Offshore Software Development: The Null Hypothesis

The null hy­poth­e­sis (H0) is a hy­poth­e­sis that the re­searcher tries to dis­prove, re­ject or nul­lify.

The hy­poth­e­sis that I want to re­ject is that there is a clear ben­e­fit for busi­nesses to use off­shore soft­ware prod­uct de­vel­op­ment com­pared to en­list­ing a lo­cal Home Grown” provider. In dis­prov­ing the null hy­poth­e­sis I will demon­strate that in re­la­tion to soft­ware de­vel­op­ment out­sourc­ing ser­vices, lo­cal ven­dors can eclipse the over­seas al­ter­na­tives.

When mak­ing any im­por­tant busi­ness de­ci­sion there are a num­ber of im­por­tant cri­te­ria that are uni­ver­sally ap­plic­a­ble and should al­ways be con­sid­ered. And in be­ing uni­ver­sally ap­plic­a­ble I shall con­sider them in re­la­tion to off­shore soft­ware com­pa­nies. The three cri­te­ria in­clude cost, cus­tomer com­mu­ni­ca­tion and fi­nally in­tel­lec­tual prop­erty pro­tec­tion. As a sci­ence-minded in­di­vid­ual I per­son­ally take much so­lace in hav­ing a clear means by which to gauge the acu­men of a busi­ness de­ci­sion. And by look­ing at these cri­te­ria I aim to as­sist in find­ing a means by which to judge soft­ware out­sourc­ing ser­vices.

Criterion 1: Cost

Cost is an im­por­tant, if not the most im­por­tant, busi­ness in­di­ca­tor. Its analy­sis is sim­ple due to the ease of its mea­sur­a­bil­ity. Furthermore its bot­tom-line ef­fect is im­me­di­ate and clear, hence adding to its im­por­tance. In the cus­tom soft­ware so­lu­tions game cost is of­ten cited as the main mo­ti­va­tion of com­pa­nies who choose to out­source to India or other off­shore soft­ware hubs. That’s why I have cho­sen to ad­dress this cri­te­rion first. Admittedly ten years ago that may well have been the case, how­ever, the Australian tech in­dus­try has cer­tainly come into its own in those ten years and has im­proved by leaps and bounds. Yet more to the point, the cost ef­fec­tive­ness of on­shore Australian soft­ware can be il­lus­trated with a sim­ple ex­am­ple.

Let’s say that the tar­get soft­ware you wish to de­velop will end up with ap­prox­i­mately 10,000,000 lines of code. If we had 10 de­vel­op­ers off­shore that worked at the same pace as 10 de­vel­op­ers on­shore and the off­shore de­vel­op­ers were half the price, then the maths is easy to cal­cu­late and soft­ware off­shoring wins as the most cost ef­fec­tive op­tion. However, the on­shore de­vel­op­ers re­alised what was go­ing on and de­cided to think lat­er­ally and be in­no­v­a­tive with their cod­ing tech­nique. They in­vented a ro­bot that can gen­er­ate 90% of what the hu­man de­vel­oper needs to do!

Now the ro­bots can only do so much of the work, but this process still al­lows for a hu­man de­vel­oper to add to the code base, mean­ing that coders can them­selves put the fin­ish­ing touches on their pro­ject.

In essence this ro­bot gen­er­ated code re­sults in a faster de­vel­op­ment process and as we all know time equals money, hence, on­shore de­vel­op­ment is now sig­nif­i­cantly more cost ef­fec­tive than the al­ter­na­tives that off­shore de­vel­op­ment com­pa­nies can of­fer. Australian de­vel­op­ers have ce­mented them­selves as su­pe­rior through the sweat they’ve poured over their key­boards that has made in­no­va­tion a re­al­ity. We have reached a plateau of pro­duc­tiv­ity in Australia that over­seas com­peti­tors can­not claim.

