Why Adopt Nearshore Agile Development?


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Ciklum, the European leader in IT nearshoring for Small and Medium Enterprises (SMEs), presents nearshore Agile development as a relatively new, yet effective Outsourcing 2.0 trend, able to better meet with the challenging requirements of today's high-tech environment compared to traditional offshore waterfall development.

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Why Adopt Nearshore Agile Development?

  1. 1. Page | 1White Paper Why Adopt Nearshore Agile Development? Ciklum ApS April 2010
  2. 2. well as challenging business demands and risks associated with offshore outsourcing.Table of Contents IntroductionExecutive Summary 2Introduction 2 With Outsourcing 2.0* being in full swing, traditional software development methodsNearshoring is the 3 such as waterfall** start losing value due toSolution their inability to meet with the rapidlyThe Answer is Agile 4 changing requirements of this high-tech epoch. Waterfall model is good with stand-alone,Summary 5 batch applications as well as robust enterprise solutions, which require 20+ developers andReferences 6 project execution distributed among multiple locations. But what about Web/Enterprise 2.0 applications, which require up to 20 IT staffExecutive Summary members to complete and accelerated time to market to be able to grow into profitableThis white paper presents nearshore Agile business solutions in a small fraction of time?development as a relatively new, yet effective Moreover, these solutions should be free ofOutsourcing 2.0 trend, able to better meet delays and errors, since any delay in deliverywith the challenging requirements of today’s and bug fixing at the post-production stage willhigh-tech environment compared to traditional cost the client time, money and reputation.offshore waterfall development. According to the latest CHAOS Report, as ofThe paper will first provide a brief overview of 2009 only 32% of all outsourced softwarethe most up-to-date statistics of the projects succeeded, while 24% failed and 44%outsourced projects failure and its major were challenged by late delivery, over-budgetcauses. Then it will discuss a transforming and poor functionality1. Another study ofnature of current IT outsourcing industry and 6,700 projects found that 4 out of 5 majorwill argumentatively explain why nearshore IT factors, contributing to the outsourced projectdevelopment is a win-win strategy for small failure, were largely associated with a waterfalland mid-sized Western European companieswho consider outsourcing to save costs, speedup time to market and leverage innovation. *In the end the paper will break some major Outsourcing 2.0 is a next-generation stage of software development/Web 2.0 outsourcing aimed at processmyths about Agile development and will simplification (agility) and establishment of long-term andanswer the question why adopting a mutually beneficial relationships between the buyer and thecombination of nearshore and Agile service providerdevelopment is able to allow Western ** Waterfall development is referred to as a sequentialEuropean companies to more easily and software development process, in which progress is seen asefficiently adapt to the emerging technology as flowing steadily downwards through the phases of conception, initiation, analysis, design (validation), construction, testing and maintenance 2 | Copyright© Ciklum ApS
  3. 3. model2. As of 2008, 68% companies economic value for companies needing toexperienced a waterfall project failure due to3: present their web or software product at the market in a small fraction of time. If something taking over 180% of target time to deliver, needs to be changed in the middle of the delivering under 70% of the required project, the vendor will most likely delay the functionality, and product delivery, trying to flex the application, wasting over 41% of the IT development and will leave the customer waiting on a bench budget remaking the end product as a and watching his competitors “skimming the result of poor requirements gathering at cream” off their working applications. the project initiation and planning stages. The bad news is that typical offshoring toHowever, the most dramatic legacy of the providers with a strong waterfall softwarewaterfall model is that it became hardwired development tradition has proven to be illusiveinto the project planners’ mindsets, making the and not a panacea for Western Europeanentire software development process- clients, located thousands kilometers away.packaged, plan-driven and bureaucratic. Today’s companies want to feel the pulse ofConsidering the above, it becomes clear why so time and are no longer satisfied with hiddenmany offshore outsourcing deals either fail or management problems and hidden costs asare cancelled prior to completion. The cause is well as headaches relating to excessiveseen in the combination of orthodox documentation and bulky processes. The goodapproaches towards software development news is that there is a solution – a good mix ofand outsourcing to offshore locations, which innovation and sustainability, which is bestgenerally complicates frequent live achieved via nearshore development.communication between