Offshore outsourcing is a brilliant business strategy for many businesses. Gartner analysts predict that offshore outsourcing will rise by 8.9% in 2008, and the trend will continue on to 2009. However, it is not (yet) a perfect solution to various business issues and requirements. Before engaging the services of vendors, whether by offshore or onshore outsourcing, it is important to know that outsourcing has its own sets of issues.

The bright side of the debate is that if a business understands the issues surrounding outsourcing, these “cons” can easily be turned into “pros” that will add up to profitability and result in better quality of products and services. Below are some of the risks that you must understand about outsourcing:

• You are putting parts of your business in someone else’s hands. Realize that you are inviting a third party into your own operations. Business matters that used to be kept within your company’s walls are being laid open to the scrutiny of the vendor, or as some say, consultant. While trust must be established between the company and the vendor, it is absolutely necessary to form security measures from contracts to security audits. And be hard-headed in the implementation of these contracts. In most security breaches, the weakest points are not the systems put in place to prevent data leaks, but humans, the staff themselves, who fail to understand the enormity of keeping corporate information secure.

• Business experts and visionaries are still a weak spot among outsourcing destination. Offshore outsourcing vendors can provide highly skilled workers who can perform volume tasks. However, management is often a weak spot among vendors. This means the lack of familiarity or knowledge of established processes by your company, lack of enough knowledge about your business or industry. In cases like these, it is important to know the people who will lead your outsourcing team. In many situations, middle- and junior managers receive months-long trainings on-shore before getting their feet wet with actual project delivery.

• Unfavorable business conditions in offshore destinations include economic and political factors. If you think that you are giving away control of parts of your businesses to companies located outside your country, consider how much less control you will have if you factor in the political and economic upheavals in that country.  Any upheavals at all poses risks of operational disruptions. You must make sure that there are business continuity measures put in place in case it is business unusual offshore.

• Businesses only consider outsourcing in terms of cost-savings instead of value to the company. This weakness happens on both ends of the outsourcing spectrum. Both business and vendor only see outsourcing as a way to cut costs instead of adding value to the company’s product, services, customer relationship, among other things. Instead of concentrating on the outsourcing relationship in terms of money savings alone, it is important to add long-term product or service innovation and process improvement in the mix. The money saved today can be reinvested into bigger endeavors tomorrow.

Outsourcing, especially offshore outsourcing, has been constantly cast in a bad light for its perceived ill effects on the job security of thousands of workers from developed economies. However, it is interesting to ask this question: If outsourcing’s negative effects far outweigh its positive results, then why does it still flourish? Is it all about the money? Apparently, the answer is “No”.

This is not to say that outsourcing does not have its bad side. In this two-part blog post, let us explore where outsourcing works, and where it should improve.

• Outsourcing allows small and medium size businesses to have more workers. Small and medium-size enterprises do not have the luxury of permanently employing large armies of workers to work on projects, such as software development, QA, accounting systems, documentation, or customer management. However, outsourcing allows them to engage as many workers as their projects need—or as they can afford—temporarily.  At the end of a project’s lifecycle, a lot of companies find it easier to halt relationships with vendors than with employees.

• Outsourcing allows companies to focus on their core competencies. This is one of the most popular and oft-repeated responses to outsourcing critics, and it is worth mentioning many times over.  By outsourcing processes that require low or mid-level skills, companies can focus on parts of their operations that need high levels of skills gathered from extensive industry experiences. Basic Java development can be handled by offshore workers, while software architecture and design are best handled by onshore resources.

• Outsourcing offers staffing flexibility. With hundreds of thousands of available workers in application development, customer management, and support services available in low-income service providers, companies have the flexibility to hire on project basis. At the end their projects, it is easier to decide whether to retain talents or hire new ones, even new vendors.

• Outsourcing saves money. Offshore workers in an emerging economy, such as the Philippines, can provide the same quality of work at a much lower cost. Outsource workers in emerging markets are college graduates and most have job experiences relevant to outsourcing requirements.  For example, IT workers in Manila are college degree holders who have also received formal trainings in specific programming languages. On top of that, IT vendors also arm their workers with trainings in consulting, customer management, communication, and methodologies.  Over time, the smaller amount paid to low-wage outsource workers increase in value.

