Why Offshore Your Software And Web Development?
WebProNews, June 20, 2003 By Marty R. Milette
(http://www.webpronews.com/enterprise/leadership/wpn-14-20030620WhyOffshoreYourSoftwareandWebDevelopment.html)
Unless you’ve been hiding under a rock someplace, you have no doubt heard of outsourcing – and, have very likely been directly affected by it. Perhaps your job was ‘outsourced’. In some cases – you become the ‘loser’ – having your job given to some local competitor – in other cases, you may have become the ‘winner’ – being able to continue the work you’ve always done, but under your own company now separate from the company you formerly worked for. Offshore Software Development or “Offshoring” The term “outsourcing” can also be extended – in cases where the work is now to be done outside the borders of your own country. A new, and popular term for this is called, “offshoring”.
Outsourcing or offshoring in their own rights are not ‘bad’ or ‘evil’ – they are simply a way companies can gain two benefits that may be critical to their survival:
- Leverage cost reductions – by taking advantage of lower offshore labor rates or economies of scale for both local and foreign firms, and;
- Core competency focus – meaning that companies outsource work outside their area of core expertise. For example, if your company makes tires – does it make sense to develop a huge IT shop that develops complex software and web sites? No – you focus on what you know best, which is to make tires, and let outside experts take care of the IT problems.
Offshore Software Development, or OSD, is not new. Companies throughout North America have been using developers in Israel and India for over 20 years with excellent results and high ROI.
Although you may not hear much about it – many of products developed and marketed by some leading American companies are, in reality, developed abroad, or developed by foreign workers employed locally.
What has happened in the past five years that has really brought these issues to the forefront is the incredible popularity and ubiquity of the Internet and general telecommunications infrastructures even in ‘developing countries’. This has served as ‘the great enabler’ of a new ‘global economy’ – making it almost effortless to both buy and sell products and services electronically.
“Body Shops”
The term “body shop” refers to a local firm whose working staff are temporarily imported foreigners – usually working on some form of ‘temporary’ or ‘short-term’ visa, like the American H1-B class of visa.
Body shops have in many cases earned the reputation similar to the old ‘sweat shops’ – where foreign workers are made to work extended hours for much lower pay then comparable local workers.
In theory, there are regulations in place to ensure that ‘body shop’ employees are paid typical local salaries for their work, workers enter the country legally, and receive the same benefits as local workers – however, in reality, there are enough loopholes in the laws so that this is seldom the case. Hence these shops operate locally, but at significantly lower prices than local shops.
This is NOT what offshore software development is about.
How Offshore Software Development is Different
True offshore software development is done either entirely, or very nearly entirely offshore. Contact with clients is conducted almost entirely via electronic communications. In very rare cases short visits or exchanges of personnel take place – and if so, only for very short periods of time. The ‘real’ development work is done entirely offshore over the course of weeks or months.
In very rare situations, it may be necessary and/or desirable to have an offshore worker placed in your workplace for a short period. This is a very rare instance, and generally only necessary if you have a product or service upon which the developer must be trained before being able to participate and be productive on your project.
These situations are not considered to be ‘work’ but more of a ‘training’ or ‘knowledge transfer’ exercise. What normally happens is that the offshore worker receives the necessary training, documentation and resources to take back to his home country and train the other developers and/or complete the work.
In some cases a project manager or project manager will do an on-site visit to organize the upcoming project and put the necessary communications and technical infrastructures in place.
Myths about Offshore Software Development
The following are some of the widely held myths about offshore software development, and developers.
1. Offshore development is just cheap access to low-skilled labor
This is false on two points – first of all, offshore developers typically have very high levels of skills and experience. For example, in our company, the average developer has over 10 years of software development experience, over 4 years of which being with our company alone. Over 97% of our software developers hold a University Degree – many at the Masters and PhD levels – in high sciences like Mathematics, Physics and Engineering. Developers with these qualifications can in no way be called ‘cheap’ – and in fact, may cost much more than many other offshore firms – but, as the saying goes – you get what you pay for!
2. Are only suitable for low-skilled coding – not for design work
This is also incorrect. During the past 5 years, Russian Universities and private schools have been turning out some of the brightest software engineers in the world. In fact, if you look at commercial institutions – there are over 6 Microsoft Certified Training Centers in St. Petersburg Russia alone. This speaks a lot of the dedication to training, education and certification for top-notch developers, designers and engineers.
3. Offshore developers are underpaid, and work in deplorable conditions
Even in Russia, there is a strong demand for highly skilled software developers. Even though the salaries are still far below what is available in Europe and North America, this certainly doesn’t mean that the top people don’t make good money. Naturally the ‘best’ jobs are considered to be doing offshore software development – however, for these jobs, to get the best people still means paying the best salaries and offering excellent working conditions. Additionally, as the work is done for foreign clients, additional requirements for English language skills and the latest hardware and software are also required.
4. Offshore developers receive no benefits, don’t pay taxes and all cash goes into their pockets
Unless you are talking about a very small shop, this is entirely untrue. In our office, we have over 100 full-time software developers and engineers. All are legally employed, and our professional offices (located in the center of the city) are regularly inspected by the taxation authorities. All software in our office is also regularly audited and inspected to ensure we are working with legal copies. As a Microsoft Development Partner, we are provided with early copies of the latest software.
5. Offshore developers work with antiquated equipment and have inadequate facilities and infrastructure
Again, this is totally untrue. At the time of this writing, the average computer in our office is a 2Ghz Intel Pentium P4 with 512 Meg or more of RAM. We currently have dual 256k backbones to the Internet. Our internal office network has 10mb, 100mb and wireless segments. We have dedicated development labs, test labs, QA labs, server farm, firewalls and DMZ isolating live servers from internal systems. As required, we can establish cloned development, staging and production servers to mirror our client’s configuration. We are also able to develop fully redundant and clustered solutions.
6. No protection of intellectual property – problems with rights and ownership of software
Regardless of whether your software development is done right at home or elsewhere in the world, you are well advised to get everything in writing from the very beginning of a project. Our company doesn’t even ask for even a detailed description of the project until a suitable NDA (Non-Disclosure Agreement) has been agreed upon and signed.
I cannot speak for other countries or companies but Russia, for example, is cracking down hard on copyright violations and is pushing hard to protect the rights of foreign companies making investments and business cooperation with Russia. Doing so is simply good business sense.
In the case of our company, the client retains ALL RIGHTS to any software developed for them under contract. There are some exceptions, such as where third-party components are used to speed development, but those are normal situations. Clients not only receive all rights, but also all source code, documentation and anything else related to the projects. We are able to maintain source code for some predetermined amount of time, but if requested, can certainly agree to destroy all copies if that is deemed necessary.
As an example of security and protection of proprietary information – we have one team dedicated to one particular company and series of projects. These team members are each under strict and separate NDA with our company. Their lab is secured by pass-card, and they are not permitted to even speak with other developers about their work. If this is the level of security and confidentiality you need, it can be had even in Russia.
Intelligence-Soft comment: Although this article describes the practice of offshore software development in another Russian company, most of the facts about personnel qualification, infrastructure, protection of intellectual property and so on, are applicable to our company as well. Take a look at our company profile to learn more about our company.