Investments

Lessons in Offshore Software Development

Bank Of America Investment By Ben Bradley • 09/02/03 Murali Iyer, founder of Samyog Software Limited, discusses with the Wisconsin Technology Network critical processes and methodologies for companies contemplating offshore outsourcing. Samyog designs and delivers Internet solutions - intranets, extranets, B2B e-business, B2C e-commerce, supply chain management and logistics. Their solutions may be either custom built or completed by integrating 3rd party tools.

There are so many different kinds of projects you could be asked to work on. You may be required to help with medical billing software, software products, help desk software, internet software, accounting software, the list just goes on and on. You could called in to assist with database development, application software development, or even offshore development.

Investment Opportunity WTN: What is Samyog Softwares background?

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Banc Of America Investment Murali Iyer: The company was founded in 1995, in Bangalore, India and its U.S. headquarters is now located in Brookfield, WI. We are specialists in the delivery of offshore development projects and are currently contemplating providing business process outsourcing. Between 1997 and 2000, in addition to building Samyog, I worked as the Vice President of Technology for USWeb/CKS and marchFIRST.

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Banking Investment WTN: For companies considering offshore development, how do you get started?

Stearns has over 20 years of experience in private capital investments in a variety of industries, capital structures and stages of development in companies located in the U.S.

Investment Solution Strategic Iyer: Look at what other companies are doing. Get a feel for companies that know your business. With a list of service providers who match your needs, start narrowing the group. From there, start with a pilot project and evolve the relationship. Offshore development works better if it is viewed as a strategic move, not tactical. If you are in a rush, look for offshore development companies that can provide on-site support of senior, experienced resources, so that you can be comfortable with the speed on the project. If you are looking for a long-term, sustained offshore development center, then do the due-diligence in selecting the right type of partner for you, build your confidence in their ability to adhere to process, and start with a project. I would urge more serious companies to send a few offshore developers to work with the offshore group for a couple of weeks. We generally recommend a 10% onsite, 90% offsite mix with a regular rotation of staff. This ensures there is enough osmosis within the team. Once the project is successful, evaluate the process, and fix any problems before scaling.

Spiralling prices in the investment market have also led investors to turn to riskier options in the development market. At the end of last year, 75% of loans are made for investments, against a rising 13% of loans on development. Speculative development lending jumped from .5bn in 2004 to around bn in 2005.

Investment Banking Services WTN: What are the biggest problems with offshore IT development?

Bank Investment Iyer: The biggest problems with an offshore development center are adopting a new methodology of capturing and communicating requirements, designing the software, tracking development and making sure the software matches the specs.

Alternative Investment The goal is to avoid a mismatch between expectations and deliverables. There can be problems with communication and understanding of requirements. It is even more important to document the requirements clearly, so that what is expected from the service provider is what is delivered. In addition to communication problems, sometimes-offshore service providers dont understand their clients marketplaces. For instance, the health-care system that is prevalent in the United States is very different from Indias. Conceivably, it takes a lot of training and education to prepare a call center employee in India to answer questions about health insurance claims filed in the United States.

Online Investment Services WTN: How do you avoid problems in offshore development?

Accompany Essential Investment Iyer: To avoid the customary growing pains with IT projects, start the process with an offshore pilot project. Use this time to educate your offshore team and get a good gut feel that your offshore partner can take the relationship to the level you expect.

Investment Company Further, offshore development requires a methodology quite different from local development. For example, an onsite development team can resolve critical issues by meeting in a conference room. When teams are diverse, you have to create a process that automatically keeps everyone in the loop. This can be achieved with discussion boards and other internal collaboration tools. There is no single method that effectively keeps everyone in the loop. You may have to do it all at one time or another: WebEx, Yahoo IM, client reviews, conference calls, telephone, documents sent via email, email, message boards and remote white-boarding, web-based project reviews and change management, and whatever else works for you.

Investment Management Solution WTN: How can you improve the performance of your offshore team?

