Companies seek efficiency by farming out work
With the U.S. economy moving in fits and starts, companies are experiencing a seismic shift in their IT workloads.
The old challenge for IT project managerskeeping development teams motivated and advancinghas given way to a new quandary: whether retaining a full-time IT staff is a cost-efficient, productive way to execute key development projects.
Some companies are discovering its not, and many are turning to offshore, outsourced IT development services to fill the gap.
Xenergy Inc., which specializes in energy consulting and engineering for investor-owned utilities, felt the need to align its IT infrastructure more closely with its development needs.
"Like most businesses, we have peaks and valleys, and maintaining an IT staff wasnt efficient anymore," said Catherine Owens, director of software products and services.
Owens and her associates at Xenergy, in Burlington, Mass., interviewed four contract companies, opting for offshore development services from Vested Development Inc. VDI, the Xenergy officials said, offered the best prospects of substantial savings combined with quality IT talent.
"We provide our clients with global working arrangements that are at least as smooth as an on-site team," said Brian Phelps, CEO and president of VDI, also in Burlington. VDI has been serving clients such as Palm Inc., Datawatch Corp. and myriad software companies since its 1998 inception, Phelps said. Despite the slow economy, VDI has grown some 50 percent per year and recently received a second round of venture capital funding, indicating the company and the broader notion of global IT development are on good footing.
"By and large, companies that have engaged in global development for several years tell success stories," said Christine Overby, an analyst at Forrester Research Inc., in Cambridge, Mass. While multinationals such as General Electric Co. and software companies like Microsoft Corp. have been sending IT programming overseas for years, Overby said more and more companies are jumping on the bandwagon.
"Projects with clearly defined requirements, like migrating legacy systems to Internet platforms, lend themselves to modular methodologies in which clients can establish clear parameters around the work of offshore providers," Overby said.
Clients save from 30 percent to 70 percent by utilizing a qualified offshore team, whether its in Ireland or the Philippines.
However, "we didnt just go for cheap," said Xenergys Owens. "The depth of talent was impressive."
In nations such as India, Russia and China, the government has funded science and technology education for decades, and their institutions have turned out more skilled graduates than American universities, experts say.
VDI puts its programmers through a rigorous training program to counter any language barriers, and it culls techies with cutting-edge expertise in everything from middleware technologies to business-to-business platforms such as Microsoft BizTalk.
If theres any truth to the adage that time is money, then offshore contracting provides bang for the buck in more ways than one. Owens said she is pleased about the round-the-clock workday thats built into offshore contracting.
"You can definitely leverage major time differences to an advantage," she said. "By the end of my day, Ill send comments and feedback to the Russian team, which is waiting for them when they arrive first thing in the morning. While Im asleep, theyre tackling our project."
Still, despite quality work, tangible cost savings and timetable compression, some companies remain skeptical of farming out critical IT projects to international contractors.
Some IT managers are wary about a loss of control, since they will not be able to look over shoulders and catch discrepancies immediately. Xenergy keeps abreast of projects via regular progress reports and conference calls, shepherded by an on-site VDI account manager whose sole purpose is to cultivate the clients peace of mind.
"We place a liaison on-site to make sure the development manager is comfortable not having his or her team right there in the office," VDIs Phelps said.
For those considering a swim in international development waters, Xenergys Owens recommends frequent milestone deliverables to ensure projects remain on track. She also advocates tight technical specification to avoid diversions. Xenergy still maintains a modest in-house staff of IT professionals who are fully apprised of the Russian-based project as somewhat of a safety net.