Synching or sinking: global software outsourcing relationships - IEEE Software

0 7 4 0 7 4 5 9 / 0 1 / $ 1 0 . 0 0 © 2 0 0 1 I E E E Advice for potential GSO clients recommends starting small, at home, and with programmers.3 Many client organizations have followed this advice, putting a toe into the GSO waters through small-scale body shopping—for example, having Indian subcontractor staff come over to the client site to complete a minor, noncritical piece of coding or conversion work. Although this minimizes risk, it also minimizes benefits. In the US, onsite costs of India-related GSO undercut those for hiring US staff by only some 10 to 20 percent, but sending development work offshore to India typically undercuts onsite costs by some 50 percent. Large projects offer a greater potential for savings than small ones. Likewise, the cost savings for hiring Indian analysts or project managers are typically some $1,000 to $2,000 per month greater than those for hiring programmers.4 Clients are therefore keen to move up the value chain to increase the cost savings of outsourcing while gaining access to local labor and markets. However, moving up the value chain in this way brings additional costs and risks. GSO of any type imposes communication and coordination costs that local outsourcing does not have.5 It also imposes risks of total or partial project failure. Clients and developers are therefore seeking routes through the cost/risk minefield to the benefits that higher-value GSO promises. The research reported here investigates these routes. We selected India as the location for the developer half of the relationships to be studied, and North America, Europe, and East Asia as the client half. In the discussion that follows, we use fictitious names to preserve anonymity.