This article has been published in our December 2007 Newsletter


After 15 years, outsourcing and off-shoring are alive and doing well and living, well, offshore. But their future – for somewhat surprising reasons – is not nearly as predictable as one might imagine. These were just two of the revelations an FACCSF panel on outsourcing presented Nov. 29 by the FACCSF’s High Tech Committee at Cooley Godward.

Moderator Remi Vespa of Venus Software started by asking the panel to distinguish between the outsourcing and off-shoring. The panel quickly agreed that outsourcing is based on a contractual agreement between two companies – one in an economically “advanced” country such as the U.S. or France and the other in any number of other countries such as India or Estonia where labor costs are lower.
Off-shoring, on the other hand, is driven by finding the most competent engineers to join a development team. If a U.S., for example, company wants to staff a 20-person development team entirely at home, said Marc Verstaen of Oracle, “it will wind up with one or two good engineers, 10 who are so-so and the rest you will regret hiring for the rest of your life.”

Phillippe Ombrédanne of NexB, an open-source tools developer, added that his development teams are spread over several countries – including France, Brazil, Estonia and Germany – and that team members were compensated at rates roughly equal to those in the U.S. The panel agreed that saving money is not the primary motivation in off-shoring. On the other hand, cost is the motivating factor for outsourcing. It is big in economic terms: Infosys, one of the largest Indian outsourcing companies, earned $1 billion in profit in a recent quarter, mostly by staffing call centers and the like for large global corporations

But Bernard Boltz of Capgemini, noted that changes are afoot. He noted that that more medium and small companies (SMBs) are outsourcing. Contracts between global corporations and outsource companies are based on service level agreements, rules, and benchmarks. In a call center, for example, the time to answer the phone is a classic benchmark. SMBs looking to staff a product development team should know that this model is not going to work for their projects. Something tailored more to the results they wish to achieve is necessary.

In product development projects, it is imperative that the “home office” remain in close contact with the outsourced engineering personnel, according to Sam Ghods of Boxnet. “you have to talk to them a lot,” he said, “and give them every possible opportunity to ask questions. IM (instant messaging) has to be on all of the time. If one day goes by without hearing from them something is wrong.”

The panel also agreed that the future of outsourcing/offshoring is not clear, particularly for engineering talent. The supply of talented people is limited, which means companies such as those represented on the panel must continuously be looking for new nations to outsource to.

by Jack Shandle