Staffing Alternatives In Distributed Software Development: Part 1 Of 2

By Author: Robert Duff
Total Articles: 4
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This article is first in a two part series describing a research study conducted on midwest IT executives and their attitutes on offshore outsourcing options. This article will introduce the study and summarize the first 4 of its 8 key findings. The second article in this series will present the final 4 of its 8 key findings and provide some closing thoughts.

Introduction

Senior IT executives face mounting pressure to produce quality software deliverables despite an ever increasing backlog of projects and mandates to maintain or reduce headcount and staffing expense. In this do more with less environment, outsourcing software development work to local or offshore vendors has emerged as a popular alternative to hiring employees for a number of reasons. Key among them is the cost savings and flexibility associated with the use of nonpermanent personnel. But softwae development outsourcing is not without its drawbacks, and IT managers' attitudes regarding the importance of these factors helps shape their future staffing decisions.

Over the last decade or so, outsourcing software development to places like ...
... India, China and Eastern Europe has gained popularity among IT executives principally because these regions offer a large population of highly qualified personnel, with hourly rates averaging about one-third the rates for U.S. contractors or the fully-loaded cost of full-time employees.

In their ongoing quest to attain aggressive departmental and corporate goals, software development leaders are carefully assessing the full breadth of staffing alternatives, which includes employees, U.S.-based outsourcing vendors and offshore resources. Ultimately, they seek the optimal balance of resources that produces a high volume of work, on-schedule, with high quality and within budgetary constraints.

Research areas studied included:

- Whether the staffing mix among different resource alternatives varies based on organizational size;
- Perceptions about the quality of work produced by employees versus outsourced personnel;
- Key factors influencing decisions about the utilization of each staffing alternative;
- Attitudes and trends in the utilization of offshore software development resources; and
- Trends in the relative popularity of the leading offshoring countries and regions.

Methodology

The target audience for this research included individuals who are responsible for making software development staffing decisions at technology companies where software development was integral to the firms' core mission. Interviewees had titles including CEO, president, CTO, director or vice-president of IT, and director or vice-president of software development. Respondents' headquarters were located in Minneapolis/St. Paul metropolitan area of Minnesota. Out of a pool of 250 randomly selected firms, telephone interviews were conducted with 49 individuals representing IT organizations with up to 500 full-time equivalents (FTEs). Among respondents, the average number of FTEs engaged in software development activities was forty (40).

Interviews were conducted in September 2007. The sponsor of this research was not identified during the interviews.

Key Findings

Finding #1 - Firms with larger software development organizations are somewhat more reliant on software development outsourcing than those with smaller software teams. The size of a company's software development operations has some bearing on the extent to which they utilize outsourced resources. Smaller organizations, on average, utilize employees for a larger share of their development work than firms with larger development needs. Companies with l00 or more software development full-time employees (FTEs) consist of 23% contract personnel, while smaller firms use contractors for 13% of their software development resource needs.

Finding #2 - Organizations are using more offshore personnel than onshore contractors for outsourcing
. Regardless of the size of an organization's software development team, firms use more offshore resources than U.S.-based contract personnel. On average, 53% of outsourced software development resources are located offshore, while 47% are based in the U.S.

Finding #3 - Employees are perceived to produce the highest-quality deliverables. Respondents were asked to rate their perception of the quality of deliverables produced by employees, U.S. contractor resources, and offshore resources over the previous 24-month period Employees were perceived to produce the highest quality work, followed by U.S. contractors, then offshore outsourced resources, indicating the perception of a very direct inverse relationship between work quality and the personnel's distance from corporate headquarters. The implication is that software development managers feel a strong loss of control over remote workers, and they believe that work quality suffers as a result.

Finding #4 - Distributed software development environments can be highly successful. Managers who have utilized distributed software development resources (which could include employees and/or contractors working from more than one location in the U.S. or offshore) during the most recent 24-month period were asked to rate their perception of the success of that experience, using a 1-5 scale with 1 being very low and 5 being very high. Sixty-five percent of managers indicated they had worked in this environment and, with an average rating of 3.6, respondents classified these projects as highly successful. Among the 32 managers responding, only four (13%) characterized their level of success as low or very low, while 17 (53%) rated their efforts as highly successful or very highly successful.
Robert Duff is the VP of Service Delivery at Coherent Solutions. Coherent Solutions provides custom software development for organziations that deliver commercial grade software. Since 1995, the company has helped over 100 software companies leverage the benefits of global software development teams.