Offshore Software Development - Term Paper Example

Offshore software development Offshore software development 1 Introduction 1 Literature review: general trends 3 Literature review 5 Risk profile of Offshore-Outsourced development projects 5 IBM Industry Practice: Challenges in Offshore development from a global delivery center 6 Global Software Development: Where are the Benefits? 7 Configurations of Global Software Development: Offshore versus Nearshore 8 Evaluating the driving factors and the suppressing factors related to IS outsourcing in Four Finnish Information system organization  9 Global IT outsourcing: software development across borders. 10 Conclusions: 11 Reference: 12 Introduction Offshore software development outsourcing takes place when a customer uses a contractor in another perform a software-related task, such as programming or data entry. Researchers have over the years explained the fact that development of custom software is different from most other business activities since it requires a detailed understanding of business processes and the ay information technology (IT) supports them. Management of offshore software development is a highly complex process given the fact that distance creates difficulties in coordination and control, knowledge transfer and communication (Aman and Nicholson, 2005). Potential problems that could be identified with respect to offshore software development are inclusive of issues such as cross-cultural problems, language barriers, time zone differences, political instability and unreliable telecommunications infrastructure (Gao, et. Al., 2002). Building an offshore partnership requires much effort and delicate management of senior employees. The filed of software engineering in this domain is relatively new and procedures for quality control and project management though developing fast, are yet to fully evolve. Abstract Recent trends are demonstrative of the fact that software developers are going offshore for the development and maintenance of their software as a strategy geared towards the improvement of cost control, product quality and development, schedule reduction and focus on core business activities. The advantages of offshore software development could be enumerated as the ability to tap specialized talent, facilitate a global presence and the achievement of savings on costs up to 60 per cent (Carmel and Agarwal, 2001). Other general reasons for the adoption of an offshore strategy include improvement of product quality, engagement in specialized product development and the focus on core business activities. Among the popular locations for offshore software development ate the first tier vendor nations often referred to as the 3Is-India, Israel and Ireland. Popular second tier countries like Singapore Russia and Philippines offer a host of services. The analysis will attempt to carry out a detailed assessment of some of larger trends prevalent in literature on offshoring of software development-its challenges and the future expectations. Literature review: general trends Offshore development of software or outsourcing is not a novel phenomenon. It in fact originates from the professional and the facility management services in the financial and operation support areas during much of the 1960s. Outsourcing has little by little become a serious strategic choice for most ICT companies. In the recent years IT outsoaring has also been a subject numerous studies in several different disciplines. IT outsourcing has been defined as a practice, where its assets and resources are transferred to a third party. It has to be mentioned here that sacral terms used in IT literature has similar connotations, for example information technology and information systems are often used interchangeably, as are the terms offshorinmg and outsourcing.   Theoretical lenses have been used to describe and interpret phenomena related to software outsourcing. Some have applied the Transaction Code Economics as an approach for providing a view on risk management. The Resource-Based view (RBV) concentration on value, accessibility and control of valuable resources-those resources that may affect the competitive advantage of the firm. Based on literature study these two approaches seem to be the most popular theories in explaining how one has to avoid hazards in the IT software offshoring decision making process.   One also finds that the maturity of the discipline is on a growth track which automatically then signifies the emergence of new tracks for research. There have therefore been studies on partnerships, equity deals, offshoring and backsoucing. One finds therefore a paradigm shift in research from analyzing the offshoring decision making process to the more subtle and hence the more complex analysis on the relationship management and learning from experience.  One would therefore recommend at the very beginning that outsourcing relationships as well as its attributes and processes should be studied carefully to be able to create an understanding of the complications of challenges attached to it.   