Investment Management Services Iyer: By investing in a long-term relationship, not only financially but also in terms of sharing their business vision. In a way, you embrace the offshore team as one of your own, so that the offshore team gets a sense of ownership and pride in the success of the company. This type of trust between the two teams goes a long way in improving the performance and getting the best out of the offshore team. Win-win is a phrase everybody in the world understands. When a relationship tends to become win-lose, performance degradation is inevitable. If you can afford it, it is worth the money to rotate 10% of the offshore staff to your local development center. When offshore developers see issues first hand, they become more productive by understanding user patterns, culture, customers, success factors and performance issues.

Guide Investment Stock WTN: What about morale problems?

Investment Manual Solution Iyer: Every single person in our team of 80 should get recognition from peers, onsite members and even the client. Offshore teams shouldn't be viewed as lesser than local teams. Offshore technical resources are in high demand. Make sure that you give them opportunities to use new technology and develop new skills. Motivation works the same way, whether onsite or offshore. Since the offshore staff is more adjusted culturally to different organizations, some sincere, constructive and inspirational emails do wonders for ones morale. If you are sincere with your team, you get a lot more with the same effort and can greatly improve retention because the team takes ownership of everything that comes out of the organization. To get a sense for the leadership in the company, look at the longevity of the employees. Also, understand the sensitivities of the offshore culture; you can't threaten them. As you know, work is more enjoyable when you are treated with respect.

Investment Stock Locally, morale problems can be expected to crop up when companies cut jobs and go for offshore teams in a big way. Here again, if a company invests in its local employees by sharing the long-term vision of increasing business by becoming more competitive, there is no reason why employees will not be ready to reconfigure their own skill sets and become good at what makes best business sense for the company.

Essential Investment Solution WTN: What can you suggest that can have immediate impact?

Citicorp Investment Services Iyer: Very often, it is the little things that have the greatest impact. For example, have your local development office hours overlap with your offshore development office hours. When developers communicate, they uncover new things and understand their goals much better.

Fool Guide Investment Motley WTN: How do you protect your intellectual property?

Fidelity Investment Services Iyer: Trust but verify. Identify an offshore partner with good ethics, great internal security practices, a reputable track record, strict adherence to quality processes, an audit process, a professional approach to the relationship and continuous investment in the relationship. Then tie it all together with proper contractual agreements to make sure that both parties are clear in their understanding that the clients and offshore companys successes are closely intertwined.

Investment Management A quality organization should have a solid disaster recovery plan for all projects, including offshore ones. Keep local copies of your source code. Have the offshore team connect to your central office through a secure protocol. Since IP needs to be protected anywhere in the world, setup your development team in such a way that you have built-in redundancy, and in extreme cases of proprietary code, make it so that no single person, local or offshore, has access to the entire source tree.

Francisco Investment San WTN: What about cost? Should you setup your own offshore center?

Mellon Investment Services Iyer: There are a couple of opinions on that topic. Many large companies have successfully setup and operated their own offshore centers over the last two decades. For small- and medium-sized businesses, the unfamiliarity with the foreign culture and market realities can pose significant challenges. One option is to consider taking a stake (in the form of equity partnership or acquisition or merger) in an existing offshore company with an impressive employee retention rate and a stellar track record, ensuring quality management and a loyal workforce.

Finance Investment Provided you adhere to process and ensure accurate and prompt completion of projects, there is a significant savings from moving work offshore. The hardest part to quantify is the ability to get something done quickly and getting it to market ahead of your competition. For others with the time to learn the culture and establish relationships, the need to have at their bidding a full-fledged offshore team, and the money to invest, starting their own offshore center makes sense.

Investment Manual Science ________________________
Ben Bradley is the founder of www.growingco.com, a peer group focused on peer learning and collaboration. He is also the founder of benbradley.net - a performance-based marketing firm. Contact him at ben@wistechnology.com.

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