Criterion 2: Customer Communication

Software de­vel­op­ment should no longer in­volve a wa­ter­fall ap­proach whereby all of the re­quire­ments of your prod­uct must be spec­i­fied up front. Instead I be­lieve in an or­ganic process of de­vel­op­ment us­ing an it­er­a­tive ap­proach. In cre­at­ing any soft­ware ap­pli­ca­tion, I am of the opin­ion that close col­lab­o­ra­tion with the cus­tomer dur­ing the de­vel­op­ment process is in­te­gral, but for a de­vel­oper based in an­other coun­try their are more bar­ri­ers to this process. Furthermore, the con­tem­po­rary busi­ness ap­proach is to use sprints or it­er­a­tions, that have a mea­sur­able out­come, in your de­vel­op­ment process. It’s from these sprints and it­er­a­tions that my team can learn and adapt our code to suit the needs of the cus­tomer which leads to a higher de­gree of flex­i­bil­ity. With the wa­ter­fall soft­ware de­vel­op­ment method­ol­ogy any such flex­i­bil­ity is lost, and ul­ti­mately that pro­longs the length of a pro­ject.

Additionally in re­la­tion to cus­tomer com­mu­ni­ca­tion there is of­ten a lan­guage bar­rier that ex­ists when you work with off­shore soft­ware de­vel­op­ment com­pa­nies in India or else­where. Most off­shore de­vel­op­ment houses will have a pro­ject man­ager that li­aises be­tween the de­vel­op­ers and you, but this rep­re­sents an­other bar­rier and fur­ther re­moves you from the peo­ple who are ac­tu­ally mak­ing the prod­uct. I be­lieve the best soft­ware prod­ucts are built when the de­vel­op­ment team at­tends plan­ning ses­sions and gets a deeper un­der­stand­ing of what is re­quired.

Finally bridg­ing the time­zone gap is the bane of any soft­ware cus­tomer’s ex­is­tence and such chal­lenges are ever pre­sent when deal­ing with a re­mote soft­ware de­vel­op­ment team. Working across time­zones can ex­tend the re­sponse times be­tween de­vel­op­ers and cus­tomers and can slow a pro­ject to the point of ca­pit­u­la­tion.

Criterion 3: Intellectual Property Protection

Intellectual prop­erty pro­tec­tion is all too of­ten over­looked by many an Australian cus­tomer when they be­gin deal­ings with an off­shore soft­ware de­vel­op­ment firm. This lack of con­sid­er­a­tion of IP rights is a huge risk, as ju­ris­dic­tions out­side Australia are of­ten far less con­cerned with cus­tomer pro­tec­tion. Intellectual prop­erty pro­tec­tion is im­por­tant as de­pend­ing on the ju­ris­dic­tion to which you have de­cided to move your soft­ware out­sourc­ing pro­jects to there may be huge ram­i­fi­ca­tions on the ex­tent to which you own the prod­uct you paid for. Another fac­tor to con­sider is the sig­nif­i­cant cost and lengthy de­lay you should ex­pect in the event that you need to launch a lit­i­ga­tion suit con­cern­ing IP rights in an­other ju­ris­dic­tion. And it would be wise to keep in mind that some Asian na­tions, namely India are renowned world­wide for their in­ef­fi­cient le­gal sys­tems.

Returning to the Null Hypothesis

Now let’s re­turn to the Null Hypothesis that there ex­ists a clear ben­e­fit for busi­nesses that move their soft­ware de­vel­op­ment off­shore. Based on the three cri­te­ria I have con­sid­ered it can be ar­gued that the hy­poth­e­sis is dis­proven, and as such on­shore so­lu­tions are the su­pe­rior op­tion. Evidently, a cost ef­fi­cient re­sult with a high stan­dard of cus­tomer com­mu­ni­ca­tion and in­tel­lec­tual prop­erty pro­tec­tion is pre­ferred, and this can be more eas­ily achieved when you en­gage a lo­cal soft­ware de­vel­op­ment com­pany.


Eban Escott

Get cu­rated con­tent on soft­ware de­vel­op­ment, straight to your in­box.

Your vi­sion,

our ex­pe­ri­ence

Book an analy­sis call