We envisioned Ideyatech to be an agile, creative and pro-active software development company. We never intended to become like any other outsourcing company that provides cheap developers and cookie cutters. To differentiate our company from the rest, we redefined the developer titles and roles.

We classified our developers into three: Codester, Codesmith and Codemaster. However, it’s more than just the making new titles… we also redefined their roles.

Codester
A codester is a dynamic individual who has passion for abstract and logical reasoning. He is trained in the art of programming and is experienced in the Java language. He is resourceful and capable of learning new technologies on his own. Codester are people you can rely on to deliver codes that work according to specifications.

Codesmith
A codesmith crafts their codes with artistic mastery. He is capable of writing clean, well-designed codes. He is well-versed in the art of programming and ensures that his codes are optimized, refactored and properly unit-tested. Codesmiths are your best bet in doing complex and more advanced transactional web applications.

Codemaster
A codemaster is one of the chosen few who can design unique solutions to common complex problems. Unlike traditional developers, he thinks of solutions with a business sense. In addition, he is an expert in design patterns - not only in theory, but also in practice. Codemasters are the perfect partners for product development since they have the creative insight and technical proficiency in developing state-of-the-art applications.

For the past two months, we have been having our weekly T3 (Tuesday Tech Talk) sessions. It’s a 30-minute discussion about any technical topic the presenter would like to discuss. Presenters are randomly selected from the development group.

So far, we have received nothing but benefits from this activity. Here are some of its benefits and advantages:

1. The presenters get an opportunity to talk, express themselves and practice their presentation skills. More importantly, they steer away from the developer mindset for a while, get out of their shells, and think of good topics to discuss.
2. The attendees learn something new. Everybody seems to know something others don’t.
3. Everyone begins to understand the specialization and span of knowledge of their colleagues. In this way, it becomes easier to know who to ask regarding particular topics. Subsequently, the developers become experts and specialists in their own way.
4. This builds camaraderie within the team. Everyone relaxes and opens up their minds for new knowledge.
5. The topics discussed are usually not something we do or use in our daily routine at work. So, everyone gets to learn more than the usual stuff.
6. Everyone realizes the things that they do not know and starts to seek for more information about it.
7. The organization strengthens its corporate IQ as people share their ideas and knowledge with each other.
8. After a couple of sessions, everyone began appreciating the activity and now looks forward for new things to learn.

When it comes to outsourcing opportunities in the Philippines, one most often calls to mind call centers or customer service. Being an English-speaking country (Philippines is the third largest English-speaking country in the world), it has an edge over call center outsourcing destinations, such as India or even China. The Philippines also boasts of college educated customer service agents who are adept at handling customer complaints and requests.

Next to call center or customer service support, Philippines has also made a considerable progress in the medical transcription business. On top of the labor force’s ability to speak and write in English, it has a surplus of workers with degrees in the medical field, such as nursing, pharmacy, and medical technology, thanks to the growing trend of exporting medical workers to developed countries, such as the US, UK, and the Middle East.

Software Development Outsourcing to the Philippines

Is Philippines in a good position to take a cut in the technology outsourcing pie? Fortunately, the answer is yes, according to analysts.

While still trailing behind India and China, the country “is already emerging as a strong player in this rapidly evolving industry, demonstrating that it can compete with India and other low-wage destinations in creating value,” according to a 2005 report by the McKinsey Global Institute (MGI). Case in point: While Philippines’ population is 16 times smaller than China, it produces twice as many engineers, according to MGI.

In 2007, the Philippines captured USD 4.1 billion or 1.4% of the global outsourcing market share. According to a Reuters report, diversifying outsourced opportunities beyond call centers will earn the country up to $12.2 billion by 2010.

Opportunities Despite Tech Spending Crunch

Because of the global economic crunch, cuts in IT spending are inevitable. The upside of belt-tightening measures is off-shoring of technology jobs. Of course, the downside could be that the growth of off-shored tech opportunities may not be as high as it was projected in the past years. Still, opportunities abound for outsourcing destinations, such as the Philippines.

