David Scott Lewis on China VS India

India doesn’t have anything to worry about for at least five years, maybe longer. No match in BPO: India and China cater to different markets. In ITO, the gap is widening, NOT narrowing. Indian firms may lose a bit in software testing, but not in much else. There are some exceptional players like Augmentum (which is an American firm with most of its development in China) and Freeborders (another American firm with most of its development in China), but just a handful — not enough to even show up on the radar of the larger Indian solution providers.

But there is one area where China will reign supreme: Engineering services outsourcing. Even using NASSCOM’s criteria, China beats India in 9 out of 10 metrics. Not bad for China. And this is where China will focus a lot of effort.

I’ll say this publicly, but NASSCOM’s wonderful report on the ESO market has been translated into Chinese and has been read by many people within three Ministries in China. (Darn, those copyright issues!! Anyway, I didn’t do the translation, so don’t look at me. Alas, maybe I’m just blowing some hot air …) Trust me, China will win the ESO battle.

BPO: Like comparing apples to oranges. If you speak decent English in China, you can get a job as the head of international marketing; you won’t take a job in a call center service U.S. clients. Forms and such: Maybe, but not likely.

ITO: The gap is widening. China picks up work in testing (mostly manual testing). A handful of companies show real promise, but that’s it. Mostly a dead issue and it doesn’t get anywhere near the level of government support that many may think.

ESO: China wins!! And thanks NASSCOM for a terrific report. Nice to know that India is helping shape China’s “destroy India in technology” policy.

via Global Services Blog

Quick Look At ITO Salaries in India

• The engineering function saw an average salary increase for 2006 of 16%.
  
  
• For tech support and operations support functions, the increase was 14%.
  
  
• The average turnover rate was 13%.
  
  
• Raises typically happen in March and April.
  
  
• Signing bonuses are gaining popularity, to offset options or a bonus a given candidate was expecting to receive before he or she jumped ship.

via Sourcingmag Blogosphere

Quick Look At Outsourcing Locations

• Romania is a growing source of specialist software development.

• China does not yet dominate voice communication, but already offers excellent technical skills and back-office functions.

• Russia and eastern Europe provide software development with pockets of IT and multi-language skills.

• Mexico is making important inroads into the call centre market. Indian services supplier TCS announced earlier this month it plans to move 5,000 jobs to Mexico in response to wage inflation at home.

• South America is entering the fray as large firms open IT development centres in Uruguay and Chile.

• Ghana and Uganda are setting themselves up as technology centres. South Africa is the continent’s leading IT services workforce market.

via Computing

India ITO/BPO sector growth declines

The new study from Associated Chambers of Commerce and Industry reveals the annual growth of India's IT and BPO industries may fall to 30 percent for the next four years, after expanding by 35 percent in the past two years.

Over the years most of the Indian IT services and BPO players have been moving up the value chain and in most cases are integral to the business of the client,' chamber president Venugopal N. Dhoot said.


Considering the positive outlook toward Indian IT/BPO service industry, private equity and venture capital investors are looking at investing in these companies to be part of India growth story,' he added.

The study says investors were particularly looking at picking up stakes in niche companies like Flextronics that specialises in telecom, Geometric Software that has major presence in engineering services and Applabs in software testing.

'Across all the sectors, venture capital and private equity firms obtained exit routes for their investments in 37 Indian companies during 2006, including 19 via initial public offerings,' says the study.

'For 2005, this figure stood at 41, including 17 via initial public offerings.'


via Indo-Asian News Service

Interfax: China's ITO industry on offshore path

China's software outsourcing industry is beginning to have an international presence, though it is still quite small, a senior official from the Chinasoft Resource Corp. said at a software and information service industry forum in Beijing yesterday, Interfax reports.

"China currently accounts for 2 percent of the world's software outsourcing market share," Fanny Chan, CEO of Chinasoft, said. An official from the Ministry of Information Industry said that the market value of China's software outsourcing industry reached $1.43
billion last year, representing an increase of 55.4 percent year-on-year.

However, Chan pointed out that despite this rapid growth, the total market value of the top 10 software outsourcing companies account for only 30 percent of the industry, meaning that China lacks a solid brand name that it can market to the world.

"What we need to do is establish our own software outsourcing brand, and that requires support from the government, from enterprises and from the industry as a whole," Chan said.

She added that a further problem is that competition within the industry in China is highly inefficient, often leading to bad quality service and high costs.

Extending Lean Thinking

More on the topic of using Lean techniques. AMR Research analyzes interviews with more than 20 technology providers of lean planning and execution applications and more than 45 companies currently practicing lean manufacturing techniques.

Despite strong advances in features and capabilities, supporting lean manufacturing through enterprise-class software is not growing at the pace one would expect. Although lean concepts have made their way into the mindset of many corporations, it has remained relatively plant centric, even line centric.

