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There are several reasons why this model is particularly relevant for outsourcing relationship maturity. First, at the lowest level of the model the focus is on purely reacting, which is exactly what many companies do when they are stressed with cost over-runs and needing to make a greater level of profitable performance happen in a very short period of time. Pan iced, companies will often resource to outsourcing and actually make their entire companies run even worse than before. Paradoxically, if a company takes the perspective on outsourcing that it is so driven by the urgent need to cut costs that they don't see the impacts of overall performance possible, eventually they will continue to churn in the lower levels of the model. Conversely, those organizations who see their role as being that of creating strategic alliances with outsourcing partners, their businesses excel and thrive given the high level of collaboration achieved. It is all a matter of how organizations choose to partner with outsourcing providers, and whether they see the relationships as strategic or not.
How companies traverse this maturity model and gain a foothold on the higher-end of it is also a cautionary tale from the Globus case study as well, as they are showing how to churn at the bottom levels. What companies must do is create enough itnerproess integration links, shared outcomes results and high level of task ownership overall to drive the development of entirely new ways for the outsourcing provider and client to deliver value. It must be a core focus of how to bring value to the shared customers of the outsourcing provider and the customer that pervades all activity. Without this, the entire outsourcing relationship will fail. Trust is the catalyst that propels companies to the top of this model and effective communication strategies keep them there. In effect for a company to attain the highest level on this model they will have to integrate their outsourcing partner directly into their value chain.
Examples of these types of scenarios including Y2K, SOX compliance and others illustrate why global software development is growing so rapidly. Another aspect of this first best practice is important to note as well. While traditional pure-play software outsourcing companies exist, the ones capable of being able to literally deliver results within weeks of a project starting also have extensive Business process Management (BPM) and Business Process Re-engineering (BPR) expertise (Ren, Ngai, Cho, 2011). The combination of software development and process engineering expertise are two of the more powerful catalysts that proceeded Infosys, HCL and other Indian outsourcers into multiple billions of dollars in revenue since their inception.
A second best practice is the selective outsourcing of software projects and tasks that are relatively easily duplicated and easily managed through TQM and Six Sigma frameworks. This is often the case with start-up companies who want to put their best software engineers on the most difficult and differentiating aspects of their software applications (Oza, Hall, Austen, Grey, 2006). This approach fees up these highly paid software engineers to find greater differentiation for their companies in the coding and development of the central areas of their applications. Companies including Microsoft, Oracle, SAP and do this routinely to allow large-scale projects to move ahead more rapidly (Oza, Hall, 2005). This practice is also pervasive for the thousands of enterprise applications developed every year by large-scale enterprises including Fortune 1,000 companies who typically build their own internal applications rather than purchase them from enterprise software vendors. This approach to outsourcing smaller segments of a broader enterprise application drastically reduces the time it takes to write the entire application, assures a higher level of quality management on each specific module as they are managed to Six Sigma quality levels, and also reduces the cost of the overall development project. Enterprise software research firm and consultancy Gartner estimates that up to 19% of development costs and over 10% of development time in a large-scale enterprise software project can be saved using this approach (Khan, Niazi, Ahmad, 2011) . The reliance on this approach has had a cumulative effect of reducing project delays by at least 25% in one case and has also greatly streamlined the development cycles of more complex enterprise system platform (Khan, Niazi, Ahmad, 2011). A third best practice is the deliberate decision on the part of many enterprise software vendors and Fortune 1,000 companies both to rely more on outsourcing for any aspect of software development that did not have a direct strategic benefit to their firms. This mindset pervades many of the freight forwarding companies and those business models that must invest all available resources in the continual development of process optimization technologies including constraint-based modeling to ensure their vehicles deliver the highest levels of profit possible. Companies who exhibit this best practice of software outsourcing have very specific needs and requirements of their business model from a computational and constraint-based standpoint; the skills sets that make these aspects of their business model work are not easily replaced. Instead of marginalizing these resources, companies as diverse as FedEx, UPS and ship forwarding companies including SRI International Logistics will often outsource large blocks of component-based code to outsourcers globally to complete. Core programmers concentrate on the rules-based and constraint models that optimize profitability by delivery channel and vehicle. The reliance on outsourcing in companies with advanced technologies as a core part of their business model is pervasive.
Relying on TQM and Six Sigma frameworks to ensure a high level of software quality is what many of these companies rely on to ensure the code delivered will be usable and immediately integrate into their broader platforms. This is also true of many of the Fortune 1,000 companies who don't have the resources to invest in smaller code updates or module extensions to their core applications. Instead of bringing on programmers and coders just for these functions, outsourcing them significantly streamlines the overall system development process. These modules are also designed to a specific series of Application Programmer Interface API) protocols and requirements, further ensuring their compatibility with existing code base (DCosta, 2002). This type of scenario is often completed through a virtual team structure with members of each development group rarely if ever seeing each other in person. According to the best practices research completed, this approach is also the one that is best suited to managing module development through virtual cross-functional teams using online collaboration and communication tools. For HCL, Infosys and others, projects like this are often the greatest profit-makers for their core software outsourcing businesses (Dey, Fan, Zhang, 2010).
A fourth best practice in global software development is rapidly emerging as a result of the exponential increase in demand for entirely new platform-based applications in smartphones and tablet PCs. The growth in outsourcing for the development of Apple iOS and Google Android-based applications continues to escalate as both enterprise software vendors anxious to move into this emerging market and Fortune 1.000 companies see to automate their sales forces. Apple continues to dominate in this market due to the iPhone and iPad adoption rate and pace of new product introductions. Outsourcing the development of applications on new platforms is another best practice both enterprise software vendors and Fortune 1,000 companies are relying on to stay competitive in their core markets. The intensity and pace of competitive rivalry is acute in these markets as well. Using the Porter Five Forces Model, the Smartphone industry is analyzed in Figure 2.
Figure 2: Five Forces Model of the Smartphone Market
Sources: (Porter, 208) (Apple Investor Relations, 2012)
Advantages and Disadvantages of Global Software Development
As can be seen from the best practices in this analysis there are many advantages to outsourcing global software development, and many potential costs and disadvantages as well. The intent of this section of the study is to define what the top advantages and disadvantages are pertaining to the globalization of software development. From the best practices research completed, the main advantages include the following:
Greater access to expertise and intelligence regarding software development and advancing process re-engineering techniques. This is the most common advantage cited by those companies attaining best practices in global software development through outsourcing. This strategy is also critically important for creating more time and focus on the core business models both of enterprise software companies and many of the Fortune 1,000 companies who routinely rely on software outsourcing partners for specific, highly complex projects (DCosta, 2002). The overriding motivation in this scenario is to gain rapid access to deep expertise in a given area of software development and quickly turn around a project that is strategically important to the software vendor or larger enterprise. This advantage is also often supported by thoroughly defined quality and compliance metrics for the project plan, including TQM and Six Sigma metrics as well (Dey, Fan, Zhang, 2010).…[continue]
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