| This article is second in a two part series describing a | | | | may be insufficient for effective offshoring. Pricing |
| research study conducted on Midwest IT executives | | | | ranked fairly low among offshoring considerations, |
| and their attitudes on offshore outsourcing options. This | | | | presumably because most IT managers expect to |
| article will review the methodology of the study, | | | | receive highly attractive hourly rates from all offshore |
| summarize the second 4 of its 8 key findings, and | | | | vendors. |
| provide some closing thoughts. The first article in the | | | | Finding #7 - India has been the dominant global center |
| series introduced the study and summarized the first 4 | | | | for offshore outsourcing work. Participants were |
| of its 8 key findings. | | | | asked to indicate the offshore locations from which |
| Methodology | | | | their firm has utilized contract resources in the past, |
| The target audience for this research included | | | | from a list that included: India, China, South Pacific, |
| individuals who are responsible for making software | | | | Eastern European countries and Other. India led the |
| development staffing decisions at technology | | | | field with 33% of IT executives indicating they have |
| companies where software development was integral | | | | utilized Indian outsourcing resources in the past. Eastern |
| to the firms' core mission. Interviewees had titles | | | | Europe has been the second-most-popular source for |
| including CEO, president, CTO, director or | | | | offshore resources, with 22% of companies having |
| vice-president of IT, and director or vice-president of | | | | experience there. China and the South Pacific region |
| software development. Respondents' headquarters | | | | placed third and fourth, respectively. |
| were located in Minneapolis/St. Paul metropolitan area | | | | Finding #8 - Eastern Europe will receive the highest |
| of Minnesota. Out of a pool of 250 randomly selected | | | | consideration in future offshore software development |
| firms, telephone interviews were conducted with 49 | | | | outsourcing engagements. Software development |
| individuals representing IT organizations with up to 500 | | | | executives were then asked to indicate, using the |
| full-time equivalents (FTEs). Among respondents, the | | | | same list of locations, the countries/regions they would |
| average number of FTEs engaged in software | | | | consider when making future offshore outsourcing |
| development activities was forty (40). | | | | decisions. Eastern Europe ranked highest among these |
| Interviews were conducted in September 2007. The | | | | key offshoring centersf, with 71% of participants |
| sponsor of this research was not identified during the | | | | indicating they would consider engaging resources |
| interviews. | | | | based in this region for their future offshore |
| Finding #5 - Cost is the least important factor in making | | | | outsourcing needs. India dropped to second place with |
| outsourcing decisions. Software development | | | | 67%, followed by China with 43% and the South |
| executives were then asked to rate the importance of | | | | Pacific region with 37%. Israel and Ireland were the |
| a series of factors in their decisions regarding | | | | most frequently mentioned countries in the "Other" |
| outsourcing software development to either U.S. or | | | | category, each with 6% of participants giving it future |
| offshore vendors, using a 1-5 scale with 1 being "very | | | | consideration. |
| low" and 5 being "very high." Somewhat surprisingly, | | | | Summary |
| cost or budget concerns ranked dead last, making it | | | | Software development outsourcing has profoundly |
| the least important factor in deciding whether or not to | | | | altered the IT staffing landscape, and most |
| outsource-apparently owing to IT managers' improved | | | | corporations today make at least some use of |
| ability to accurately forecast and budget for | | | | contract resources for ready access to their |
| outsourced software development resources. Not | | | | high-caliber personnel and for the flexibility they gain |
| surprisingly, the leading factor in these decisions is that | | | | through nonpermanent staff. The abundance of |
| IT manager's have a strong preference for utilizing | | | | well-qualified and highly affordable offshore personnel |
| employees rather than contractors. Similarly, a poor | | | | has opened new doors for IT leaders, but it also raises |
| personal perception of outsourcing in general came in | | | | questions and concerns about their efficacy. |
| as the second-most-important factor. | | | | This study has revealed that managers prefer to use |
| The next-most-important factor was a general | | | | employees when possible, believing they offer a |
| concern that managers believe they may have | | | | greater measure of project control and produce higher |
| insufficient control over contract personnel to ensure | | | | quality work than outsourced staff. Firms with larger IT |
| successful projects, followed by worries that in-house | | | | departments rely more heavily on contractors than |
| development process and procedures were ill-defined, | | | | smaller organizations and, regardless of department |
| and therefore not conducive to effective outsourcing. | | | | size, software development executives are now |
| Managers also believe their in-house systems are too | | | | utilizing more offshore outsourcing personnel than |
| complex for effective outsourcing, followed by fears | | | | U.S.-based contractors. And irrespective of resource |
| that their internal hardware or software environment | | | | type, the vast majority of managers have been |
| does not lend itself to successful outsourcing. | | | | successful orchestrating projects involving personnel |
| Finding #6 - IT managers are business-savvy in their | | | | based in multiple locations. |
| offshoring decisions. After learning participants' | | | | Aside from their general bias towards hiring |
| concerns with outsourcing in general, they were asked | | | | employees whenever possible, participants tend to |
| to rate the importance of a series of factors or | | | | believe that their specific environment is not very |
| considerations in terms of their importance in making | | | | conducive to effective outsourcing. Concerns that their |
| decisions about utilizing offshore software | | | | industry, their in-house systems and their development |
| development contractors. Again, respondents rated | | | | processes were sufficiently unique so as to complicate |
| these factors using a 1-5 scale with 1 being "very low' | | | | outsourcing were factors they considered when |
| and 5 being "very high." For many people in the IT | | | | assessing outsourcing options. Major concerns with |
| industry, the top-of-mind considerations regarding | | | | overseas contractors included loss of intellectual |
| offshoring tend to be cultural issues, concerns about | | | | property and a general skepticism about the technical |
| time-zone differences, and language or communication | | | | skills, industry knowledge, and project management |
| worries. Such was not the case in this study. Although | | | | controls needed to deliver successful outcomes. While |
| concerns about language barriers rated fairly high | | | | India has historically been the dominant center for |
| overall, cultural and time zone issues ranked as the | | | | accessing affordable offshore IT talent, Eastern |
| least important offshoring factors. | | | | European countries have emerged as the leading |
| Overall, software development executives are much | | | | contender for future offshoring engagements. |
| more focused on business-oriented, bottom line | | | | With an array of staffing alternatives at their disposal, |
| impacting issues than societal concerns and personal | | | | software development executives must carefully |
| biases. The offshore vendor's technical expertise | | | | examine their options, giving thoughtful consideration to |
| ranked as the single most important factor in these | | | | the pros and cons of each staffing solution, including |
| decisions, followed by worries about the potential loss | | | | the relative costs and the short- and long-term |
| of intellectual property. | | | | strategic implications to their organization. In the |
| Offshore vendors' project management capabilities | | | | decision-making process, IT managers' personal |
| and project controls also ranked fairly high, with an | | | | attitudes, knowledge, beliefs, biases and perceptions |
| average score 3.6, followed by the vendor's | | | | play critical roles in establishing the future direction for |
| knowledge and experience in the company's industry. | | | | their organizations. Collectively, the strategies employed |
| Many respondents were also concerned that their | | | | by these executives will indelibly shape the future of |
| in-house project management and project controls | | | | the global IT industry. |