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Application Development Outsourcing
- 1. Application Development Outsourcing: Whyit can fail and why it can be successful Hans van der Meer Director Edsson Software 1
- 2. Topics Why companiesdo not outsource application development Why should companies outsource? Why outsourcing often goes wrong Principles of success The next level: smartsourcing Conclusions 2
- 3. Why companies donot outsource application development IT industry is very young, so not mature There are too many bad examples Intellectual property and personal issues Non-understanding of specific markets Language and cultural barriers There is no internal structure to build on There is no need for outsourcing 3
- 4. Why should companiesoutsource? Winning of business deals is in the margin Competition has become much tougher Focus on the business has become more important Increase market knowledge, reduce production costs It’s about branding instead of manufacturing In B2B: Customer Value Management makes the difference IT industry moves and develops very fast Globalization 4
- 5. Why should companiesoutsource? 5
- 6. Outsourcing is themost popular movement of the new global business economy. In fact, the typical executive will soon spend one-third of their budget on outsourcing! Source: Tom Roloff and Thomas Koulopoulos 6
- 7. Why should companiesoutsource? The ultimate situation: Your company is a well known brand, buying all products and services from third parties. 7
- 8. Why outsourcing oftengoes wrong No major plan No real vision than only cutting costs No well defined processes Misunderstand each other Overpromise, under deliver Customer – provider relationship Lack of trust 8
- 9. Principles of success Timespend in projects Requirements Project Management 10% 15% •Project 1000 hrs Testing •Development 300 hrs 15% Analysis & Design •Normal hour rate € 80 30% •OS hour rate € 30 •Project costs € 65.000 •Savings: Outsourced 300 x € 50 = € 15.000 Development = 22% savings of total costs 30% 9
- 10. Principles of success Time spend in projects 50% OS Project Requirements Management 10% 15% 80% OS •Project (example) 1000 hrs •Normal hour rate € 80 Testing 15% •OS hour rate € 30 Analysis & Design •Development 300 hrs 30% 66% OS •A & D 240 hrs •Testing 100 hrs •PM 75 hrs •Total OS 715 hrs Development •Savings: 30% 715 hrs x € 50 = € 35.750 100% OS = 45% savings of total 10
- 11. Principles of success Preparation Measurement framework about expectations from both sides Planning Picture of the end-state and how to achieve this vision Organization changes needed Partnership Share common goals Source: Tom Roloff and Thomas Koulopoulos 11
- 12. Principles of success Define responsabilities Who is responsible for what? Fixed time/price vs times & material Use well defined processes Tooling, structures, conditions, deliverables, planning Risk management Cut large projects into smaller ones (more itterations) 12
- 13. Principles of success Stay independent Documentation Intellectual property Stay open to learn from each other Communication Evaluate After each project ask yourself: how can we do this better? 13
- 14. The next level:smartsourcing Smartsourcing is the next evolution in outsourcing. Traditional outsourcing reduces costs by moving the work to where the least expensive workers are. While that may cut costs, it simply replicates the status quo. Smartsourcing goes a step further by showing companies how to partner with service providers to not only cut costs, but also increase innovation across the full spectrum of their business. Source: Tom Roloff and Thomas Koulopoulos 14
- 15. Smartsourcing Handover responsibilityfor a non-core competence Reduce cost of design and development Empower your company to take stronger positions on the market with extra-resources behind you Engage into a co-maker relationship with the software production company, aiming to: Increase innovation across all processes free up resources to focus on core competences 15
- 16. Smartsourcing Flexibility Scaling up or scaling down of resources needed for projects Costs structure Choice Knowledge and technology needed per project Focus on business instead of development Control Fixed time/price Project management Based on source: Tom Roloff and Thomas Koulopoulos 16
- 17. Conclusions Outsourcing (smartsouring) canbe very successful when there is a real vision behind it. Well organized, it can save 20 – 50% of the development lifecycle costs while increasing quality of the organization and developed products. It is about Preparation, Planning and Partnership. Without these outsourcing will not work! 17
- 18. Conclusions Youcannot stay alone in this world. If you want to survive, you must focus and cooperate with others. 18
- 19. Conclusions There is a well known proverb: the ones that will survive are not the largest or the smartest, but the ones that are open to change 19
- 20. Successful outsourcing is possible! www.edsson.com h.vandermeer@edsson.com 20