Facts and Figures of Offshore Programming Development

1
Facts and Figures of Offshore Programming
Development

• James Townsend
• May 2, 2001

2
Topics

• Facts and Figures on Offshore Programming
  Development
  
• Implications for IT Managers

3
Facts and Figures India

• The city of Bangalore is known as the Silicon
  Valley of India
  
• 60 - 65 of Indias Offshore Programming business
  comes from the United States
  
• Remaining portions come from Australia, New
  Zealand, United Kingdom, Western Europe, Japan,
  and elsewhere
  
• India is experiencing a 34 growth rate

4
Facts and Figures

• Offshore Programming growth in other countries
• Ireland, 38
• Singapore, 43
• Israel, 39
• Mexico, 30
• Hungary, 53
• China, 43
• Philippines, 32
• South Korea, 40
• Taiwan, 48

5
Facts and Figures

• Offshore Programming growth in other countries,
  continued
  
• Chile, 98
• Cuba, 40

6
Facts and Figures

• Why the Offshore Programming experience?
• Wages for programmers in Russia and Eastern
  European are 1/5 of those in the U.S.
  
• Wages for programmers in India and China are even
  less
  
• Examples
• Typical U.S. programmer makes 80,000 per year
• Typical Indian or Chinese programmer makes
  15,000 to 20,000 per year

7
Facts and Figures

• Some major companies involved in Offshore
  Programming
  
• Hewlett-Packard
• IBM
• Motorola
• Unisys
• Fujitsu
• Oracle
• Novell
• Sun Microsystems
• Microsoft

8
Facts and Figures

• Hewlett-Packard example
• Established an software development center in
  Bangalore, India in 1989 with 200 programmers
  
• Has invested a further 24 million in the
  operation because of its success
  
• Presently employs 2,000 software developers

9
Facts and Figures

• Prudential Insurance example
• Created an offshore subsidiary named Prumerica
  Systems Ireland Ltd
  
• Located in Letterkenny, Ireland
• New subsidiary will cost 4 million to start and
  12 million to maintain annually
  
• Main purpose will be to develop and maintain
  software used by Prudentials Individual
  Financial Services
  
• Will begin operations this summer 2001 with 150
  employees

10
Facts and Figures

• Prudential Insurance example, continued
• Prudentials subsidiary will pay corporate taxes
  of only 10, compared with 30 or 40 in the U.S.
  
• Subsidiary may eventually develop software for
  the entire corporation

11
Facts and Figures

• Avalanche Technology example
• One of a growing number of Colorado companies
  setting up in Northern Ireland
  
• Will be investing 12 million, including a 5
  million incentive grant from Northern Irelands
  government
  
• Company presently has 50 employees, with 15 in
  Denver and 35 in Belfast
  
• Projects new staffing centers in Canada and New
  Zealand within 2 years, with a total of 2,000
  employees by 2005

12
Implications for IT Managers

• The offshore software development industry is a
  prime example of the increased globalization
  trend
  
• It is attributed to 3 factors
• Emergence of intellectual capital as the key
  wealth creating asset in an economy
  
• Transportation and communication technologies
  assisted by advances in computers
  
• Reduction in trade and investment barriers plus
  the emergence of alliances between global players

13
Implications for IT Managers

• This industry has been growing at a rate of 50
  per year
  
• These trends have resulted in the value chain
  being dispersed across different parts of the
  world in pursuit of competitive advantages
  
• Manager are now faced with a host of problems in
  dealing with this dispersion of value chain
  activities across the globe

14
Implications for IT Managers

• Management experience over the past has shown
  that ensuring success in software development is
  a difficult task
  
• Even for software developed in-house, at least
  15 of the projects are not completed at all, and
  a larger fraction is not developed on time or
  within budget
• Thus, the management of offshore programming has
  got to develop new ways to meet the challenge of
  managing different parts of one project spread
  across the globe

15
References

• Denver Information-Technology Firm to Set Up Shop
  in Northern Ireland. Denver Post. November 30,
  2000.
  
• Developing Nations. Computer Business Review
  3(4). April 1, 1995.
  
• Howard, Geoffrey. Offshore Programming in the
  Caribbean - Current Practice and Future
  Possibilities. May 6, 2000.
  
• Mukhopadhyay, Tridas Gopal, Anandasivam.
  Contracts in Offshore Software Development An
  Analytical and Empirical Investigation. Graduate
  School of Industrial Administration, Carnegie
  Mellon University. Http//cbi.gsia.cmu.edu/newweb/
  research/Abstractsofsuccessfulproposals/98-45Summa
  ry-Mukhopadhyay.html

16
References

• Prudential to Open Technology Subsidiary in
  Ireland. Bestwire. March 13, 2000.
  
• Prudential Proceeds With Technology Center in
  Ireland. Bestwire. April 13, 2000.