Software group issues guidelines on offshore work.

Offshore outsourcing is a hot topic in an election year, because from a political approach, it is about whether or not American jobs are being sent overseas--and hurting the nation's economy and Americans' livelihoods as a result.

The membership of the Southern California Software Council, a trade organization of the area's software creators, knows it intimately well. Many Southern California firms have outsourced programming work to workers on other continents--including the popular destination Bangalore, India, and St. Petersburg, Russia.

The group met in Woodland Hills several months ago to discuss the implications of offshore outsourcing and to share experiences. Out of that, SCSC executives decided to produce a white paper that would unity the various positions and present the group's official stance on the issue.

"We are the only voice for the software industry in southern California, someone had to represent (software firms' views)," said Hoshi Printer, president of the SCSC. "Things could be done politically that could be detrimental to the software industry."

The recently released 27-page paper, formally called "Offshore Outsourcing in Today's Global Economy: Defining and Executing an Effective Strategy," was primarily based on survey responses in addition to other research. It found most software firms were in favor of offshore outsourcing. This had been the general attitude of most of them, no secret. The paper, however, goes a step further to present scenarios--and advocate, its other purpose--about when offshoring is appropriate and when it is not.

"The economics are widely in favor of offshoring," Printer said. "I don't want to minimize the effect on one person--but if you take the economy as a whole, the overall conclusion is that we in the software industry will continue to offshore."

Helping growth

The two major reasons: cost-effectiveness and the ability to help a company grow. Printer, a 40-year software business veteran, said the two reasons are hinged on each other "because if you're not cost-effective, you can't grow."

Printer also pointed out some rough edges in offshore outsourcing. For one, he said, continuous and clear communication is crucial due to "immense cultural issues" that arise when American companies offshore to places such as India or Russia.

In addition, "Offshoring doesn't work if it's a highly complex project that can not be broken into discrete parts," Printer said.

Based on the results, he also advised about the speed of completion.

"Don't go offshore if you're in a time crunch," Printer said."

Among the results of the Software Council's survey, published in the position paper:

* 92 percent of companies reported they have outsourced internationally.

* 55 percent outsourced to India: 20 percent to Russia; 12 percent to China; 10 percent to Ireland; 9 percent to Croatia; 4 percent to Canada; and 3 percent to Brazil.

* 63 percent said they outsourced for software development.

* 33 percent found offshore outsourcing met their expectations, while 25 percent said it didn't.

* 79 percent said cost savings was the reason; 20 percent reported it was for offloading routine work

* 50 percent said communication and language barriers were a problem: 35 percent said the learning curve was a problem

* 53 percent said they planned to outsource offshore in the future, while 18 percent said they would not. Another 15 percent said "possibly" and 7 percent said "very selectively."

When it doesn't work

The paper also provides guidelines for when offshore outsourcing is appropriate when it is not.

It advises firms to avoid offshoring if they are start-ups or organizations with new product development projects, have complex projects requiring multiple software teams or projects involving a company's core competency; projects involving a company's core intellectual property and "crash" projects created to help bring another project back to schedule, and attempt to gain immediate cost savings.

The situations when offshore outsourcing is appropriate are maintenance, support and extensions to legacy code, "tasks that are generally considered less glamorous to U.S. developers," the paper states. Also, the paper takes the position that ancillary projects, or "those that are not 'mission critical" are good candidates for offshore outsourcing.

Deepak Sharma, president of Santa Clarita-based Software Development Center, Inc., a company that matches IT firms looking to offshore outsource with programmers in India, was among SCSC members who helped work on the paper.

He said beyond cost savings, offshore outsourcing is a positive move for "appropriate resource allocation, agility in getting projects done and competitive advantage in dealing with the marketplace."

Further, Sharma said: "Today more Americans can afford to start their own IT companies since they can use offshore outsourcing."

Sharma personally believes offshore outsourcing is here to stay.

"It is a genie which has come out of the bottle," he said.

The Right ... and Wrong Time

Some SCSC guidelines for outsourcing:

When Not to Offshore:

* Start-ups or organizations with new product development projects

* Complex projects involving multiple teams

* Projects involving a company's core competency

* Projects involving a company's core intellectual property (IP)

* A "crash" project created to help bring another project back on schedule

* An attempt to gain immediate cost savings

When to Offshore:

* Maintenance and support functions

* Ancillary projects

Source Southern California Software Council