the buyer andprovider. While promising to help cut software Nearshoring is the solution!development costs, most of offshoreoutsourcing services providers, who offer their A recent joint survey by Duke Universitysclients pure waterfall development regardless Offshoring Research Network and the globalof their business needs and project scope, hide leading consultancy PricewaterhouseCoopersthe fact that the clients will have to pay (PwC) finds that the global outsourcingoverheads related to fixing the end product’s industry is rapidly transforming due todefects and/or malfunctioning (which is a emergence of innovative providers and existingcommon practice due to inadaptability and outsourcers’ expansion into the new markets4.inflexibility of the waterfall model), and The survey reveals that such traditional“helping” the vendor upgrade its infrastructure outsourcing hubs as India and China are beingand processes as required by CMMI and other challenged by Eastern Europe and Latinorganization’s maturity certifications (which America. Increased competition is graduallymost of old-school vendors are obsessed turning the outsourcing landscape into a globalabout). race for the market share, driving outsourcersAdditionally, the waterfall model assumes to adopt nearshore software development ascreation of a detailed set of requirements and, an effective business strategy.based on it, determination of a single projectscope, which has neither practical, nor 3 | Copyright© Ciklum ApS
  4. 4. Offloading IT development nearshore (to optimum time-to-market schedules both foreconomically slower-achieving neighbors) has early-stage and established global companies.proven very effective in recent years. Its majorbenefits include, but are not limited to:  Higher employee retention and lower turnover rates Enhanced collaboration between the customer and vendor’s development team As was noted at the 7th Annual Conference on Information Science, Technology &Geographical proximity allows better project Management, the turnover rate among thecoordination and management. According to Indian developers working for offshoreVentoro Institute, the global sourcing research industry is very high and reaches 30-40% annually6. In Eastern European countries,organization, many offshoring customers try to especially non-EU members, the employeecut corners by avoiding face-to-face meetings turnover rates are much lower than in India,with their vendors and international trips5. Western Europe and the United States7,However, such approach is just a false meaning that each outsourcing serviceseconomy. No secret that only regular “live” provider can invest in nurturing his own talentcommunication with the vendor’s team can pool with little risk of losing people.guarantee IT project success. The customers Direct work with clients encourages developersand vendors can practice enhanced knowledge to be more responsible and responsive.sharing and, thus, become more proactive in Understanding that their pay progression andfinding the best solution to this or that other benefits depend directly on client’sproblem. Some new-generation companies satisfaction (and not on corporate teamoffer an innovative approach of establishing leaders, project managers, IT directors etc likeinteractive IT teams to enable clients to work with traditional outsourcing services providers), software developers provenlydirectly with nearshore located developers become more productive and efficient in theand, thus, to be independent from classical workplace.project management hierarchy andcomplicated procedures. For a Western Now that the key benefits are known, theEuropean company to set up such a team question remains - how to achieve the bestnearshore (say, in Ukraine) is equal to having software development via Nearshoring?its own in-house IT team, but lower Ukrainiantaxes, salaries and overall rates help reduce The answer is … Agile!development and operational costs. Agile development*** has made its way into the Working in the same or similar time zone application development mainstream in the past few years and has already gainedIn traditional offshore locations time difference momentum among smart outsourcers willingis a serious barrier in the way of successful to speed up delivery schedules, to quickly adapt to changing business demands, to alignsoftware development project completion.Due to it, developers have to work in nightshifts, which can’t help impacting the general *** In this white paper Agile Development is referred to as aquality of the software product. Most bugs and group of software development methodologies based onerrors occur as a result of occupational stress iterative development, where requirements and solutions evolve through collaboration between self-organizing cross-and burnout. Nearshore development model functional teamsensures easier bug-fixing, faster solutions and 4 | Copyright© Ciklum ApS
