dedicated offshore development centers: a popular trend in outsourcing
Post on 05-Sep-2014
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Offshore Dedicated Centers
www.softheme.com
a popular trend in outsourcing
ODC features
Benefits, flip sides and challenges
Set up steps
Budget components, estimate
Sample cost dynamics
Operational models
ODC service levels
Table of Contents
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
Offshore Software Development Centers (ODCs):
are good for both startups and existing businesses
can run one or several software engineering projects simultaneously
can include one or several software development and QA teams with different skills
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
Why an Offshore Development Center
are set up and supported by an outsourcing service provider usually at their premises and with the vendor’s experience and existing infrastructure
serves as a technology and software engineering extension of customer’s main facility
allows the customer focus on business specifics while the admin routines are being resolved by the outsourcing services vendor in parallel
ODC features
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
possibility to effectively keep, reduce or increase ODC staff when the customer merges with another company or sells the business
customer’s 100% ownership
staff replacements within from a week to a month, no special costs
recommended contract term: from 6 months to several years upfront payments are not requested unless a large volume of equipment is required to be purchased ownership: the outsourcing services provider may or may not participate security measures:
ODC features
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
workflow is adjusted in order to meet the one hosted by the customer; a replication of existing customer environment at the vendor’s side is suggested. Otherwise the vendor sets up the environment and workflows.
maintained by vendor
security
disaster recovery
data backup
no additional costs
For the customer: quick set up and quick cancellation reduced costs as compared to onshore labor costs reduced costs as compared to offshore full time development team transparent (“aquarium” vs. a “black box”) simplified accounting no problems to visit
Benefits
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For the vendor: additional jobs additional income possible % in ownership (negotiated and is not mandatory, though) new experience in customer’s business domain
requires an intensive communication due to large geographic distances; poor communication makes ODC use its resources inefficiently and increase overall costs requires regular assessment of the team to perform necessary HR adjustments ODC members are not native English speakers in the most cases; lack of other European language speakers may require additional trainings in customer’s business domain time difference
Flip sides and challenges
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
may need mutual adjustment of processes, e.g. work out identical views, accepted by the customer and the outsourcing services vendor, on:
team management motivation quality control, etc.
the customer may need to get familiar with local HR markets, their specifics, levels of salaries and professionalism to make effective HR decisions if he wants to startups often don’t have solid development processes: the outsourcing services vendor has to analyze, recommend and implement average time to hire talents **:
** An advantage of dealing with an outsourcing team provider who already has an existing infrastructure and works with multiple clients is the vendor’s obviously having a pool of talents that might be used in ODC temporarily or permanently, hence, cutting down the time for hiring.
Flip sides and challenges
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
business requirements are always on customer’s side: ODC only delivers software, meets deadlines and quality. The customer extends it to the market.
create and discuss an estimation for the monthly budget
consider a particular model of building the team: based on existing vendor’s employees or hiring new ones or a mixed model
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
Steps of ODC creation
figure out requirements to the talents expertise, identify the needs of:
plan infrastructure:
permanent long-term employees
contractors for shorter periods of timevs.
budget sign off
build a team: hiring processes
set up knowledge transfer, requirements gathering process, training
set up communication process:
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
Steps of ODC creation (continued)
meeting schedule
reporting personal communications
set up workflows, management systems
achieve success
Typical regular budget expenses are:
salaries, bonuses
office space costs
collective taxes
telecommunication costs
bank expenses
a fee to the vendor
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
Budget components, estimate
Monthly budget **:
10 ... 30 engineers, no equipment purchase needed $23k … $70k
10 … 30 engineers, equipment purchase $40k … $110k
** details available upon request
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
Budget components, estimate
Timing:
build a 10 … 30 engineers ODC 1 … 3 months
Sample cost dynamics of a startup based on one of the existing ODCs
months
norm
alize
d co
sts,
%
Initial cost of infrastructure,purchase, no employees
Infrastructure is ready, a small number of employees, started hiring process
Full staff, a number of short-term sub-contractors. Pre-release efforts. High costs
Production final release. Support started
Support with the same staff who started the initial development The product is stable. Support
costs are lower
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
regular model:
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
Operational models
In any case the process is overviewed by the outsourcing service provider’s representatives.
independent engineers model:
mixed
TLsenior
developers
developers +
QA managertesters
intensive communication
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
Typical ODC model structure
customer it consultant vendorsenior developers
team leaders
developers
testers
What the customer can do:
review all and any costs, cost analysis, suggestions and negotiations for cost reductions or additional expenses HR activities such as:
conduct interviews make hire decisions make firing decisions motivate – bonuses
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
ODC service levels
project management: yes, if the customer wishes, and may be hidden if the customer wants so visits to ODC: yes, any time
What is hidden from the customer:
local accounting reports, tax and legal fee payments, vacation and holiday management
micro cash flow management, payroll
initial resume screening, HR, replacements, training
sys admin support, office equipment
disaster recovery support and data management
physical, network and data security steps
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
ODC service levels
Types of activities supported by ODCs:
box software development custom application development gathering requirements:
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
ODC service levels
system design QA and testing tech writing marketing research, content and data management, SEO remote system administration
independent partially independentvs. dependent on
customervs.
Level of ODC professionalism and success:
highest level capabilities (desirable level): gather functional requirements, do system design, coding, QA planning, design and run test cases, final delivery, acceptance testing. ODC strives to take a leadership role in as large area of responsibilities as possible. It is typical for Ukraine and Russia. middle level capabilities (ok level): system design, coding, test cases creation, testing, final deliveries lower level capabilities (ok only for particular cases): coding, test case execution or either of them. It is typical for India and China.
www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers
ODC service levels
Business analysis and business requirements are always done on customer side.
Thank you!
2010 | Softheme Team | Kyiv, Ukraine | Software Outsourcing Solutions
www.softheme.com » Outsourcing to Softheme™
Questions? → info@softheme.com
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