I moderated a roundtable discussion at SD Expo – Best Practices in Boston on Thursday. This is a major professional software development conference in the U.S. with session tracks including:

• C++
• Design & Architecture
• People, Projects & Teams
• Process & Methods
• Requirements & Analysis
• Testing & Quality

These sessions covered mostly the technical side of software development and the roundtable discussion (in the People, Projects & Teams track) was the only one that dealt with offshore outsourcing.

Most sessions at the conference were lecture format and covered topics of the software development process, aimed mainly at attendees developing software in IT departments and software product companies.

In contrast, the roundtable format was an open discussion between the all the attendees. All I had to do was get the ball rolling by introducing what I consider the five areas of mastery required for successful global outsourcing of software development. There were about 40 attendees.

We did not discuss the technical details of software technology and process. After all, software is developed pretty much the same no matter where ever you happen to be on the planet.

Or is it?

The attendees brought up the problems, issues and challenges of offshore outsourcing. Some wanted to know what to watch out for if they start offshoring. Others were looking for solutions to problems they have encountered. Problems like these:

• Too much project management overhead outsourcing to India – the vendor had a layer project managers managing other project managers!
• Attrition too high in a team of over 200 engineers in India
• Senior programmers are really junior – 3 years of experience is considered senior in India.
• Friends & family subsidiary not getting good results – want them to be more agile

One attendee wanted a Senior Java engineer but was given candidates with no EJB or database experience.Another had a Friends & Family subsidiary created when an existing employee decided he wanted to go back to India. Rather than loose the employee, the employee goes back and hires a small team. The company keeps the employee and gains an offshore operation at with programmers at a lower cost.

But problems can emerge when it becomes difficult to attract engineers to work for such a small operation in a country like India where good engineers want to work for a larger company. The original employee may be a good programmer but not an experience manager. The company is left with an offshore operation with inexpensive programmers but not delivering the software needed.

Another attendee had a Friends & Family subsidiary in Bulgaria that worked well with 2 engineers doing QA of their software developed in the U.S.

The bottom line of the discussion was that many companies are already offshoring their software development because of the cost savings. Some felt that the cost savings are overstated because of the problems and issues that are encountered.

Were you at the roundtable? Enter your own comments if you were there or if you have encountered similar results with your offshore outsourcing of software development.

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You may not be getting the savings and flexibility you need from your offshore captive center, operation or wholly-owned subsidiary in India, China, Russia and other countries according to a report from outsourcing consulting firm Equiterra.

The report Assessing the Role of Captive Operations (free after entering your contact information) presents some interesting statistics on the declining popularity and limited success of a captive offshore center compared to use of an outsourcing vendor partner to handle you offshore work. Here are the major issues to consider:

• Captives tend to pay more for rent & furnishings than local companies
• Captives lack institutional knowledge and take time to become efficient
• 25% of IT outsourcing to India in 2005 went to captive centers, 60% for BPO
• An underutilized captive center is more expensive than using a 3 rd -party provider
• Sending your executives for captive center set-up is 60% more expensive than using a 3 rd -party provider.
• Small captives do not compete well for talent with large multinationals and 3 rd -party providers
• Shutting down a captive operation can take up to 2 years

Hybrid partnerships between your own captive operation and one or more 3rd party provider is a way to improve your chances of success if you are still convinced a captive center is required. For example, a partner can recruit or provide resources on a contract basis to work in your captive center.

The classic approach of Build, Operate and Transfer (BOT) is another hybrid approach. That’s where the partner sets up or builds the center and then operates it for you. You have the option of transferring the entire operation into a captive center later. However, Equiterra reports execution of the actual transfer is limited.

In most cases, creation of your own captive center is overkill when you are outsourcing your software development. Use of small teams of 3 to 30 programmers at a reputable vendor is a much more cost-effective and flexible approach.

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Redwood City, CA (September 18, 2007) – Accelerance, the company that takes the risk out of outsourcing software development, announced that its new client, Visionpace, a Microsoft Gold Certified Partner and custom software development firm based in Kansas City, Missouri has selected a global partner in Costa Rica to assist with Microsoft .NET and Visual FoxPro software development projects following an Agile process.

“It’s becoming increasingly difficult to find seasoned developers in the Kansas City area that have the specific expertise we need,” said Visionpace COO Doug Bliss. “We began to search outside our market and in the process heard how other software development firms were getting good results with global outsourcing, so we decided to give it a try.”

Visionpace wanted to focus on vendors in Latin America because the time zone overlap makes it easier for both companies to conduct business and used Accelerance’s Outsourcing Jumpstart Program (OJP) to learn more about the pros and cons of outsourcing to that region. After visiting two Accelerance Global Partners in Mexico, Visionpace was convinced that outsourcing could indeed save them time and money. They then invested in Accelerance’s Rapid Ramp-Up Consulting Services to expand their search to Costa Rica and the Philippines. Accelerance found more than a dozen vendors in those geographic areas with programmers who had experience with Visual FoxPro, a technology that Microsoft has planned for obsolescence. The top three most-qualified vendors were presented to Visionpace for their extensive evaluation.

“The primary consideration, with most other requirements being equal, was to find a partner who could consistently deliver high-quality software for our clients and in the process we also discovered a cost advantage,” said Bliss. “Specific and extensive Microsoft experience and the ability to adopt our Agile software development processes were also important. Accelerance not only helped us find the right partner quickly and easily, but also mitigated the risks of doing business globally.”

Steve Mezak, CEO of Accelerance and author of awarding-winning book Software without Borders and the Steve Mezak Blog, said, “Visionpace needed a development partner that could help them maintain their reputation of delivering ‘what’s needed, when it’s needed’ software solutions. They’re a great example of a U.S.-based Microsoft Gold Certified Partner that has satisfied their customers’ needs and improved profitability by including talented offshore engineers in their software development team.”

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On Thursday, September 20, 2007 Steve Mezak, CEO of Accelerance, Inc. will be speaking on how to master successful offshoring.

This event will be at the Hynes Convention Center Room #308 in Boston, MA. Steve will be speaking from 3:45 pm - 5:15 pm.

Presentation Abstract:

Learn strategies and tactics for using offshore programmers when they are thrust upon you, or by pro-actively leading a successful offshoring strategy within your company.

Anyone starting a new software development project or software company is foolish not to at least consider using offshore programmers. But what if your CEO or CIO wants to replace your existing engineering team with offshore programmers? Will you be able to offer critical information required to prove it is a bad decision? Or if it is a good choice for your company, can you deliver the advice and leadership required to make offshoring a success?

Learn how others are grappling with these challenges and achieving success in the new global high-tech environment. Presentation Outline: - When offshoring does NOT make sense - Various models of offshore engagements - Freelancers, dedicated team with an offshore vendor, fixed price, BOT, subsidiary, etc. - Three simple steps to find, evaluate and select your offshore vendor - Comparison of the 5+ regions of the world to consider for offshoring - How to describe what your software should do for effective offshoring - Metrics and management for your offshore team

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The debate over U.S. jobs being sent offshore continues with Microsoft opening an R&D facility in British Columbia, Canada. A major reason they are opening the facility is it is easier to import workers to Canada where they are not subject to the U.S. foreign worker visa limit of 65,000 which is exceeded on the first day of applications (April 1) each year.

For an intelligent debate on the subject, including the opposite trend of Wipro opening a facility in Atlanta you can listen to this NPR discussion on the Science Friday call in segment that was on the radio today.

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