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Steve Mezak, CEOwww.Accelerance.com
+1-650-472-3785 [email protected]
m
Global Software Development-- & --
Why U.S. Companies WillOutsource to Mexico
Copyright, 2008 2
Outsourcing Software Developmentfrom a U.S. perspective
• Who– in the U.S. is outsourcing?
• What– kind of outsourcing?
• Where– is the work going?
• Why– are U.S. companies outsourcing?
• How– are they making their decisions?
And perhaps how Accelerance can help you reach the U.S. market . . .
Copyright, 2008 3
Who is Outsourcing?Software Development from the U.S.
• Independent Software Vendors (ISVs)– Growing but can’t find programmers in U.S.
– Want cost savings
– Startups with limited funding
• Small company IT department– Fixed-price SW development
projects
• Large companies– Create an offshore operation
– Mix of IT services & SW development
Copyright, 2008 4
Who is Outsourcing?Target Markets
█ Bronze (< $100K)– Software Startup: Entrepreneur/CEO/Founder– Create demo for customers and investors. Validate market opportunity &
raise funding █ Silver (< $500K)
– Funded Startup: Entrepreneur/CEO/Founder/CTO/VPE– IT Department: CIO/IT Manager– New product launch or IT project implementation
█ Gold (< $1M)– Small & Growing Software Company: CEO/CTO/VPE– Enable growth with dedicated global team & control/reduce costs
█ Platinum ($1M+)– Medium & Growing Software Company: VPE/Engineering Director– Enable growth & control/reduce costs with own offshore operation
Copyright, 2008 5
Who is Outsourcing?Example Deals
• Small PHP team– 4 engineers for 6 months
– Approx. $96K
• Medium Java Team– 8 engineers for 6 months
– 12 engineers next 6 months
– Approx. $360K
• Medium .NET Team– 15 engineers for 12 months
– Approx. $540K
• Large Team– Custom vendor search
– 20+ engineer team
– $1M+ per year
Bronze Silver
Gold Platinum
Copyright, 2008 6
What Kind of Outsourcing?Engagement Models
• Fixed-Price Project– Good spec required!– Used as pilot for ODC
• ODC– Offshore Development Center– Dedicated team– Paid monthly
• In-house / Outsource Blend– Staff augmentation
• BOT– Build, Operate, Transfer
• Offshore Subsidiary
Copyright, 2008 7
What Kind of Outsourcing?• Software Development
– To a detailed spec
– Java and .NET
• Design & Development Process– Architecture
– Agile vs. CMMi vs. Waterfall
• Quality Assurance
• Special Technical Expertise
• SAP or Oracle practice
• What is your specialty?
• Also BPO - Business Process Outsourcing
Copyright, 2008 8
Where are they Outsourcing?Everywhere!
Copyright, 2008 9
Where are they Outsourcing?Pros & Cons & Costs
• India ($20/hr)+ 80% of outsourcing– 10 to 12 hours away
• China ($18/hr)+ Many engineers– Limited English
• Philippines ($20/hr)+ English & low cost– Limited tech workforce
• Russia ($25 to $30/hr)+ Analytical technologists– Limited English & stability
• Eastern Europe ($20/hr)+ Well educated & low cost– Limited English skills
• Canada ($40/hr)+ Almost same culture & time zone– Almost same cost as U.S.
• Mexico ($25 to $30/hr)+ Near & time zone overlap– Higher cost than other countries
• Central & South America ($20 to $30/hr)+ Low cost in same time zone– Limited tech workforce
Copyright, 2008 10
Why Are US Companies Outsourcing?The Million Dollar Outsourcing Decision
• Ignore Outsourcing & Overspend– 20 engineers for one year
– Difference between In-house ($64/hour) &Offshore Outsourcing ($32/hour) is about $1 million
• Competitors Are Outsourcing – Joining the global economy
– Foreign-born executives
• Needed Technical Expertise
Estimated Costs
$2,520,000
$1,320,000
$0$500,000
$1,000,000$1,500,000
$2,000,000$2,500,000$3,000,000
In-house Offshore
Copyright, 2008 11
How Are Outsourcing Decisions Made?
