up with an approximate hourly rate in the last column.  These rates are about what you would pay if you set up your own captive operation in these countries. Hourly rates for contract programmers will be 2 to 2.5 times these rates. The higher amount covers office, equipment and profit for the Latin American partner.

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It’s April 1st and no joke, it’s H1-B Visa day. This is the day that companies apply to the U.S. government to receive visas for foreign workers. There is a limit of 65,000 and they are issues within the first 24 hours.

NPR interviewed a software company CEO about his challenge in hiring a software architect here in the U.S.

This is a controversial issue that really strikes a nerve with those Americans that think companies (like Microsoft) are selling out by hiring cheaper foreigners instead of paying Americans what they are worth.

Even if it is true, there is reported shortage of IT talent in the U.S. that may drive up salaries anyway.

Mentioned in this interview was a study done by professors at Duke University that showed the quality of offshore workers is not. One of the professors is Vivek Wadhwa who was interviewed on NPR last year when the study was published.

I am going to post a blog about this interesting study of offshore talent very soon.

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Contact Info Previously Available Through $497-$5,000 Consulting Services
Accessible at No Cost Until April 30, 2008

Redwood City, CA – [Business Wire] – Accelerance, the company dedicated to taking the risk out of outsourcing software development globally, announced that it will provide one month of free unlimited access to the 40 members in its Global Partner Network beginning today. The 40 offshore software development company partners located throughout Eastern Europe, India, Latin America, North America and Southeast Asia have been meticulously pre-screened and qualified by Accelerance. Contact information is available by registering at http://www.accelerance.com/free-jumpstart.htm.

“We’re offering this valuable global partners contact information at no charge to encourage companies to discover the benefits of outsourcing,” said Steve Mezak, Accelerance CEO and author of the awarding-winning book Software Without Borders and the Steve Mezak Blog.

According to Mezak, many free directories list tens of thousands of offshore outsourcing companies, but give no information on the competency or quality of any particular vendor. “It’s hard to tell which ones are any good. You can spend a lot of time fishing for vendors, describing a project and reviewing your bids. If you need to build an offshore software development team quickly, these directories and project bidding websites are useless.”

Previously, access to contact information in the Accelerance Global Partner Network cost clients between $497 to $5,000, depending on the consulting services included. “Once they chose an offshore vendor, our Outsourcing Jumpstart, Rapid Ramp-Up and consulting services can help pinpoint evaluation criteria and select the partner that best fit their needs,” said Mezak. “But there’s no obligation. The partner contact info is now free for a limited time.”

Companies considering using outside resources to develop software can check the Accelerance Global Partner Network Member Directory to get an overview and sense of depth and breadth of the global network.

Accelerance, Inc. offers consulting, coaching, tools and processes to help clients select offshore, near-shore and onshore outsourcing vendors quickly and safely. The Accelerance Global Partner Network of 40+ expert software development vendors in over a dozen countries provides software development services for 19 leading software technologies. Accelerance also guides customers in contract negotiation, offshore engagement set-up, and on-going software development oversight.

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