Developing a project offshore or across multiple locations follows a similar philosophy in that constant re-evaluation is required to ensure progress proceeds according to plan (Mookerji, 2007). The difference with offshore development is that face-to-face interaction is absent. In essence, customers are contracting for houses they will never see until completion, using builders they will never meet. With the emergence of a more diversified global market for offshore software development, one expects significant impact on the market overall. First, distributed teams, which would mean that the market would be more diversified in the context of rapidly expanding geographical markets. These project teams might be participants of various organizations and would therefore need novel models of development such as the business network model to become more prevalent. Second, organization structure and size would have to be restructured in as much as the need for efficient work in frictionless business networks would mean the need would be for leaner organizational structures. Either large software companies will create more autonomous organizations or they will split into totally independent entities. Moving Up The Ladder, in as much as the one expects paradigm shifts from pure maintenance to full life-cycle projects. In coming decade, more and more IT products and business applications will start coming from the developing areas. Finally one sees a market for the development of niche software factories, focusing on new players who would provide specialized services to these small and medium companies. The current models of large IT companies are too rigid to adjust to rapidly changing requirements of SMB companies. Finally, one expects the development of open source and the entry of the public sector, given the fact that the advancements made in the field of eGovernance initiatives and their successes are bound to open new avenues with the open source movement expected to grow and turn into a viable platform so much so that even the private companies will start adopting Open Source applications. Literature review Risk profile of Offshore-Outsourced development projects A study entitled “A Risk profile of Offshore-Outsourced development projects” by Charalambos Iacovou and Robbie Nakatsu in 2008, attempted to analyze the risks and the problems that would normally be associated in case of a novel venture into offshore outsourcing in IT to a country like India. The idea took shape in the form of a case study wherein Life Time Fitness, a company based in US plans on setting up an offshore software development scheme. The point put forward is that despite an analysis of the vendor environment and the requirement of the project the project could not be immunized from problems. The study develops on the basic premise that unless an organization is well-equipped to deal with the challenges of offshore outsourcing, its projects are bound to go awry. The idea therefore is that an inadequacy in preparedness and ineffectiveness in the management of problems would have to be addressed if a successful venture needs to be set up. The study reaffirms the premise that offshore projects are intrinsically risky in terms of their characteristics. The study and its findings have revealed that most offshore development projects have to combat traditional project risks along with novel challenges that are by their nature unique to offshore software development ventures. This is true given the fact that any project when developed would have to be in line with existing environments in a given country. Without doubt then, fundamental project management skills are essential in guiding such projects. It must also however be remembered that skills alone are likely to be insufficient in directing offshore initiatives effectively. If companies are not able to identify the distinctive challenges associated with distant administration in off-shoring and provide suitable preparation to their project managers, then there are large possibilities that the work done by the company would face huge failure risks. Individuals in charge of offshore projects may sometimes face unique organizational settings (such as a heightened sensitivity to PR issues surrounding offshoring, or a lack of needed resources). The distinctiveness of circumstances would automatically then require the growth of a tailored risk profile for the project. IBM Industry Practice: Challenges in Offshore development from a global delivery center A study entitled, IBM Industry Practice: Challenges in Offshore development from a global delivery center (2009) by Iilario Mario enumerates the benefits of the system of offshore software development as: 1. Shorter project set up times due to internal contracting 2. Standard infrastructure and communication channels 3. Consistent methodologies and processes 4. Increased security and confidentiality 5. Protection of proprietary knowledge The study focuses on the IBM case study in outlining the advantages that could be reaped by a global organization by the implementation of offshore software development. 6he paper discusses the experiences and lessons learned during the Global Delivery India Program. All experiences are based on qualitative assessments on seven different global delivery case studies. The study states that cultural difference could impede a smooth collaboration given the fact that messages could be interpreted differently by different cultures which could lead to misunderstandings and confusion. The study is also clear on the fact that the success of a global delivery project ultimately depends on an involved work-force. Methodologists and processes might very well be optimal, but the real challenge could be fining engineers with the required skills. The study found that difference among cultures implies that there are different manners of interaction between onsite and offsite team members. Sin some cultures, it could be considered impolite to directly disagree with someone, while in another people might speak plainly. Global Software Development: Where are the Benefits? In the same vein, an article by Conchúir, et. Al., in 2009, focuses on the benefits of offshore software developments projects. The basic benefits from outsourcing of software development could be enumerated as the very basic and oft repeated, one of reduced development costs due to the salary savings possible. Also, GSD can lead to reduced development duration due to greater time zone effectiveness as companies practice the so-called ‘follow-the-sun’ software development model. It must be noted that these projects have an innate ability to aid reduction in levels of project development and execution costs. A case in point would be the example of the basic salary structure of a software development professional from India would be U.S.