Cisco Systems has struggled with the attrition of workers at outsourcing firms in India, Israel and China that develop software for the firm, said Jan Roberts, Cisco's senior director of its Central Engineering Tools and Services group.
Cisco first used outsourcing firms to supplement teams in the US, she said, but found that the attrition rate was "terrible." After that, Cisco sent core projects overseas, so that developers at outsourcing firms "don't feel like we are giving them work we don't want to do," she said, adding that the attrition rate has been cut significantly since then.
The company now is struggling to ensure that its intellectual property is protected in projects sent to outsourcing firms in China, Roberts added.
Cisco, based in California, is working to create an automated process of separating key pieces to ensure it is not sent overseas, she said.
Roberts was speaking on a panel of experts at the IBM Rational Software Development Conference 2007 in Orlando on the challenges companies face when outsourcing development work offshore.
The executives agreed that companies must ensure that offshore workers possess adequate technical skills, that outsourcing firms retain qualified workers, and that projects sent overseas present minimal risk to the organisation.
The IT operation has long outsourced the bulk of its work overseas, said Nanette Brown, director of architecture and quality management at Pitney Bowes, a manufacturer of mail and postage equipment. The company's product developers use offshore firms more as an extension of domestic, internal teams.
Brown noted that Pitney Bowes is finding that its outsourcing partners are having a difficult time retaining top developers, who often opt to take on project management roles after a few years writing code, Brown added. The company is aiming to help its partners forge a career path where workers stay hand on in development for longer, she added.
Dave Lubanko, principal consultant at Rational, noted that many companies struggle to decide when to send a project to offshore developers. New projects can be more difficult to manage, while sending mature software for updates could adversely impact quality, he noted.
"The successful companies ... have taken second-tier projects and experimented with those being offshored first. Then [they have] gone across with their largest projects," he said. "The bulk of the companies keep testing close to their quality organisation, and their development goes offshore."
Daniel Sabbah, Rational's general manager, said that Rational takes that tactic when it sends work to outsourcing firms offshore. The company will first send a firm projects at the back-end of the life cycle and then slowly - over three to five years - send them projects that require a deeper understanding of the life cycle.
"[Overseas workers] start having to understand the products themselves without being overstressed in trying to innovate at the same time," he said. "You want a sense of ownership at the end of the day."
But, Lubanko added, regardless of the type of work companies opt to send offshore, they should expect to wait six to 12 months to begin to see a return on the investment.
The panellists agreed that it is important to devise metrics to measure the performance of overseas workers, but Brown noted that managers must tread carefully when interpreting the metrics.
At Pitney Bowes, for example, the number of bugs that overseas testers have submitted that have been rejected by developers is double the percentage compared to domestic employees, she said, adding the company has worked deliberately to interpret the results.
She noted that the company did not assume that domestic developers are discounting bugs or that offshore workers are mistaking valid operations for bugs, she said. "You always want to make sure you use (metrics) in a functional, not a dysfunctional fashion," she said.
Finally, the panellists were asked if labour costs were the same in the US and overseas if they would continue to outsource their development work.
Sabbah said his company would continue to send development work overseas because it is a critical way for the company to learn about potential new markets for its own products.
Cisco's Roberts acknowledged that the company likely would cut back on offshore development if the costs were the same as in the US. She noted that in some instances - like in India - labour savings are offset by higher infrastructure costs.
Therefore, while Cisco continues to use offshore operations for regression testing, the company has no plans to build its own facilities there for such projects, she added. Brown said her company also would be likely to send less work overseas if the labour costs were equal. In that scenario, instead of competing to offer the lowest cost workers, she suggested, perhaps markets would begin to specialise
"People would be competing to try to develop areas of expertise that you would want to try to source. That would be exciting."