Reducing Computer Budgets in JapanQuestion: Would your company like to complete its newest software development project in half the time of past projects, and at two-thirds of the cost? No, the answer isn't magic; it's offshore development.by Steven J. Davis When your company begins the decision-making process to develop or re-engineer a software application, numerous issues - primarily those related to time, cost, quality, and control of development - must be considered. Many companies have found that the best method to satisfy these needs is to conduct development offshore, while maintaining a Japanese engineering link onsite. Developing software in India or China offers several advantages over trying to do it all in Japan, some of which I will describe in this article. Traditionally, the greatest concerns about using offshore development have centered around language and cultural barriers. These, in turn, usually lead to worries about product quality and control. There are, however, some common sense steps that you can take to alleviate these concerns and ensure the successful, efficient, and cost-effective use of offshore development resources.
Just do it! We all know, for example, that top-of-the-line Nike shoes are a good product, and are in high demand. However, these shoes are not manufactured in Portland, Oregon, where Nike's home office is located. Instead, Nike outsources shoe production to Korea or Southeast Asia, where it can maintain control of both cost and quality. Shoes or software, the principle is the same. And if Nike can do it, so can your company! The key is to stay aware of, and be objective about, global trends and the potential opportunities of manufacturing overseas. Many companies, including those in the software and information services industries, are unaware of the potential to develop offshore - that is, the potential to operate on a global scale. It doesn't matter whether your company is in the financial, telecommunications, industrial, or manufacturing business; you can save money on system development by properly utilizing offshore resources. What's the secret? By the time you get around to considering where the work will be done, your company should already have a solid idea of its developmental needs. When that essential first decision has been made, the next step is to network: Find a suitable, experienced partner who can advise you, one that can properly manage both the onsite and offshore aspects of your development project. In choosing, carefully weigh the benefits, gains, and advantages that each prospective partner can provide. There are many companies that can offer the necessary links and support; but as in any business relationship, you'll find that you're able to work more comfortably with some than with others. Choose wisely. When you have selected your partner, work closely with them to review case studies and develop a viable quality control methodology. The main points to clarify at this stage are your expectations of what benefits can be derived from offshore development, and how much (what specific aspects) of the project should be handled offshore. The direct benefits to your company of offshore development will accrue in the form of cost reductions, time savings, access to top-quality engineers, and enhanced control of development. Let's consider each of these potential benefits individually.
Price savings Consider that each year in the Japanese information services (IS) industry, over $6.1 billion is spent on software development. Industry analysts have suggested that at least 16% of this work could easily be handled through offshore development. The arithmetic is clear: If that 16% ($975 billion worth) of development work were handled in India or China instead of being done in Japan, at an average calculated savings of 42.5%, this would be a total saving for the Japanese IS industry of $4.1 billion per year.* (That amount could have kept Yamaichi Securities in business for at least two more years.) The price and degree of savings, of course, greatly depends upon the scope and skill requirements of each project. It has been estimated that the minimum savings when developing in India or China is 30%, while the maximum savings can reach 55%. This includes the onsite service of communication links and development design, and support between the client and the offshore development teams.
Time savings Almost always, the timeliness of creating a deliverable installed application offshore is much quicker than doing the same in Japan, due in part to the availability of engineers. In India, for example, the ability to ramp-up engineers for a new project is fairly easy; there are an average of 35,000 new engineers graduating and entering the market each year. And, of course, the engineers go where the work is, which in turn means that available engineers are easily accessible. The time saved for your company depends almost solely upon how quickly you wish to produce your applications. Because of the ramping-up capabilities, if time is of the essence, engineers can easily be allocated to speed up the development project.
Quality maintenance The technical schooling in India is very impressive and, even though there is a lack of infrastructure, India is slowly developing a firm position in the world by specializing in information services. In turn, the quality of Indian engineers is equal to that of any topflight nation. Thus, the assurance that your company's development project will be handled by high-quality engineers can be established. The second factor of quality assurance is establishing a quality control methodology. Make sure that your selected partner has ample experience in offshore development, and that their quality assurance methods are already established. A good way to identify whether a prospective partner has good quality control capabilities is to check if they are ISO certified. ISO 9001 certification indicates that the company has complied with international standards for quality control. It also means that they will take the appropriate measures to guarantee quality to their customers. This assurance that your development will be bug free and of good quality will help you to sleep better at nights.
On-site control In the case of the financial company in Kabutocho that I mentioned earlier, their project could have had 18 engineers offshore, plus 3 Japanese engineers and two foreign engineers onsite, making for a perfect combined team to work with the company's IS managers or administrators. With this strategy, all communication, change management, and onsite design and development would flow smoothly. So, the next time your company is considering a software development project, don't limit your options to the resources available in Japan. Think internationally, and consider the feasibility of offshore development options, and a partner who can see the project to a quick, less costly, successful conclusion.
Steve Davis is general manager of General Industry and Off-shore Development at Japan Information Engineering Company, an IBM and CSK group company. For more information or seminars on offshore business, you can contact him at davis@jiec.co.jp.
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