InformationWeek

October 27, 1997

Offshore Rescue?

Cobol programmers abroad are great for coding, but testing is a nother story

By Claire Tristram

t's big, it's ugly, and it's getting more expensive with each passing day. If you, like an estimated 40% of corporate America, are still stalling on year 2000 planning, expect to pay for your procrastination-$65 an hour, to be precise, with the rate rising by 10% per quarter between now and the end of the decade.

Unless you go offshore, that is. Experienced, skilled Cobol programmers still charge just $25 an hour in India. The going rate falls to even less in the Philippines or the Ukraine. In India alone, an estimated 350 companies are trying to grab a piece of the U.S. conversion market, and they're underbidding U.S. companies by as much as half. The largest, Tata Consultancy Services, has just built a year 2000 conversion site in Madras, India, that it estimates will process as many as 1 billion lines of code, most coming from contracts with U.S. companies.

As the year 2000 frenzy builds and domestic Cobol programmers become a too-scarce resource, hiring help offshore will be not just economically attractive, but inevitable. Still, it's never going to be simple: IT managers contemplating an offshore solution need to worry about everything from communication problems to security to what might be called the Nike Effect-political backlash from a decision to hire international labor at cheaper-than-domestic rates.

Although converting code for the year 2000 is regarded as being straightforward, even tedious, work, it's amazing how complicated it can get when the programmers are 12,000 miles away. Even with rapid improvements in electronic messaging and telecommunications, poor communication is the problem most frequently cited by IT managers involved with offshore projects.

"We didn't know how bad it was until we started testing and the program failed completely," says Sam Suaudom, IS client manager at South Carolina Electric and Gas Co. His first experience using offshore programmers came in 1993, with a vendor he declines to name. "I blame it on poor communications. We couldn't communicate easily electronically. What we got back didn't conform to our standards."

Many offshore service providers have responded to communication problems with an arsenal of successful strategies, from high-speed satellite links to frequent site visits to full-time, on-site project managers.

Any offshore evaluation should include an investigation of the potential partner's commitment to solving the communication problem. "We insist on an on-site project manager for any offshore project we take on," says Siva Velu, director of business management for CBSI, an information services provider with extensive facilities in India and significant investment in year 2000 conversion tools and facilities. "This isn't just a matter of hiring programmers and throwing the job over the wall. People who ta ke that approach will fail."

Velu readily concedes that, because CBSI requires an on-site manager, it will not be the lowest-cost provider of offshore programming services. But after a few failed projects for which the client asked for less service at a lower price, CBSI now insists on having an on-site project manager or team for every job it contracts.

Even after his earlier disastrous experience with another offshore vendor, South Carolina Electric's Suaudom was won over by CBSI's communication methodology: His company is now contracting with CBSI to have all its year 2000 work done in India.

If communication is a problem, language is not-computer language, that is. "Cobol isn't a popular programming language in the United States anymore, but it's an excellent language, and luckily the talent pool in other countries hasn't been completely swept up in the newer languages," says John Bace, research director for Gartner Group Inc. "There may even be better capability offshore than in the U.S."

But w hile the pool of talented Cobol programmers may be vast in the offshore market, the ability to reproduce systems and do reliable testing usually isn't. And it's in the testing phase that analysts predict the real capacity problems with year 2000 conversion will hit (IW, Sept. 15, " Testing For 2000 "). That's why they recommend that IS managers ensure that an offshore service provider can manage its year 2000 project from initial planning to final testing.

"Right now, managers are asking themselves, `Where can I find the people to do the Cobol programming?' " says Ellen Kitsis, VP for the IT services group of Dataquest Inc. But Kitsis says it will take more than programmers to get the job done. "The partner has to be able to take you through the whole process. In India they may have the people, but in all likelihood they will not have the infrastructure to do the kind of testing you'll need done."

Kitsis further recommends that unless IS managers can f ill in the gaps themselves, they should choose a partner that owns its test facilities, rather than accepting assurances that it plans to subcontract applications testing to another service provider. "When the crunch comes-and it certainly will-you want to be with a company that has its own capacity to manage your project, rather than one that will be competing for resources provided by someone else," she says.

