Agile Outsourcing: Taking the Lead!

Agile methodologies such as agile software development and continuous process improvement are considered more suitable for software development outsourcing than traditional ones. Now they are seen as critical factors for software projects success and customer satisfaction. Why is it so? Let’s see.

Methodology Fit. For any outsourcing or offshoring company, agile methodologies are more suitable than traditional ones. Agile software development and continuous process improvement offer the chance to make fine adjustments continuously on both sides to accommodate for these differences. Traditional methodologies in software development will almost always lead to fixed price contracts since the buyers of those services will insist upon it.

Bridging Communication Gaps. Even apart from the differences in language between the United States and India or the United States and the Philippines, imagine the differences in time zones, culture and work habits. Agile software development ensures that frequent releases bridge these communication gaps quickly.

Perfection Is an Iterative Process. When two disparate organizations work together, success can be achieved only iteratively with as many feedback loops as you can design into the effort as possible. Agile software development and continuous process improvement offer both buyers and sellers of outsourcing services the opportunity to achieve perfection iteratively.

Building Expertise. Service providers can move to using agile software development methodologies or billing customers on a transaction basis only if the sellers of these services aren't just executing a project or process but building expertise in that area.

Responsiveness to Change. Software requirements change over time. Business processes are evolving everyday due to competitive pressures as well as changes in the law. Agile methodologies are needed in outsourced software development to keep the development effort synchronized with changes in requirements.

Building Longer Term Partnerships. Building a partnership with your software development service provider makes it easier and better the next time you have another major software development effort come up.

Building Quality. Agile methodologies achieve something that is counterintuitive at first glance. You build things faster, but by doing so, you ensure better quality. Agile methodologies address serious problems in ways humans communicate. They do this by allowing faster and quicker feedback cycles so that course corrections are made as soon as possible.


Source: Global Services

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Europe or North America – Who Will Spend More on Software Outsourcing?

With anti-crisis plans adopted and the first shock and mess settling down, the ITO buyers and providers are back to daily work. In a challenging environment requirements and priorities change, and new trends surface. Most market players talk of increasing demand for nearhsore software development services in Western Europe, and stay generally optimistic about offshore outsourcing as an important element of the global economic equation.

According to the latest edition of global management consulting firm A.T. Kearney’s Global Services Location Index (GSLI), a ranking of the most attractive offshore destinations, the outsourcing landscape has changed worldwide as Europe already spends more on outsourced services than North America. North America has been regarded as the leading user of offshore services for many years.

Western Europe displays increased interest in using nearshore locations. One of the best options is engaging a software services provider with conveniently located software development centers in Central and Eastern Europe, a region most promising in terms of quality, stability, and costs.

Moreover, A.T. Kearney study reveals a rather optimistic forecast regarding the future of offshore outsourcing, stating that offshoring has become an integral part of the supply chain for the financial, banking,and IT sectors, and expects the industry to continue to grow over the long term.

Source: ITO News

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Russian ITO market: possible development scenarios

At present Russian IT companies are on top of the IT export boom curve. But what is behind this flourishing? Which factors stimulate and restrain export of Russian IT services?

According to Vladimir Karacharovskii, consultant of IT publication CNews, there are two possible scenarios of the development of ITO - extensive and intensive - which are closely connected with Russian IT companies’ priorities. The extensive scenario is based on price competition (with other offshore outsourcing providers like Indian and Chinese ones), the intensive scenario - on the quality of services, their uniqueness, diversity and individual approach to each customer.

According to a 2007 Gartner survey of 750 IT and outsourcing executives in North America, Asia/Pacific and Europe, 41 percent of organizations that were currently outsourcing IT said they use ITO to enhance business outcomes and performance but not to reduce costs as compared to only 28 percent in 2005. It means price competition shouldn’t be the top priority.

Therefore Russian IT companies have to use other differentiators positioning themselves as providers of qualitative solutions. The advantage also lies in the fact that innovation product markets are never saturated, just vice versa - they tend to expand with each appearing innovation. This strategy requires higher employees’ commitment but will be finally rewarded with higher profits.

Government support plays a critical role in facilitating Russian IT outsourcing exports growth. The degree of government support provided in the global market differs from country to country. In Russia it results in the creation of techno parks, specialized support investment trust ICT, Federal agency on export development in IT sphere. But as Vladimir Karacharovskii claims there may be some adverse effects of the government’s intent attention if their measures are introduced and controlled by too many authorities: IT export might get overtaxed which will raise its costs.

It’s not quite clear at present which of the scenarios will be the base of Russian IT sector in the near future, but the answer will surface within the next couple of years.

