7 Steps to Offshore Software Development Success

An interesting thing is happening with the many outsourcing deals struck in the last several years. Rather than costing less, outsourced software projects are exceeding their budgets and are often riddled with bugs. What's interesting is that there are indeed cost savings in the early years of outsourcing deals, but these savings often disappear in the fourth year.

A while back, IT consultancy DiamondCluster International reported that the number of buyers satisfied with their offshore providers dropped to 62 percent from 79 percent. What's more, 51 percent of buyers terminated their outsourcing projects early — a doubling over previous years. Also in 2005, PricewaterhouseCoopers found that half of the financial services executives it survey were dissatisfied with offshoring. And lastly, a survey by Deloitte Touche Tohmatsu discovered that performance of outsourcing companies had an alarming drop-off in both cost and savings after three years.

So why do things go sour? According to Philip Hatch of Ventoro, an offshore outsourcing consultancy cites a few reasons namely increased turnover rates; obsolete methodologies and processes; and other soft costs. CIO Magazine offers the following 7 seven steps to help ensure long-term success with offshore software development projects.

  1. Offshore relationships require continuous improvement throughout their lifecycles. In particular, it's important to re-examine them thoroughly every 3 years.
  2. Once the deal has been closed, the senior-level representation from the offshore company may disappear from day-to-day activities. Insist that they meet quarterly so that they remain involved with the account.
  3. Don't leave the same person in charge of managing the relationship for more than a 2 or 3 years. After this amount of time, burnout is likely to set in. Alternatively, consider having someone permanently stationed at the offshore site. This will eliminate the need for much of the travel that a US-based employee would have to deal with.
  4. Keep close tabs on turnover at the offshore company. Frequent departures from any level can be disruptive to projects and can serve as a warning sign of things to come.
  5. Make explicit plans with the offshore provider to deal with and cushion against the unexpected loss of key employees. All projects have key players whose departure can grind a project's progress to a halt.
  6. Develop performance metrics that are in line with reality. Avoid the fluffy, nice-to-look-at metrics and focus on what can actually be acted upon.
  7. Check in with business users and internal IT staff to get a handle on their experiences with their counterparts at the offshore company. They can provide information at the grassroots level about how day-to-day activities are handled.
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  1. Hi,

    I think to solve this problem you need two things:

    1) good management at American side

    2) using special tools which allows managers and CEOs to control distributed software teams.

    I am representing a company that developed such a technology.

    The key idea is to offer reports to managers on each team member which show his/her activity, know-how, code complexity and other metrics.

    Reports are generated on the basis of source code committed to repository and sent by emails in PDF format twice a month.

    If this topic is interesting for you, I can give you detail information.

    Email: MichaelSadovsky@gmail.com

  2. I think you're underestimating the importance of the leadership of the offshore group. The process manages turnover, it doesn't eliminate it. Metrics reflect low quality, they don't improve it.

    A local (offshore) leader who cares about the project as much as you do motivates the group, delivers quality product, and reduces turnover, more than process improvement alone.

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