$15,000, which is also a quarter of the salary of an Irish developer-An Irish developer on the other and would earn only half as much earned by an average developer in the US. The second stated advantage of an offshore software development project is the utilization of time zone differences- it must be remembered that the availability of developers located in different time-zones can allow organizations to increase the number of daily working hours in a ‘follow-the-sun’ development model which can decrease cycle time. Other major benefits include Cross-Site Modularization of Development Work, Access to Large Skilled Labor Pool, Innovation and Shared Best Practice, and assumptions on Closer Proximity to Market and Customer. The point that the research puts forward is that none of these advantages are immune from problems encroaching on them and cancelling out the benefits that could be assumed. The problem here is that none of the benefits that are assumed to have been put forward by available literature are clear-cut nor could their realization be taken-for-granted. Specifically, anyone engaging in GSD should be aware of the many risks associated with these “benefits”. One cannot assume that the overall savings on salary costs that are incurred given the salary responses, it cannot be assumed that these would negate the overhead of higher managerial complexities. Sharing of best practice between cultures can be problematic, especially if those expected to share feel they are giving away their competitive edge to lower waged colleagues, or do not trust their abilities. Taking advantage of closer proximity to foreign markets leads to a number of socio-cultural problems which have to be addressed. Configurations of Global Software Development: Offshore versus Nearshore Carmel and Abbott (2008) in an article entitled Configurations of Global Software Development: Offshore versus Nearshore focus on the fact that given the nature of international software development, near-shore is a term used for differentiation. The term itself is used to connote the differentiation between firms and nations. Nearshore as a term is representative of a way of competition with India, the software superpower. It is also stated that one cannot think of only India as a far-shore destination, there are other countries that connote “far” depending on the positioning of the client. An example would be Warsaw which is a “far-shore country from the USA, but only a few hours by car from Berlin -- and thus nearshore to the latter.   Nevertheless, it needs to be understood that India, as software super power holds a position that is unique in terms of the fact that it could be considered as being “far” from all major client nations. Distance then automatically is representative of both a Distance a tactical and strategic variety. One would also have to accept that most software firms identify this. The result has been a quick and clever adaption by global software providers in as much as most have used the easy route of the development of multiple “Offshore Development Centers” (ODCs). These are big in nature are offer their clients a menu of locations which is inclusive of and thereby eliminative of far-shore and nearshore equation. Typical is EDS’ global network of ODCs, which the US-based outsourcing company calls “Best-shore”, and which includes 13 centers scattered around the world (besides its centers in the USA).   In the case of most Indian firms, near-shoring destinations are representative of a big competitive threat-the manifestation of this has been that most of the top-rung Indian IT firms have expanded their global reach into nearshore locations. This in turn then means that these firms develop the ability to offer locational menu to their clients. They have also thus assimilated some of the near-shoring discourse. The concluding remark that the research makes reinforces the issue spoken about earlier- geographical differences continue  to have an impact on global software development markets, implying simply that distance and proximity are not disappearing but still matter and that the no global offshoring operation could discount problems that arise from these distances in an overall strategizing of their larger plans.   Evaluating the driving factors and the suppressing factors related to IS outsourcing in Four Finnish Information system organization  A study by Paul Juvonen (2008) “Evaluating the driving factors and the suppressing factors related to IS outsourcing in Four Finnish Information system organization” found that the main driving factor behind software development outsourcing was a strong pressure on most companies to cut down on ISD projects. The demands are presented by the shareholders or even the consumers. The main suppressing factor in the utilization of offshoring as a method of software development was the language barrier-in most cases interviewees somehow expressed that their written and spoken language skills did not match the levels required for the operation of foreign subcontractors. The study also found that in most cases, the companies being interviewed felt that ISD practices were not formally institutionalized enough within the company prior to expansion and offshoring, creating a crisis for the company in general. There were also doubts raised over the real benefits gained from software development outsourcing. There were several within interview boards that felt that offshoring software development produced a new group of