But even before evaluating a potential partner's ability to solve communications issues and to take the project end to end, IT managers need to evaluate whether their year 2000 work is suitable for offshore completion at all. That evaluation may include an assessment of not only practical concerns, but also political issues.

Politics Intrude
One such issue is employment. Jim Quinlan, a consultant with Data Solutions, a provider of year 2000 conversion services in Clearwater, Fla., says he receives at least one solicitation a day from offshore software companies wanting to subcontract with him. But Quinlan wants no part of it. "When the work starts flowing more rapidly to India, it will hurt America," says Quinlan, without equivocation.

Quinlan isn't alone. Protectionist sentiments in the United States wax and wane with the economy but never completely disappear. Beyond that, an assessment of political risk associated with hiring offshore programmers needs to be part of any year 2000-project planning. In 1993, Hewlett-Packard was the target of an investigation by the TV program "60 Minutes" for hiring contract programmers in India. It became a public relations nightmare: HP ran full-page newspaper ads denying that it was filling high-skill positions with low-paid workers, and it even closed down its training program for foreign programmers.

There are plenty of less spectacular reasons why taking the work offshore may not be suitable for year 2000 projects. One factor is security. Although offshore providers have been able to satisfy some security-conscious customers with encryption and pa ssword-protected work areas, they have yet to win a U.S. federal government contract.

Perhaps the most critical consideration is the relative complexity of the work to be done, which in the case of year 2000 compliance is almost always underestimated. Offshore projects work well when requirements are frozen, but they work poorly when requirements are constantly changing. That could be bad news for companies that are trying to beat the clock by rewriting and downsizing as many applications as possible from mainframes to client-server. They may change their year 2000 requirements so often that attempting to manage the work offshore would be a nightmare. "There's a misconception that year 2000 work is always sort of mundane, when in reality it can be very complex," says Kamal Bhadada, a Tata project manager who has worked on-site to coordinate the offshore year 2000 conversion work of NASD Regulation, Nasdaq's regulatory arm, since May 1995. "It requires a lot of understanding of the company. And most systems aren't well documented."

Combine And Conquer
Some IT managers find that by combining year 2000 work with other software initiatives, they derive greater value from the offshore relationship. Brian Moore, manager of application services for Spartan Stores Inc. in Grand Rapids, Mich., was planning to downsize all of his company's business applications before Jan. 1, 2000. "I was so naive," he says now. "I thought, hey, what a wonderful opportunity! We'll throw it all away and write new code that's all year 2000-compliant! I realized quickly that we didn't have the time to provide a safety net for our business-critical systems."

Moore has since contracted with CBSI to evaluate Spartan's 11 million lines of code, and to help assess each system for either immediate downsizing or year 2000 conversion. Moore says it made sense to combine both efforts: "We have to constantly balance what we send offshore to be made year 2000-compliant, and what we replace."

Moore also says that applications that can be divided into discrete segments make the best candidates for shipping offshore. "We break each application into usable chunks that can be tested and put back with a minimum of integration," he says. "The first system to be completed was our procurement system, which consisted of 155 programs that we broke into 10 segments."

Six months ago, offshore providers were competing fiercely on cost; now the pendulum is swinging the other way. "If you're looking for a long-term partner, our door is always open," says one offshore vendor. "But if you're looking for 20 bodies for the next six months, we may think twice."

Once IS managers complete due diligence on the concept of offshore work for year 2000 projects, they need to choose a vendor fast, and they should probably forgo the normal request-for-proposal process in the interest of time, analysts say. Capacity is being tied up fast in India, Ireland, and Israel, three offshore locations with that happy combination of high skill and minimal language barriers. Other countries offer such services, but the communication problems could outweigh the savings.

"My advice: Move quickly toward a serious, mature commitment to solving your year 2000 problem," says Gartner's Bace. Only two years ago, offshore programmers charged just $12 an hour. Now it's $25 to $35 an hour. "We're seeing some really outrageous data," Bace adds. "The rates are moving up much faster than in the United States."

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