Custom Software Development

Offshoring Software Development

Introduction

If we want to talk about moving work offshore, we must first deal with the elephant in the room. As we ease the pachyderm out the door, perhaps we can simply acknowledge that the loss of local jobs arising from offshoring software development raises issues well beyond the economic. These issues are a matter between board, senior management and conscience. And as Forio Business Simulations notes: "We live in a global economy and people in India deserve jobs as much as people in the United States or anywhere else." (forio.com). This article focuses on the potential economic gain of offshoring and on the snares and obstacles waiting to sink their teeth into it.

The gain

The substantially cheaper contracts made possible by the relatively low wages paid by offshore providers are the basis for the profit in offshoring software development. Some hourly rates listed on the web for trained software engineers are as low as US$15, permitting contracts at better than half the local price. This is the only plus to offshoring, an attraction designed to seduce those with purchasing responsibility, and which can dazzle and mislead many an uninformed player in the offshoring game.

Where are the costs?

The difference in costs associated with the development and production of tangible versus intangible products is shown in the following table (source: forio.com.):

In the production of straightforward tangible goods, such as clothing or toys, design is undemanding, with the major effort being necessarily invested in materials purchase, assembly, manufacture and distribution. The reverse applies to software, where dumping the final product onto CDs takes miniscule resources compared with all the work required in software design, redesign, coding, correcting errors, withdrawing from blind alleys and gradually moving towards accomplishing the aims of the original design.

Do not offshore everything

Anecdotal evidence strongly suggests potential offshorers should distinguish between creative software which is strategically important and software designed to maximise operational efficiency and effectiveness. Examples of operational software include ordering, supplying and billing, cost and inventory control, HR functions and so on. These can be fairly safely sent offshore for development – safely, in the sense that since a company already has such systems in operation, there is usually less urgency to upgrading them.

It is when the software in question matters to the company, where strategy and competitive advantage are the central issues, that most of the offshoring pitfalls have their greatest impact. Such software will differ from company to company, but all will have vulnerabilities in common.

The design/code controversy

Are coders also designers, or do they simply code someone else's designs? This is relevant to offshoring. Rockford Lhotka observes: "Some people seem to think that you can separate software design from software coding. Sure you can but if you let coders work in isolation they will find a way to mess up your design [in ways that will not be obvious], so you will end up spending months 'fixing' the software … " (lhotka.net/weblog). He argues companies always struggle if they disrespect mere 'coding' and have a rank of higher paid, non-coding 'architects' who pass the coding on to cheap minions.

Alternatively, can design be left to the coders? There are many who think not. "As for throwing the whole design thing out, and just designing in code … hahahahahahahah no really hahahahahahahahah." (developerdotstar.com)

So if you wish to retain control over the design of your strategically significant software, it seems completely sensible not to offshore that design. But don't forget the coding!

The deepest pitfalls

Language and culture. Many clients of offshore suppliers complain about expensive holdups and problems arising from language difficulties. This is acknowledged by one supplier, who notes: "Even if everything is spec-ed out it's still often difficult to understand the English in the spec. if you're not a native (or very close) speaker … People in radically different cultures just think different" ('Jaap', responding to discuss.fogcreek.com). The responsibility for ensuring cultural and language differences are recognised and taken into account rests with the client company, which must be certain each of the following is in place:

• Adequate, clear specifications, and its own satisfaction that the specs are understood.
• A team has been chosen which has a full-time English-speaking liaison person, not wholly tied to the supplier's welfare, who can communicate effectively with the company and the outsourced team.
• It must satisfy itself there are not too many cultural barriers to ensuring the development of a proper user interface. (accelerance.com)

Security and IP protection. Given current rates of IP theft, the client company must do its best to ensure that its intellectual property is protected. Unfortunately, 'do its best' probably implies the maximum possible, because although major suppliers such as India and China have, at the prompting of major clients, introduced strong IP protection legislation, enforcement provisions lag considerably behind. These countries "do not have the enforcement infrastructure needed to implement that protection." (lawyerinparadise.typepad.com).

Steve Mezak, CEO at accelerance.com , says this inadequate enforcement trap is lying in wait for companies anxious to jump on the cheap offshore bandwagon, and which focus all attention on the mechanics of getting the software produced. Such companies are "putting off developing and communicating IP protection policies and procedures until it's too late, thereby jeopardizing [their] trade secrets."

Other trips and traps. Mezak notes some other issues which can arise, and which imply the need for constant vigilance:

• Hiring a team that states it is solely dedicated to your project, only to find it is over-extended servicing multiple clients.
• Hiring a 'body shop', a vendor that charges you for a room full of programmers without adequate supervision. So you end up having to manage and direct them yourself at a distance.
• Finding the 'perfect' team only to discover they regularly lose engineers because of high attrition rates, dramatically delaying the completion of your project.

Are things getting better?

Mezak reports studies conducted by organisations like the Sand Hill Group, Gartner Inc., and the Software & Information Industry Association, citing surveys of CIOs:

• Product-quality problems rose from 24% in 2003 to 37% in 2006
• Difficulty in hiring the right outsource team increased from 48% to 56%
• Communication issues rose from 44% to 53%
• Cultural misunderstandings increased from 16% to 21%

So, as always, caveat emptor.