Filipino engineers and generalist tech workers have become attractive to foreign companies. “Poaching” of tech workers by other Southeast Asian countries has been observed over the past 3 years, thanks to their technical and communication skills. This temporary diaspora of Filipino tech workers offers better earning opportunities to the workers themselves, but on a larger and more important scale, world-class training experiences that they can bring back home.

If the tech industry can supply ample technical and managerial training to its workers, the Philippines can become a more attractive outsourcing destination for technical development. The country should not rest on its call center laurels alone.

Today, we attended the Sun Tech Days Conference at the Makati Shangrila. Aside from the great food and freebies, I enjoyed the whole experience. There were several things I learned during the second day of the 3-day conference. Here’s to recap what I learned and observed:

• Java 6 has some nice features including Scripting Language Support (JSR 223) and Web Service Integration. I agree that these 2 features are very common and should be part of the standard Java. I’m not sure about JDBC 4.0; with the success of JPA, JDBC might not be that useful anymore.
• Grails is cool, but not necessarily great. I think it still needs improvement to be able to compete in the enterprise, if at all possible. My main concern with template codes is “customizability”. But it’s still cool.
• Sun admitted their problems with Java 6, such as slow start-up and large codebase. I think this is a good sign for the future of Java.
• Netbeans has improved since I switched to Eclipse three years ago. It supports a ton of platforms/frameworks and has a lot of productivity tools. I believe Netbeans is probably worth revisiting.
• Half of the conference attendees are going to the Enterprise track, which means there is more demand for web applications development rather than desktop (Swing, SWT) or system administration.
• The “new” technologies that the speakers discussed were the same technologies two years ago. We have been already using these technologies (such as Ajaz, JPA, and ESB) in our projects. Either Sun didn’t do a good job in looking for resource persons, or Ideyatech is just updated with the latest technology! (The latter is most probably true… hehe) Anything else new?
• Open-source is confusing - everyone else wanted to be the best platform/framework, and developers are confused which one to use. Even Sun promotes several conflicting/competing technologies - Seam vs. Grails vs. JSF, JDBC vs. JPA, GlassFish vs. JWS. With the myriad of platforms available, which one works best?

Green means “growth“. This is why we chose green as our new corporate color.

However, what does it really mean?

Growth is an opportunity and, at the same time, a challenge. It means more people and projects to manage. It also means more income (and more expenses). Growth should always be handled with care… too much growth can put your organization out of control.

We have always been conservative on growth. While there are opportunities for us to grow, we occasionally pass over some projects because we believe that quality is priority over quantity. It is not important how many projects we’ve completed, but how well we’ve developed them.

Here at Ideyatech, we redefine the meaning of growth. Our growth comes naturally by keeping the quality of service consistent.

Our first official company outing held in Blue Coral, San Juan, Batangas …

We now have a new home - bigger and bolder. We moved to our new office space last weekend. The move was fun, but painful…

Our new space houses all the facilities we need, such as workstations and meeting rooms. Everything is perfect… well.. almost… Our Internet provider did not deliver their promise of weekend-line transfer. Instead, we had to wait for three working days to get the line transferred. As contingency, we tried asking another vendor for a new line. But, guess what? Both vendors installed their lines at the same time - three days after. Having a “work-from-home” policy saved the company since most of our developers have Internet connections at home or have access to wi-fi hot spots.

Now, for the fun part…

While it may seem that our blog activities have been quiet and slow, we have been very busy and active,  continuously expanding our operations and improving our processes. For the past three months, we have almost doubled our employee head count and we plan to add more in the next months. The only thing that hinders us right now is “space”… precious office space.

Nevertheless, we managed to prioritize things, and have decided to work on our “office space” problems first. So, this weekend we are moving to a new office space, a bigger and better office. I hope this move will help us grow as we establish our business office.

At the same time, we are working on rebranding our corporate image. Consequently, we will be launching our new website soon. Like any other thing we do, we apply continuous and iterative methodology; therefore, instead of having a grand launch and major rebranding, we will be applying our changes slowly for a span of about a month.

So watch out for this! We are changing our image in the face of the Earth!