Sourcing Options
• Strategic Consulting Firms– NeoIT
– TPI
– Equiterra
• Single-Country Experts• Personal Referrals• Elance Project• Global Partner Network
Copyright, 2008 12
How Are Outsourcing Decisions Made?Selecting the Optimum Outsourcing Team
• Vendor Selection Criteria1. Location / Culture
2. Positive References in U.S.
3. Technical Competence
4. Time zone
5. Domain Experience
6. …
Copyright, 2008 13
How Are Outsourcing Decisions Made?The Selection Process – can take 6+ months
• Matrix with evaluation criteria• Define evaluation process
– Number of vendors, schedule
• Create RFP– Define optional pilot project
• Choose countries• Contact vendors• Send RFP / Get responses• Select semi-finalists
– Using evaluation matrix
• Final selection– Visits, pilot, pricing & terms
Copyright, 2008 14
How Are Outsourcing Decisions Made?How Do You Get Selected?
• Differentiate your services– What are you best in the world at doing?
– Java, .NET, C++, …
– CMMi, Agile, XP, …
– Wireless, embedded, web apps
– Software as a Service, Web 2.0
• Sell your value, not low price• Have great references• Understand your customers
Copyright, 2008 15
How Are Outsourcing Decisions Made?Why Mexico?
• Close to the U.S.– Same time zones– Fast travel– NAFTA– Agile development
• Smart Engineers• Lower cost
– Less than U.S. engineers
• What else?
“Pobrecito Mexico—tan lejos de Dios y tan cercas de los Estados Unidos!”
Copyright, 2008 16
Global Software DevelopmentConclusion
• Who– Most companies in the US
• What– Software & business processes
• Where– Everywhere, each with pros & cons
• Why– Savings & global economy
• How– After a careful evaluation process
Copyright, 2008 17
The Accelerance SolutionSpeed Dating for Outsourcing
• Global Partner Network– 40+ vendors in 14 countries– Proven, pre-screened & qualified
• Outsourcing Jumpstart– Select by Region or Technology– Guided DIY vendor selection– Money-back guarantee
• Rapid Ramp-Up Programs– More consultation– Custom vendor searches– Setup of offshore operation
Copyright, 2008 18
The Accelerance Value PropositionTo U.S. Clients
• Cost of Vendor Selection– 3 months, part-time: $15K
– Unproductive programming with the wrong vendor: $30K
– Selecting a new vendor: $5K
– Delayed time to market: $huge
• Other Consultants – $50K to $100K
• Accelerance Programs– Only $497 to $15K
“The outsourcing partner we found through the Accelerance Outsourcing Jumpstart service has successfully finished our initial project and we've now re-launched our website and programs. Again, thank you for guiding me in our outsourcing endeavors!“
— Vince Turk, Directory Manager, Find White Papers, Inc.
Copyright, 2008 19
The Accelerance Value PropositionTo Global Partners
• Network Member Benefits– Low cost lead generation– Another sales channel – Joint promotion opportunities– Lost deal feedback– Leave network at any time
• Application Fee– Only $500– Money-back guarantee
• What’s the Deal?– Accelerance earns a one-year
10% referral fee when you are selected by a client
“We still find U.S. clients through our personal connections, but being an Accelerance partner has tremendously increased our business and enables usto win clients we never would meet otherwise.” — Vijay Shah, CEO of V2Solutions in Mumbai, India
Copyright, 2008 20
How Are Outsourcing Decisions Made?How to Make Contact
• Outsourcing is a relationship business– Personal networking & referrals– Partnerships– Publish articles– Give talks & seminars– Webinars & teleseminars– Virtual networking with
LinkedIn, Plaxo, Facebook, etc.– Attend conferences
• Cold calling does not work
Copyright, 2008 21
Promotional Tools• Copies of Software without Borders
• Promotional discount codes
• Ezine content to use or contribute
• Frequent updates to www.SteveMezak.com author blog
• Joint Teleseminars
• Listing on the Accelerance Global Partner page
• Blurb for your website
Copyright, 2008 22
Next Steps
• Questions ???– Honest feedback
– Suggestions
• Apply to Join– Meet with me today