Concurrent, and to a degree consequential, to the world's political troubles are of course the world's current economic problems. Cost is often touted as the principal reason for outsourcing or contracting out offshore and META Group claims that economic uncertainty is actually increasing interest in offshore outsourcing. Nobody from META Group (worldwide) was available to comment on this assertion. Nor was the organisation able to supply any research or other information to back it up. Be that as it may, any cost advantages for Australian CIOs are likely to be significantly less than for their US or European counterparts, given the current worth of the Australian dollar. Indeed, some purport that the combination of its low dollar and relative political stability potentially make Australia a country to outsource to.
Jester, though, maintains that cost should not be the reason for outsourcing anything. Rather, access to skills and, in particular, quality, should be the key drivers. "[Outsourcing] may be cheaper but isn't always," says Jester. "The leading Indian service providers are very high quality companies and that is their strongest selling point. They are also very skilled in particular vertical and even micro-vertical markets like stockbroking where they really understand the applications and business processes as well as possess the technological talent."
In fact, according to Gartner, the long-term trends driving the offshore outsourcing industry remain. Infosys and other Indian vendors have reported signing significant deals since the terrorist attacks of September 11. The perception of risk by Western enterprises - however misplaced - will likely hurt the earnings of India's software industry through the first half of 2002 but probably not in the long term, Gartner says.
And while offshore outsourcing as a concept has been slow to take off in Australia, Jester believes this is an issue of both supply and demand. On the supply side, he says that Indian companies haven't needed to focus on Australia. The US and European markets have proved very lucrative for them and consequently they have tended to ignore the rest of the world, where their relative cost advantage is also weaker.
On the demand side, Jester thinks there is also reluctance on the part of Australians to embrace the concept and a somewhat parochial attitude that everything has to be done locally. "Despite us being a virtual society these days, people are not yet totally comfortable with things being done for them elsewhere," Jester says. However, he believes this is changing, albeit slowly, and anticipates more multi-country collaboration on IT projects in the future.
Infosys, Satyam and Wipro all have a presence and local clients in Australia and Orange's chief information officer Michael Young, for one, says that in the various CIO roles he has held in Australia he has been approached, quite aggressively in some instances, by Indian companies. On each occasion he knocked them back as he felt the risk of offshore development outweighed the potential benefits. This may not always be the case, he concedes, but the timing of the "cold calling" would have to be right.
Hemant Kogekar, on the other hand, used offshore companies for development both when he was head of technology at Citibank and IT director at Franklins. His experience with Indian software companies has been very positive and says his reasons for choosing them over local organisations is that they use a better software quality process and discipline.
"This in turn gives better results at lower cost," Kogekar says. "I also found that we could get better documentation and timely delivery of software. They [the providers] could ramp up to meet tight deadlines better than local organisations. Australian companies try to recruit good people, but good people leave and projects consequently falter. That's why engaging companies with good quality processes, rather than necessarily better quality people, pays off."
While at Citibank, Kogekar says he used a number of offshore companies in a limited way. However, their people predominantly worked onshore at Citibank's premises, rather than actually doing the development offshore. At Franklins, Kogekar engaged offshore providers to assist with Y2K, GST and a supply chain re-engineering project. In the case of Y2K, some of the provider's development staff also worked onsite at Franklins. For GST, though, the provider had a senior project manager onshore, but the majority of the development and coding took place in India.
The supply chain project was perhaps more typical of what takes place onshore/offshore when engaging an offshore developer. A project manager from Zensar, the provider, came into Franklins to spec the company's requirements. The high level design also took place locally. The project then essentially shifted to India where Zensar did the detailed design. This was sent back to Franklins for review, after which Franklins' senior project manager and others visited India for a week to fine tune the design with Zensar, change some requirements and iron out any problems. Franklins then gave the go ahead for coding to commence. After initial testing, the system came back to Franklins for acceptance testing and implementation. According to Kogekar, the project was very successful.
Zensar also took on the maintenance and support of Franklins' legacy systems onshore, and Kogekar was planning to move this offshore when Franklins' fortunes changed and he departed the company.
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