October 18, 1999

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Outside Development Partners
Careful planning and support from upper management are key to the success of outsourcing

By Andrew Binstock

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sidebar: Unusual Partnership Benefits Medical Center, Outsourcer

pplication development frequently becomes a candidate for outsourcing for one key reason: It doesn't leverage internal resources well, particularly when the task is too mundane or demands too many new skills. A classic example is year 2000 program remediation.

Clearly, in-house developers who are well-versed in the business rules of their own industry and have expertise in specific technologies are poorly utilized when assigned to combing through legacy code looking for six-digit dates to fix.

Likewise, new technologies can prove a poor fit for in-house developers. For example, the training curve for Web development (HTML/Extensible Markup Language, Common Gateway Interface, Java, Perl, and so forth) might be prohibitively long for rank-and-file Cobol developers to get a Web site up and running quickly. If a company needs to establish a Web presence in a hurry, it can't waste time by investing in training and then letting the beginners design its Web site. Such sites would benefit from outsourcing to Web design experts, while in-house programmers supply the business logic, says Norton Greenfeld, principal analyst at Implements Inc., a market-analysis firm.

"This is a common way of doing things," says Eric Ashman, managing partner for E-commerce at USWeb/ CKS, a company that specializes in bringing companies onto the Web.

In-house developers coming up to speed on Web development can work with consultants or outsourcing companies to hone their skills. "The smart IT shops recognize that tight integration between outsourcing firms and in-house personnel benefits both parties enormously," says Craig Goren, the founder of Clarity Consulting Inc., which implements Windows IT systems.

Another compelling reason to outsource programming is to handle the fallout from mergers and acquisitions. Who will reprogram the legacy systems in the new company? This question is especially pressing if the data center where the legacy systems are located has been moved to a new site.

Working with a compatible outsourcing partner can also be economically attractive, says Phyllis Recca, executive VP of professional services at Compuware Corp., a company that provides outsourced application development. "The savings in this model can reach up to 30%," she says. "This is mostly attributable to the greater efficiency of the outsourcing partner and to the redeployment of in-house developers on high-value work."

When HolonTech Corp., a San Jose, Calif., vendor of load-balancing hardware, was founded in 1996, the 65-employee company decided to outsource as much of its software development as possible to its offshore outsourcing partner, Ceeyes Technology in Hyderabad, India, where programming costs are as much as 25% lower. "With the proper partner and the proper methodologies, the quality of the deliverables is as good as, and often better than, what you would expect here," says HolonTech executive VP Sri Chaganty.

HolonTech has an elaborate methodology in place--one that's not uncommon for companies with overseas outsourcing strategies: Its design specifications and programming requirements are spelled out in great detail, and both parties agree to a precise software development schedule. The project managers in both countries monitor the progress of the scheduled work. Meanwhile, an in-house staff reviews developed software for compliance with specifications. The result is that both parties are clear on their roles and what is expected of them.

continued...page 2, 3, 4

Illustration by Matt Foster
Photo by Gary Parker

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