October 18, 1999

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Outside Development Partners
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"Detailed specifications and schedules followed by constant communication is the key to success," Chaganty says. But this approach requires an extensive investment by the user in time and energy. "This is often the unseen cost of outsourcing application development--the constant management of the project by the client," says Peter Burris, a senior analyst at Meta Group, a research and consulting firm.

Small companies aren't the only ones working with programmers overseas. Cisco Systems outsources software development for its older switches and routers to Intelicent Inc. facilities in Chennai, India; NCR Corp. also moved much of its kernel development for NCR Unix to Chennai. "Countries with lots of highly trained, inexpensive engineers are especially attractive for this kind of work; Russia, Ireland, and India are among the leaders," Greenfeld says.

Despite the advantages, many IT developers and managers resist outsourcing application development. Some in-house developers prefer to use the latest technology on new projects rather than maintain existing ones. Managers occasionally view outsourcing as a threat--one that can diminish the scope of their responsibility and perhaps even threaten their position. As a result, the outsourcing decision is generally made at the CIO level or above.

It's particularly important that the IT staff trust the partner to deliver the goods. If a consulting firm has already worked with the company and is familiar with its processes, that firm will have an enormous advantage over other candidates seeking the outsourcing assignment. However, in the absence of consultants of this kind, a new partner must be found.

In general, an outsourcing partner should have experience in the industry it will be addressing. The partner also should have a demonstrated ability to deliver quality goods on time. This should consist of more than warm references from other customers. According to Sax Krishna, Intelicent's director of sales, Cisco CEO John Chambers visited the outsourcing site in Chennai before their contract was finalized.

The partner should also demonstrate certified compliance with either ISO 9001 or level 2 or 3 of the Capability Maturity Model of Carnegie Mellon University's Software Engineering Institute. ISO 9001 and Capability Maturity Model are specifications that ensure quality by setting standards for software development. Representatives from standards organizations visit the sites to certify that they satisfy the requirements. Of the two specifications, the Capability Maturity Model is more common in the United States; level 2 of the model is fairly basic, so level 3 would be much more desirable.

"Either way, you should bear in mind that the certification applies only to a specific site," says Mark Paulk, a Software Engineering Institute senior technical staff member, so verify that the site you're working with is the one certified.

Once a potential partner is found, companies must assess compatibility with current staff needs. This frequently involves working on a small pilot project together. All steps in the partner's normal development process should be undertaken in the pilot, including analysis, composition of a statement of work, agreement on schedule, coding standards, and metrics for tracking performance. Once the pilot is done, the company can determine the quality of the deliverable and the compatibility of the staffs. However, "the pilot should not be used to assess cost benefits," Krishna says. "The cost of planning and developing the statement of work normally would be distributed over the entire project. A pilot is too small to recapture these costs."

The biggest worry among companies contemplating outsourcing development is that the other party will not return a quality product. This concern should be paramount when designing the contract. Be specific about deliverables, schedules, and quality milestones.

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Illustration by Matt Foster

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