Direct Link to Lean Planning and Execution Software: Extending Lean Thinking Across the Enterprise

Applying Lean Techniques to Application Development

The recent paper from McKinsey explains how lean techniques, originally developed to reduce waste in manufacturing, can be applied to application development where many processes generate waste that effect productivity. Essentially the idea behind Lean is to identify and measure the main sources of waste, than find opportunities to reduce it. Why Lean?

While traditional methods of controlling productivity like Capability Maturity Model address some of the drivers of waste, other important sources remain out of control. Lean principles enable to take control over quite unstable offshore ADM environment.

Different types of waste defined in Lean manufacturing can be easily identified in application development and maintenance.

Overproduction/overprocessing
Fulfillment of requests that won't be used within next 3 months
Unnecessary Functionality

Rework
Changes in business requirements during development
Application Bugs

Wasted Motion
Requests not tied to business priorities
Ineffective prioritization of maintenance requests
Unplanned task switching

Wasted Intellect
Limited cross-training of developers across different apps
Poor usage of employees and offshoring resources

Wasted Time
Key resources not available
Developers idling because of incomplete information on the request

Inventory Waste
Maintenance backlogs
Many partially completed requests


The principles of reducing waste found in Lean manufacturing can as well be applied to ADM process. Now, it is worth noting that today manufacturing practices like Six Sigma and Lean are applied more and more widely to boost performance of IT services companies

Like any major transformation effort, Lean requires significant changes across organization: in it's technical, behavioral and management systems. But when done right it well worth it.

McKinsey paper further details how organizations involved in ADM can take advantage of lean.
I totally agree the paper is the required reading for both ITO providers and buyers!

Direct link to "Applying Lean to Application Development and Maintenance" (free registration required)

WEEKLY INSIDER | Six Sigma & IT Outsourcing

While expectations management is a very healthy "background" activity that ensures everyones' assumptions are controlled, the great way to manage requirements and control overall software product quality is to apply Six Sigma. In the first part of the article i will focus on defining Six Sigma and how each of the parties that participate in software outsourcing process can take advantage of it.

This article will answer the following questions:

• What is Six Sigma?
• What are the main Six Sigma methodologies?
• How Six Sigma can be applied in IT Outsourcing?

Defining Six Sigma

Six Sigma was originally introduced in 1986 by Motorola senior engineer and scientist, Bill Smith. He defined it as a metric for measuring defects and improving quality in manufacturing process. However the roots can be traced all the way back to late 17-th century and German mathematician and scientist Frederick Gauss who introduced the concept of the normal curve.

The key concepts of Six Sigma revolve around reducing variation in any critical-to-quality process and aligning the process mean with customer specified target. The result of applying Six Sigma is achieving near zero defects per million opportunities.The foundation of Six Sigma comprised of the following elements:

• Critical to Quality (CTQ): Attributes most important to the customer

• Defect: Any event that does not meet CTQ specifications

• Defect Opportunity: Any event that provides z chance of not meeting customer requirements and can be measured
  

• Transfer Function Y=f(X1,X2,X3,Xn) : Y is output measure such as process cycle time or customer satisfaction, while X's are any processes involved in producing the output. For example, if your client dials your customer support to ask a question, the ability to have the question answered (Y) is a function (f) of the wait time, the number of people answering the phones, the time it takes to talk with the representative, the representative's knowledge, etc.

All in all, Six Sigma is about defining, measuring and improving your X's after your Y metrics have been identified

From Manufacturing to IT Services

Originally deployed in manufacturing industries, Six Sigma was first perceived as ineffective in the IT services sector due to the complexity and people-intensiveness of software development process. However it didn’t take a long time until some pioneered Six Sigma implementation in non-manufacturing set-ups. Over time Six Sigma has really involved from a quality system like TQM or ISO to more of a way of doing business.

Six Sigma in software development life cycle (SDLC) helps making the software development process more predictable and guarantees that all customer requirements are met. Organizations can use Six Sigma to make better decisions about how, when and how much to deploy offshore.

Six Sigma Strategies

There are two commonly used Six Sigma strategies: DMAIC (Define, Measure, Analyze, Improve, Control) for improving existing products and processes and DMADV (Define, Measure, Analyze, Design, Verify) for designing new products or services. Here we will take a look at Six Sigma strategies from buyer and provider perspective.

Because DMAIC is ideal for controlling the quality of recurring processes, software outsourcing services provider can apply it to 4 phases of software development life cycle (SDLC) that are present in each single software development project: Analysis, Design, Coding and Testing. Each phase include repeatable processes such as bug fixing, project management, quality assurance (SQA), Reviews, etc. These processes should be measured, analyzed and improved.

The company that plans to outsource it's back-office or IT functions can take advantage of Six Sigma as well. If a company treats each new outsourcing initiative as a Six Sigma Project, DMADV methodology can address the risks of offshore outsourcing failure.