Software Offshore Outsourcing Opportunities Expandby QArea Team on December 8, 2011
From an efficient know-how available for a few outsourcing has turned to an essential technique with a definable methodology. Nowadays outsourcing penetrates almost any industry dealing with manpower and talent, “from payroll processing to facilities management”.
Many discussions plume the headache question “to be or not to be…” an outsourcer? Yet, this question is not essential anymore. The agenda is where find the right partner to outsource to?
Let us revise some benefits of outsourcing development to be sure we understand the terms and definitions in the same meaning. Outsourcing is the type of contracting activities which allows to:
- reduce operating expenses;
- keep your staff levels to a minimum;
- give up to an external service provider the work that they can do more cost efficiently rather than you can in-house;
- not to be an expert in this particular area that you outsource;
- keep this particular function confidential;
- have uneven workloads throughout the year at a variable cost structure;
- operate in a shift work situation;
- expand rapidly while the growth may not be permanent;
- free up your management time and concentrate on your core competencies.
When outsourcing a development project one should clearly understand that a mature concept should be outsourced for the immediate success of the business since raw ideas can hardly produce good solutions without investing more attention to them. In this connection, specific attention should be paid to software requirements specifications as the main instrument to reach customer satisfaction. The practice has shown.
If you outsource from the US I suggest compare some benefits and misleads of outsourcing to various “New Silicone Valleys”.
Generally speaking cost of any product is the accumulated cost of labor spent upon production thereof (starting from raw materials mining up to a finished product release.) Thus, the rate of leaving in general and developer’s salary in particular can serve an indicator of the lowest prices.
So, average salary of a software developer in Russia is $700 to 1500, Ukraine $200 to 500, India $400 to 700, Central Europe $400 to 600, China $700 to 800, Philippines $500 to 600.
2. Staff quantity
This is rather an exception that quantity transfers to quality. Thus, quantity may play its beneficial role with testing. While developing, programmers’ proficiency and experience, as well as their communication skills, will stake for success not their quantity. Yet, in case of India, for example, we face a dilemma: on one hand, India is known as an IT incubator for some 1,000,000 mature IT specialists and some 150,000 fresh engineers produces yearly. On the other hand an outsourcer still has only 24 hours per day to validate CVs of, say, 20 companies instead of 2.
Many American companies complaint that instead of one developer per $50 that would have been spent in the US they just received 3 developers per $20 in India. On the other hand there are thousands of teams that consist of one to five people.
India draws attention for a simple reason: there are 1.1 billion Indians. And 1 mln. of them are claimed to be IT developers. No country yet can compare to India but China with its 1.3 billion population which is now trending to opening its society. Taking into account that China is aiming at even development of infrastructure and industries while India demonstrates only the IT sector boost, it is expected to produce a more reliable and stable business and commercial environment. If multiply this practical approach by the traditional Confucian philosophy and willingness China has every chance to bridge the gap within the nearest future.
We are a big team of developers and testing engineers
3. Staff proficiency
Staff proficiency plays major role being the basement for the future product success. The grounds of proficiency are education. Since times of the Soviet Union thousands of Indian or Chinese and other countries’ citizens studied in the USSR. They still come to what was the Soviet Union and not vise versa.
For the moment, the transition to the Western pattern in higher school education is complete in Ukraine and almost complete in Russia. Thus, we have 3 categories of graduates coming out of universities and academies: Specialists, Bachelors and Masters. Traditionally, in Ukraine students trend to masters degree which is equivalent to former soviet educational pattern: any graduate in the USSR had 5 year higher school education.
Ukraine can boast of strong academic basis, engineering in particular, with Kharkiv and Kyiv being the strongest knowledge pulls. (E.g. Kharkiv has 25 universities and academies against Kyiv with its 18 high schools). The engineering R&D basis in Kharkiv used to be one of the three whales of the USSR’s engineering science and remains the most donating in modern Ukraine.
Branch expertise is the key to success of your particular project. The best way to get acknowledged with company’s expertise in a particular branch is study its Success Stories or Case Studies and some publications about this company. Feedback from previous clients can also be examined. Since NDA practices are used as main weapons of protecting confidential business information it might appear problematic.
The problem with English language appears to be drastic in those countries that claim to be English-speaking. India, for example, although having English as one of the state languages, in fact, does not speak it in 100 per cent of its citizens. Moreover, being an independent state it has separated its English from its British parent. Soon, it is likely to build an independent English language branch as Australian or the USA did.
This English language mislead was very well demonstrated in AOL’s move of its customers’ support to India. The many good old customers that have stayed with AOL for years moved to younger providers after footless attempts to obtain help in solving their problems with call center guys not very much getting their spoken English.
In Ukraine or Russia (and sometimes in Central Europe) English is practically a mandatory foreign language that is taught at school for at least 8 years and in high schools for 3 to 5 years. Apart to managers, developers, and engineers that have advanced language skills, the software development companies (starting from medium ones) always have professional translators and technical writers in their staff to support the communication and information capabilities of the company and ensure no misunderstanding has occurred.