  5. 5. technology and business goals and to gaincompetitive advantage against theincreasing competitive pressures.According to the 2009 State of AgileDevelopment Survey, 28% of companiesuse Agile on outsourced projects, while13% plan to offload their Agile projectsnearshore8. These figures highlight thegrowing popularity of Agile developmentover traditional waterfall methods. Listingthe greatest concerns of Agile adoption,the above Survey points among all to thelack of upfront planning and lack ofpredictability. However, these are just twomisconceptions generally relating to thelack of understanding of an incrementalplanning approach.In fact, most Agile teams spend as muchtime planning their project as waterfall-model teams. The only difference is that inAgile the planning efforts are distributedthroughout an entire project and are notjust compressed to the project beginningstage, like in waterfall. Unlike upfront a simple mechanism of integrating newplanning, the incremental approach givesvenues to both high-level initial planning and information into the plans. In Agilelower-level iterative planning, which is more predictability is more precise, as theeffective, as more knowledge is incremental planning and re-planning aregained with each new iteration. refreshed with new actual data emerging throughout the development process.Unlike traditional detailed and task-basedproject planning, Agile continuous planningprovides teams with the necessary process- According to the State of Agile Developmentbased frameworks to more easily and Survey, 90% of respondents say thatefficiently adapt to the new technology, implementing Agile either improved orrequirements, business demands, risks and significantly improved their ability to manageissues. rapidly changing environments. Additionally, 83% of respondents reportRegarding the lack of predictability, in software achieving better project visibility with the usedevelopment what is often believed to be of Agile methods.“predictability” is, in fact, only “the perceptionof predictability”. In traditional models Summarypredictions are made based on activity plans, Agile is no panacea either. All it offers is simplyprogress evaluation, and analysis of deviations process, engineering and managerial practicesfrom plan etc. But decades of experience show packaged together to allow higher degree ofwell how dismal such predictions prove to be. discipline and sustainability in every single areaThis happens, because traditional models lack 5 | Copyright© Ciklum ApS
  6. 6. of software development, from test-driven tocontinuous integration to daily stand-ups. Waterfall vs. AgileWhile large outsourcers can afford to leverage Waterfall Agiletheir technologic expertise by locating their ITfunction offshore or distributing it among Software Softwaremultiple locations, a combination of Philosophy development is a development is aNearshoring and Agile development appears construction process creative processto be a perfect option for small and mid-sizedWestern European companies due toenhanced ability to manage changing Workflow Serial Iterativepriorities, improved alignment betweenbusiness objectives and IT, faster time tomarket and simplified development process. Thorough Concise Requirements documentation documentation Focus on frequentReferences verbal Focus on written Knowledge communication documentation and a transfer and regular1 The Standish Group, “2009 CHAOS Report,” 2010 final release working releases2 Cited in C. Larman, Agile and iterativedevelopment: a manager’s guide, Addison-Wesley Team size Large SmallProfessional, 20033 IAG Consulting, “Business Analysis Benchmark Planning Gantt Chart Task/feature listStudy,” 20094 Progress and PricewaterhouseCoopers, Inc., “Global Offshoring Monitoring Progress qualityResearch,” 20095 Change Control or minimize Make change Ventoro, “Offshore 2005 Research,” 20056 th management change easier ‘Proceedings of the 7 Annual Conference onInformation Science, Technology & Management,’ Concise and Process Thoroughly2009 memorable definition documented7 Gartner, 2008 Process Metrics Brainstorming8 improvement VersionOne, “State of Agile Development Survey,”2009 Meeting the initial Delivering Final predictions of cost business value outcome and schedule 6 | Copyright© Ciklum ApS
  7. 7. About CiklumCiklum is an innovative Danish IT outsourcing company specializing in nearshore softwaredevelopment in Ukraine, and in addition having a set-up in Pakistan. Founded in 2002 byTorben Majgaard, Ciklum has grown into Denmark’s largest IT Nearshoring services provider.With 8+ years of using best practice and 800+ developers working for 100+ customers, Ciklumfocuses on setting up streamlined and productive IT development teams for WesternEuropean customers.Ciklum’s core offering is establishing and servicing clients’ own development teams that 100%belong to and are managed by clients. The strategic advantages of Ciklum Client Team modelcompared to classic outsourcing are very significant in terms of Team competences,motivation, consistency in KnowHow, low employee fluctuation, meeting deadlines, flexibilityand scalability etc.Ciklum has four offices in the four largest cities of Ukraine and two offices in Pakistan, as wellas offices in Denmark, Sweden, United Kingdom, Switzerland, Germany and the Netherlands.Ciklum is a winner of the Red Herring 100 Europe 2009, an award given to the Top 100 privatetechnology companies based in the EMEA (Europe, Middle East and Africa) region each year.Ciklum is a member of the Ukrainian Hi-Tech Initiative.For more information please go to www.ciklum.net 7 | Copyright© Ciklum ApS