Off-shoring

Off-shoring

I received an interesting question from a reader in Germany the other day, who is a software developer, and asked me whether he could get business from clients in Japan, but work remotely in Germany. This method of working is commonly called off-shoring in the software industry and as a concept is well established, with most overseas contracts going to companies in India, China, Russia, and Eastern Europe.

Off-shoring as a concept is also well used in Japan – with most major Japanese software companies involved with some vendor in either India, China, or most recently Vietnam and the Philippines. The off-shoring trend started with Indian companies arriving in Tokyo back in the early 90’s, who were skilled in financial software in particular and were both cheaper and more flexible than Japan-based software firms.

The first time I came across off-shoring was when I was running an outsourcing business at a major US bank here in Tokyo. The off-shoring contractor had formed a joint venture with the bank and kept about 20-30 staff in Tokyo and another 500 back in New Delhi and Calcutta. Back then, off-shoring was a fantastic cost-reduction exercise, with a JPY5-7M software developer in Japan costing only JPY15,000 a month in India… no longer of course!

These days, off-shoring is still marginally cheaper per man-month, but not enough to warrant one to send work to another country unless there is a significant amount of volume. Smaller jobs (under 12 man-months) don’t translate well into off-shoring projects. However, where off-shoring really comes into its own these days is with the quality of solutions. Many of the Indian companies in particular have done a great job gaining industry expertise, and are now state-of-the-art in terms of systems architecting, domain expertise and quality control.

The biggest challenge for companies engaged in off-shoring is that of interfacing with the client companies’ business managers and IT staff, so as to understand, specify, and design out projects, as well as bug-fixes, design improvements, and other user-interface tuning. To meet the challenge, most off-shoring companies hire local bilingual/trilingual staff to interface with the clients – gathering specifications, user needs, IT department input, etc. If you have the language skills and a technical bent, there are plenty of jobs in this space.

The challenge for newcomers to off-shoring project facilitation and/or management is that the individuals need not only language and software project management skills (they don’t necessarily have to be developers themselves), but they also have to have an incredible amount of patience. Software is a deep-reaching activity for any business, and will soon flush out the cultural differences of the off-shore engineers and the Japanese customer. For example, while the facilitator is being pushed from India (or China) for specifications and answers on a particularly critical issue, the person may actually still be trying to get the customer’s key managers in the project to actually meet, discuss, and agree on the recommended changes.

Working at the front-end of an off-shoring company may sound a bit like a nightmare job, and there is no denying that it is a challenging role. However, like all project management roles, after you have gained some experience, you learn where the leverage points and trouble spots are and can forestall or educate customers and teams around the problems. And, then there is of course the satisfaction of being involved in a major project from start to finish as a critical member of the team. This is something that not many software people can experience working purely for a Japanese-only company.