Although some Indian companies establish so-called IT incubators for further education of developers, they are few while hiring thousands of programmers and quality assurance engineers. It is quite clear mid and small business can scarcely outsource their projects to giants.
Hence, the average mass of some 200,000 engineers yielded yearly is quite raw. Only one young specialist of a thousand will get the chance to prove their potential and overcome their relatively low software programming skills in companies like TATA, Infosys and Wipro. Thus, each average one of many thousands of Indian IT companies promises the best rates and staff full commitment. Assumed one-third of IT business (about 330,000 IT specialists) is concentrated at Bangalore, Karnataka, one can imagine the tightness and the competitiveness.
With China, which trends to developing its IT outsourcing potential, the local specifics provides currently for difficulties with qualified engineers accessibility as indicated on the diagram below. If compared to India which demonstrates the spontaneous growth of software development and testing market only, China trends to balanced development of all the economy branches which means involvement of artificial economic leverages in case the natural ones are not enough.
Problems with accessing qualified technical engineers in some countries
With its 6 million population (and rapidly growing one) Bangalore’s infrastructure (IT communications inclusive) promises to yell may day. Due to deteriorating effect of nature Indian infrastructure requires constant investment which are when given are always insufficient. During monsoon rain periods which are twice a year roads of the Indian Silicone Valley become flooded and washed away. This leads to closing offices and sometimes affects drastically the financial state of many businesses. Indian railroad and highways are claimed to be the most dangerous in the world. This makes airline communication the only relatively safe means of transport. Yet, due to weather condition, it also cannot be relied upon.
With financial and technological donations provided by international and globalized corporations multiplied by local personnel know-how, East Europe is showing a dramatic development of IT infrastructure. The telecom infrastructure in Ukraine is highly developed providing for different means of internet connection from fiberglass cables to satellite and G3 internet. Besides, monthly fees for a DSL connection are lower in Ukraine than in India. As to suitable, spacious buildings furnished with modern commodities, with reliable IT infrastructure and located in areas close to well-developed travel infrastructures, Ukraine takes its time after short after-independence-gained-period (except for Kyiv which is an ancient historical and capital city suffering from intense traffic.)
While among natural benefits of Ukraine and Poland are their location in the geographic heart of Europe. Temperate climate and ancient flat geological platform make an ideally stable environmental grounds for living. Ukraine, Poland and Central European part of Russia are exposed to no monsoon rains, extreme frosts, floods, earthquakes of wildfires. No hurricanes or tsunami waves.
While Poland being the member of Iraqi campaign along with the USA and UK was threatened by terrorists and while Russian Federation periodically suffers acts of terrorism performed by Chechen militants, Ukraine has never been subject to any attacks or threatened to be the subject thereof.
The main major risk that is mentioned when outsourcing to India is its neighborhood to Pakistan. Pakistan is considered to be a nuclear reactor which is out of control: it has not exploded yet, but it can any moment. Recent explosions in Daily revealed India is not immune from terrorism.
Minor risks are weather connected and of technotronic nature. Bangalore is subject for 6 month long monsoon rains and high humidity. Apart of it is situated on the South-west coast of Indian peninsular in the northern part of Indian Ocean which recently revealed its drastic character: seismic sea waives raising.
The main man-risk that was recently reveled in India is sensitive information unsecured ness. In this sector, India is claimed to be even more dangerous than Ukraine. Difficulties with holding background checks on employees in India have been reported, yet, these were never problematic in Ukraine. It is normal with Ukrainian outsourcing companies to sign NDA both globally and with each team member, though it restricts the outsourcing companies from advantaging on certain PR techniques.
The main risks that are generally imputed when speaking of outsourcing to Ukraine are political instability and extreme bureaucracy. Yet, since IT is not among the strategic concerns of Ukrainian government, it is no subject to type-of-ownership (and owners) change. Ukrainian IT and outsourcing companies are no steel or ferrous alloy mills and for the above reason are of no interest for bureaucrats.
6. Time Lag
India is 12 hours ahead of US Eastern Time Zone. It means the exact ‘night shift’ which extremely inconvenient for communication between managers.
Ukraine (which is in a single time zone) is 7 hours ahead of US Eastern Time Zone (10 hours ahead of US Pacific Time Zone) which means it is lunch time in Ukraine when America sets to work (of dinner time). This saves time for needs of communication and details agreement in on-line mode.
7. Cultural Gaps
It is generally known that the Old World and the New World have much in common. The more is dedication to work in outsourcing field the more is the will to overcome cultural gaps.
Although there are many trends in Christianity, all of them from Orthodox to Baptism base on common ideas and values. Centuries of development in close neighborhood (wars inevitable part of it) bring much in common in the way of living in Western countries and Newly Independent States (NIS).
The newly adopted democratic models in NIS are greatly inspired if not copied from their American model.
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