Tips and Advice

In today's rapidly developing market companies generally have less than six months to bring an idea to market before the competition begins to heat up. This window provides for limited time to recover from mistakes. Additionally, cash burn rate is important in any economic environment but especially so today. To meet these challenges companies quite often need to turn to an outsourcing partner. In selecting this partner there are four basic principles that the management needs to aware of.
The right partner will:

  • Accelerate your time to market for your competitive edge
  • Provide a quality development team that ensures a usable and technically sound product
  • Structure the development to assure you ownership of your product and IP
  • Minimize cash burn with cost-conscious pricing

The first principle is the need to recognize that accelerating your time to market involves numerous aspects such as development philosophy, team productivity, company attrition, time zone differences and the stability of a country in an overseas engagement. The partners approach to development needs to be set up to address user needs not just finding a way to apply their technology. Are the team members empowered to offer their own opinions and ideas or are they expected to just follow the task, even when it is wrong? Is the team experienced with development models that allow for flexibility such as the spiral development process? Will you be able to easily communicate with the development team in both spoken and written communications or will there be potential language issues? How stable is the partner's work force? 50% attrition will kill the project schedule. What is the time zone difference between your company and the partner's lead development effort? Will you be able to use a "follow the sun" development approach? It is critical that you select a partner that provides a positive answer to each of these questions. Any relationship with partner that cannot fulfill each of these needs will surely result in an unsatisfactory product.

The next principle focuses on being aware that product quality requires a combination of knowledge, skills, experience, specification and processes. When considering outsourcing to a firm with overseas development the country needs to have a solid base of technical universities and education. You need to be sure that the skills and experience of the team will match with your product needs. A team that is only experienced in IT projects does not have the qualifications needed to develop a product. Additionally, a well qualified team needs to have the right processes in place that will allow them to apply their capabilities towards a successful project. However you need to make sure that the processes match the needs of your project. Overly cumbersome processes can slow the effort down and stifle innovation and flexibility. While insufficient process will lead to poor quality. Ensuring proper specifications are established is also very important and is a team effort with your partner. Obviously, you need to know what the requirements for the product are, but your partner needs to be experienced in working with the customer to fine tune these specifications to ensure a quality project. Solid team capabilities coupled with sound processes and specifications will lead to quality being built into the product. However, you will still need to make sure that both you and your partner have quality checks in place.

The third principle that a company needs to play close attention to in selecting a partner is product ownership and IP risk. Legal language in the agreement addressing ownership and IP is obvious, but that is not always enough when dealing with foreign countries. There are many countries where software development is not protected by the laws and/or enforcement sufficiently to allow you to rely on the agreement. You need to look closely at the country where your partner will complete the development. Additionally, the reliability and security of the partner's development locations are critical in protecting your innovations.

The final principle is cost controls. As we stated earlier burn rate is important to all companies. One of the primary reasons to outsource development to an overseas operation is that the labor costs will be less than in the U.S. However, to achieve the maximum benefit of this there are some things you need to consider. With any new product development you need to make sure the contract supports the flexibility that will be needed as market and technical requirements are refined during the development process. However, you also need to makes sure costs controls in place that will prevent surprises. Some things to consider are whether an hourly or monthly rate based charge structure will be appropriate or are your specification solid enough to support a fixed bid. Another cost consideration in outsourcing overseas is the fluctuation in currency exchange rates. Who will have the ownership of this risk, you or your partner? Even more important is how stable the country's currency and inflation is.

In summary there are many benefits for companies to consider outsourcing software products to a partner in order to take advantage of the benefits of offshore development. Additionally, while there are some potential risks in this decision, conducting due diligence to address the four principles we have listed will reduce, if not eliminate, these risks. At Neubloc we are confident that any customer reviewing these four principles will find that we have established a company that solidly addresses each one. We have established our development centers in countries where:

  • We can accelerate time to market
  • There is a stable political and economic structure
  • Where there is a reliable source of highly qualified engineers
  • Where IP is protected
  • Where we can help the customer save cash.