dominica2day: Outsourcing Dominica

Outsourcing Dominica
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vapordan on 09 January, 2008 01:11:00
 
Outsourcing is the new craze in the Information Technology (IT) sector.  And
with good reason, there are quite literally millions of dollars up for grabs. 
And, it isn't headed our way anytime soon.  How about we change that?  What
would it take to grab a very small piece of the pie,say 5-10 million dollars US
per Year?  What would we have to do?  What would we have to give up to make this
a reality given that the benefits are obvious?  Let's walk through this at a
high level to see if it is something feasible.
Let’s first level-set by getting some terminology out of the way. Companies,
mainly those in North America, are always looking to cut costs; stock holders
demand it! IT staff salaries are expensive and keep growing yearly. These
companies need all sorts of software programs to run their business effectively.
There are two choices available, build the much needed software with an onsite
staff of software developers or give it to someone else to build for you
(outsourcing).
There is also a third choice that we won't consider: buying the software from a
third party vendor. We won't consider it because it is circular; software bought
from a third party vendor has to be built either in-house or outsourced. It's a
wicked IT world!
Building in-house, or organically developing software, can cost a fortune,
typically around $70 - $120 per hour spread among a developer team ranging from
5 – 10 individuals. For a typical 6 month project, the development cost can
easily exceed $100,000. Unfortunately, that’s only the development cost. A
typical software development effort lasts longer than six months of which 1/3 of
the cost is development. Factor in project delays and equipment purchase,
software maintenance and you have a typical budget of around 2 million dollars
for a small to medium sized application. It’s reasonable for a small to medium
sized company to run 3 – 5 of these projects per year. Large companies extend
this figure considerably.
Outsource the development to India for instance, and the cost plunges to $25
per hour for the same team. On paper at least, a company can expect a savings of
around 70% by sending just the development work elsewhere. There’s even more
savings to be had by sending more of the work (testing, quality assurance,
deployment, maintenance) offshore. But, we will stick with the simplest scenario
for now.
There’s also a great debate raging about the actual savings versus the paper
savings. I’ll conveniently side-step that issue noting that it can vary
considerably based on a number of factors. But we will work with these figures
for now because they represent the typical case, on paper at least.
So there’s a lot of money out there, just multiply that figure by the several
thousand companies outsourcing today and you get the picture. It’s the reason
why India, China and several other players are fighting tooth and nail for a
slice of this large pie. I'll argue here that we shouldn’t pursue a large
slice, just the 5 – 10 million dollar crumbs!
Have the crumbs gotten your attention? Do you want to know how to jump into the
race? I’ll outline a path forward next column.
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