different cost factors. Based on the interviews, it was found that these cost factors have in most cases been identified but have not been calculated or analyzed in depth-according to the interviews, the total costs of the outsourced projects are not yet known. It would justifiably argue in this case then that offshoring is in practice a lot more complex in implementation than the management of an organization presumes. Furthermore, it seems that offshoring decisions have been mostly based on cost related issues. However, there it is difficult to find explanations on interviews on evaluating of the costs that offshoring would mean for the firm. The results of the study mostly reinforced the claims made by previous studies on software offshoring and revealed that the driving factor and the suppressing factor related to software offshoring reported in different contexts are mostly the same context as in the previously studied contexts. The main driving factors identified were demand for cost-effectiveness, utilization of special technological competencies and the possibility of access to a pool of resources, while language barriers, lack of domain knowledge and challenging technological environments could be identified as being the main suppressing factors. Global IT outsourcing: software development across borders. The future predictions and the requirements in the field of software development outsourcing are probably among the most important areas of research given the fact that these provide not just an insight into problems but also an insight into possible futuristic solutions. One such work is Global IT outsourcing: software development across borders (Sahay, Nicholson and Krishna, 2003) they state at hat as companies enter new domains and countries they have the important task of developing strategies that blend adopting a global outlook and building on local strengths. A key challenge is the development of capabilities to handle complex communication and coordination problems in conditions o time space and cultural separation. These problems, they state are magnified in the absence of reliable infrastructure and in domains where user specifications are constantly subject to change. Mature project management abilities, especially the capability to deal with quality and time standards would be another important determinant if where work is sourced. While offshoring firms are becoming increasingly sophisticated in developing systems to create transparency in operations, the demands and expectations of clients have witnessed commensurate growth. This would then automatically imply a process of continuous learbibf and renegotiating the terms of the relationship. How well countries can revamp legal systems and create confidence and trust among investing companies would then in the long run determine future of global software development offshoring. Conclusions: A deeper analysis of the total costs of certain outsourced projects could be an interesting topic of discussion for future references. Trends in literature review clearly suggest that the process of offshoring in software development though useful has its share of problems-this would then mean that most companies attempting this would have to have its basics clear and be prepared for combating problems that are intrinsic to the issue. The hypothesis that a standard offshoring project and its success is hinged on multiple factors thus stands reinforced by the literature review. Reference: E. Carmel and R. Agarwal, (2001). “Tactical approaches for alleviating distance in global software development”. IEEE Software Journal. March April Gao, J. Z., Itaru, F., and Tyoshima, Y., (2002). “Managing Problems for global software production-experience and lessons”. Information Technology and management. Vol.3. pp85-112 Aman , A., and Nicholson, B., (2005). “The process of offshore software development”. In Organizational information systems in the context of globalization., Eds.  Korpela, Montealegre, R., and Poulymenakou, A. pp201-217 Mookerji, S., (2007). Reducing Offshore Software Development Risks. Retrieved May 9, 2010, < http://www.tagonline.org/articles.php?id=80> Iacovou, C., and Nakatsu, R., (2008). A Risk profile of Offshore-Outsourced development projects”. Communication of the ACM. 51(6). Pp89-94 Chopra, R. D. (2010, March 13). Offshore Software Development - Global Trends. Retrieved May 9, 2010, from http://ezinearticles.com/?Offshore-­Software- Development- - - Global- Trends&id=3921216 Musio I., (2008). IBM Industry Practice: Challenges in Offshore development from a global delivery center. In Software Engineering Approaches for Offshore and Outsourced Development. Eds. Gotel, O., Mathai, J., and Meyer, B., pp6-10. retrieved May 10, 2010, < http://books.google.co.in/books?id=D-1Y9XCe_kYC&pg=PA4&dq=IBM+Industry+Practice:+Challenges+in+Offshore+development+from+a+global+delivery+center&cd=1#v=onepage&q=IBM%20Industry%20Practice%3A%20Challenges%20in%20Offshore%20development%20from%20a%20global%20delivery%20center&f=false> Juvonen, P., (2008) “Evaluating the driving factors and the suppressing factors related to IS outsourcing in Four Finnish Information system organization, in Information Systems Development: Challenges in Practice, Theory, and Education. Eds. Barry., C. pp687-690. Retrieved May 10, 2010, Sahay, S., Nicholson, B., and Krishna, S., (2003). Global IT outsourcing: software development across borders. Cambridge university Press. p22. retrieved May 10, 2010, < http://books.google.co.in/books?id=VCc88BvSypwC&pg=PP19&lpg=PP19&dq=Sahay,+S.,+Nicholson,+B.,+and+Krishna,+S.,+(2003).+Global+IT+outsourcing:+software+development+across+borders&source=bl&ots=ZAQ6VYhQcb&sig=FpAlQlsCPukvZVa2kuHLkoL-Pkw&hl=en&ei=eZ7nS_2wI4eAswOr5bWWCQ&sa=X&oi=book_result&ct=result&resnum=1&ved=0CBYQ6AEwAA> Read More