Source: CNews (in Russian)

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Russian and Ukrainian IT Services

A couple of months ago Goaleurope experts were scanning ITO market of Eastern Europe and now have summarized their findings and a few facts about the industry.

We have identified over 150 companies of various sizes, vertical mix, product and services mix. One certain observation that came out of our research is that the industry is highly fragmented. These companies together employed over 50 000 people and generated $12.5B in revenue.

Goaleurope suppose there is a lack of resources in the services sector in Russia. However we find the annual supply of graduates with IT and IT-related degrees sufficient for the internal market demand. Despite being almost 80% smaller by population, Russia produces the same 200,000 graduates capable of entering the IT sector as India, according to Microsoft Research, and 20 times more scientists per capita, according to Forrester (source: Add Russia to IT Favourites, Global Services, 2007).

As mergers and acquisitions have become a global trend, Russian ITO industry is no exception:

The company Verysell (10th on our list with $470M turnover and 500 employees in 2006) has raised $50M in 2007 from Renaissance pre-IPO fund, Mint Capital, RP Explorer Fund, and Steep Rock to acquire IT services companies in preparation for an IPO.

In 2007 Systematica has announced an acquisition of the system integrator TopS BI, which in 2006 employed 475 people and generated revenue of $96M.

In 2006 EPAM Systems (US-based company with origins and development centers in Belarus) acquired Vested Development Inc. (Moscow, Russia, 400 employees) to create the largest software development company in Eastern Europe.

By acquiring VDI, EPAM expanded its geographical reach and increased scalability to better satisfy increased demand in IT outsourcing. Belarus and Russia locate EPAM’s major development centers with over 3 500 employees on board. EPAM offers a broad line of software development outsourcing services in the region.

The official figures paint IT market in bright colours: the IT services market has grown by 23% to $3B, representing 20% of the total IT market. The largest service segment was IT consulting and software development, which accounted for over 30% of the total market. The top vertical markets included financial services (21%), telecommunications (15%) and manufacturing (11%).

Noteworthy are also Russian IT export growth rates. The country's IT export-oriented outsourcing industry grew up to $1.7 billion at present, with a $5.8 billion forecast by 2009 and $10 billion by 2010, says IDC.

Compared to Russia, with population of 143 million, Ukraine (population of 47 million) has seen a considerably smaller IT services market. According to IDC in 2006 IT services market was estimated at $192M, which is over 20% more than in the previous year. Installation and maintenance of equipment and software products constituted 51%, system integration - 25% and software development - 10% of the total market.

In their latest study entitled “Outsourcing Ukraine 2007: The Capital and The Provinces" Goaleurope noted: "Ukraine has undoubtedly become the most attractive outsourcing destination in Eastern Europe. With the second largest population after Russia, a legacy of Soviet science and success-hungry entrepreneurs, the country boasts the fastest-growing software development industry”.

Source: GoalEurope

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The Russians are coming! Why IT buyers are selecting Russian suppliers like EPAM

Five years ago, India was synonymous with IT offshoring. Today, that is not the case. IT buyers can find IT developers and engineers in every corner of the world.

Two areas are seriously challenging India's supremacy: China (position No. 2) and Russia (No. 3). Today, many IT outsourcing buyers are experienced offshore customers. They are going outside of India for specific skills they can't find there, in the US, or in Western Europe. And they want to mitigate risk by sending work to more than one locale and distribute their efforts in software outsourcing. Eastern Europe, Russia, and China have been the big beneficiaries.

According to the Russian Software Development Association (RUSSOFT), Russian outsourcers have enjoyed 40 percent annual growth since 2003; 2007 is on par to equal that growth spurt. EU and US-based IT outsourcing buyers are sending work to Russia because its suppliers have distinct advantages over both China and India. They include:

The ability to handle complex tasks. Anyone who grew up in the Sputnik era knows the former Soviet Union's emphasis on math and science. Today's for-export IT companies are enjoying that vaunted legacy. That's why Russian IT suppliers specialize in embedded software, mission-critical, complex applications, system engineering, multi-platform projects, and algorithmic work. Russian workers can tackle non-standard tasks essential for troubleshooting and new software product development. An educated labor force. Half of Russian students major in science and math. That's 20 percent more than in China and at least twice the amount in India, Japan, or the US. A deep talent pool. Today 1.3 million Russians have degrees in computer science or engineering, yet only 70,000 work in IT-related jobs. The deep pool will keep wages steady in the next 24 months. Compare this to India, where wages are going up by as much as 10 percent a year. A stable workforce. Attrition rates in India routinely stay in the high 20s. The IT industry average in Russia is eight percent. A March 2007 IDC white paper entitled "Russia As Offshore Software Development Location: Should You Consider This Your Next Move?" found respondents discovered "price alone is a poor decision criterion which must be balanced by other considerations, not the least of which is the stability of the relationship, i.e. the rate of staff turnover." Labor stability means there is no need to overstaff projects to protect against high attrition. This saves money in the long run. Speed-to-market for new product development. In today's intense global marketplace, companies have to stay agile if they are going to remain competitive. They have to feed the revenue cycle by thinking up and then bringing to market new products. The Russian's ability to handle complex projects has helped its outsourcing buyers reduce time-to-market of critical new products, which has helped their bottom lines more than the initial cost savings, according to the IDC study. Cost. Russian salaries remain much lower than their counterparts in the mainstream ITO destinations, let alone in Western Europe or the US. Geographic proximity. Russian's major IT centers, the ones whose residents have the greatest scientific knowledge, are three hours or less by air to any Western European capital, making Russian suppliers the natural choice for nearshoring opportunities. The time zone difference is more convenient for both EU and US buyers than India or China. Cultural affinity. The Russian culture, business ethics, and mindset are closer to the EU/US than their Asian competitors. The benefits of working with EPAM, CEE's and Russia's ITO leader Currently there are dozens of players in the rapidly maturing ITO market. EPAM Systems, which was established in 1993, is the leader for many reasons: Size, stability and scalability. Currently, EPAM is the largest software services supplier in Central and Eastern Europe by both revenue (estimated US $100 million in 2007) and head count (3,000 plus employees). Also, the company is one of the fastest growing firms in technology world and has been recognized among the Deloitte Fast 500 for six years in a row and by Software Magazine among the Top 10 fastest-growing software product and services companies in $30 and $100M revenue range category for 2007. Efficiency and Quality. EPAM demonstrates sustained excellence in software engineering outsourcing following the latest development and technology standards. It uses a proprietary SDLC management tool designed specifically for distributed development using RUP and Agile methodologies. EPAM customers rely on its extensive outsourcing experience of 20+ million hours of successfully completed projects gained since its foundation in 1993. Software vendor partnerships. One of the unique aspects of EPAM's delivery model is its close partnerships with major software vendors including Microsoft, SAP, BEA Systems, and Hyperion which EPAM serves as clients as well. "Such relationships are a sound competitive advantage which helps us bring cutting edge expertise to our corporate clients and help them to build complex, mission-critical applications based on the new, advanced technologies," says Arkadiy Dobkin, EPAM CEO and President. "Participation in actual new product development for the top software vendors in the world is an unbeatable, unique experience that prepares our teams ahead of the market." US headquarters. EPAM is a US corporation based in New Jersey, which means it is subject to western corporate and intellectual laws; this is important because it simplifies the contracting stage and provides the highest level of comfort to US and EU clients. Multiple jurisdictions. EPAM's buyers benefit from the company's global delivery offices in the US, UK, Germany, Hungary, Russia, Belarus, and Ukraine. Multiple locations also mitigate geopolitical risk. The company routes the work to the most appropriate spot based on technology skills and vertical industry expertise. Strong onsite presence. EPAM currently has about 80 employees in the US and 200+ within the EU who provide strong interface to the company's development offices in Eastern Europe. Marquee client roster. Some of the biggest names globally outsource to EPAM. They include Reuters, London Stock Exchange, Colgate-Palmolive, British Telecom William Hill, Empire and CareFirst BlueCross BlueShield, Schlumberger, Halliburton, SAP, BEA Systems, Microsoft, and Hyperion, to name a few. Today, IT buyers are developing a more sophisticated offshoring strategy. That's why they are turning to Russia in general and EPAM in particular to help them stay competitive in our global village. Lessons from the Outsourcing Journal: India is no longer synonymous with offshoring. While other countries still have not challenged India's hegemony, buyers today are sending work to other places to search for specific skills and to mitigate geopolitical risk. They are selecting Russian suppliers for the following reasons: 1. The ability to handle complex tasks 2. An educated workforce 3. A deep talent pool 4. A stable work force 5. Speed-to-market 6. Cost 7. Geographic proximity 8. Cultural affinity Buyers chose EPAM because of its: 1. Size, stability, and scalability 2. Efficiency and quality 3. Software vendor partnerships 4. US headquarters 5. Multiple jurisdictions 6. Strong onsite presence 7. Marquee clients Source: Outsourcing-Center.com

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