application development outsourcing
DESCRIPTION
This presentation is about why outourcing can fail or why it can be successful. Note: the .pdf version lacks the animation of the original .ppt.TRANSCRIPT
Application Development Outsourcing:
Why it can fail and why it can be successful
Hans van der Meer
Director Edsson Software
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Why companies do not outsource application
development
Topics
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Why should companies outsource?
Why outsourcing often goes wrong
Principles of success
The next level: smartsourcing
Conclusions
Why companies do not outsource application development
IT industry is very young, so not mature
There are too many bad examples
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There are too many bad examples
Intellectual property and personal issues
Non-understanding of specific markets
Language and cultural barriers
There is no internal structure to build on
There is no need for outsourcing
Why should companies outsource?
Winning of business deals is in the margin
Competition has become much tougher
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Competition has become much tougher
Focus on the business has become more important
Increase market knowledge, reduce production costs
It’s about branding instead of manufacturing
In B2B: Customer Value Management makes the difference
IT industry moves and develops very fast
Globalization
Why should companies outsource?
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Outsourcing is the most popular movement of the new global
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business economy. In fact, the typical executive will soon spend
one-third of their budget on outsourcing!
Source: Tom Roloff and Thomas Koulopoulos
Why should companies outsource?
The ultimate situation:
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Your company is a well known brand, buying
all products and services from third parties.
Why outsourcing often goes wrong
No major plan
No real vision than only cutting costs
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No real vision than only cutting costs
No well defined processes
Misunderstand each other
Overpromise, under deliver
Customer – provider relationship
Lack of trust
Principles of success
Requirements
10%
Project
Management
15%
Time spend in projects
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Analysis & Design
30%
Development
30%
Testing
15%
•Project 1000 hrs
•Development 300 hrs
•Normal hour rate € 80
•OS hour rate € 30
•Project costs € 65.000
•Savings:
300 x € 50 = € 15.000
= 22% savings of total costs
Outsourced
Principles of success
Requirements
10%
Project
Management
15%
Time spend in projects
80% OS
50% OS
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Analysis & Design
30%
Development
30%
Testing
15%
•Project (example) 1000 hrs
•Normal hour rate € 80
•OS hour rate € 30
•Development 300 hrs
•A & D 240 hrs
•Testing 100 hrs
•PM 75 hrs
•Total OS 715 hrs
•Savings:
715 hrs x € 50 = € 35.750
= 45% savings of total 100% OS
66% OS
Principles of success
Preparation
Measurement framework about expectations from both sides
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Measurement framework about expectations from both sides
Planning
Picture of the end-state and how to achieve this vision
Organization changes needed
Partnership
Share common goals
Source: Tom Roloff and Thomas Koulopoulos
Principles of success
Define responsabilities
Who is responsible for what?
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Who is responsible for what?
Fixed time/price vs times & material
Use well defined processes
Tooling, structures, conditions, deliverables, planning
Risk management
Cut large projects into smaller ones (more itterations)
Principles of success
Stay independent
Documentation
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Documentation
Intellectual property
Stay open to learn from each other
Communication
Evaluate
After each project ask yourself: how can we do this better?
The next level: smartsourcing
Smartsourcing is the next evolution in outsourcing. Traditional
outsourcing reduces costs by moving the work to where the least
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expensive workers are. While that may cut costs, it simply
replicates the status quo. Smartsourcing goes a step further by
showing companies how to partner with service providers to not
only cut costs, but also increase innovation across the full
spectrum of their business.
Source: Tom Roloff and Thomas Koulopoulos
Smartsourcing
Handover responsibility for a non-core competence
Reduce cost of design and development
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Reduce cost of design and development
Empower your company to take stronger positions on the
market with extra-resources behind you
Engage into a co-maker relationship with the software
production company, aiming to:
Increase innovation across all processes
free up resources to focus on core competences
Smartsourcing
Flexibility
Scaling up or scaling down of resources needed for projects
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Costs structure
Choice
Knowledge and technology needed per project
Focus on business instead of development
Control
Fixed time/price
Project management Based on source: Tom Roloff and Thomas Koulopoulos
Conclusions
Outsourcing (smartsouring) can be very successful when there
is a real vision behind it. Well organized, it can save 20 – 50%
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is a real vision behind it. Well organized, it can save 20 – 50%
of the development lifecycle costs while increasing quality of
the organization and developed products. It is about
Preparation, Planning and Partnership.
Without these outsourcing will not work!
You cannot stay alone in this world.
Conclusions
You cannot stay alone in this world.
If you want to survive, you must
focus and cooperate with others.
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There is a well known proverb:
Conclusions
the ones that will survive are not the largest or the smartest,
but the ones that are
open to change19
