This presentation is about why outourcing can fail or why it can be successful. Note: the .pdf version lacks the animation of the original .ppt.

1. Application Development Outsourcing:
Why it can fail and why it can be successful
Hans van der Meer
Director Edsson Software
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2. Topics
Why companies do not outsource application
development
Why should companies outsource?
Why outsourcing often goes wrong
Principles of success
The next level: smartsourcing
Conclusions
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3. Why companies do not 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
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4. Why should companies outsource?
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 companies outsource?
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6. Outsourcing is the most 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
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7. Why should companies outsource?
The ultimate situation:
Your company is a well known brand, buying
all products and services from third parties.
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8. Why outsourcing often goes 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
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9. Principles of success
Time spend 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%
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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)
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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?
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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
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15. Smartsourcing
Handover responsibility for 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
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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
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17. Conclusions
Outsourcing (smartsouring) can be 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!
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18. Conclusions
You cannot stay alone in this world.
If you want to survive, you must
focus and cooperate with others.
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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
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20. Successful outsourcing
is possible!
www.edsson.com
h.vandermeer@edsson.com
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